John Maynard Keynes, the famous economist who was the guiding light for economic policy for the world in the Great Depression of the 1930s, was once criticised for changing his view on a vital economic matter. His reply was one of the smartest and most rational of all time.

“When the facts change, I change my mind,” he said to his critic. “What do you do, sir?”

This is the issue we investors have to consider all the time. And it gives rise to this question: Have the facts changed so much that what looked like a good investment idea/strategy is now a bad one?

Telstra investors are asking this question as they ponder if they should see the current price as the bottom. Or could they be wondering if they should dollar cost average to bring down the average price they’ve paid for their TLS stock?

Bellamy’s (BAL) stockholders should be asking if the facts have changed, with Chinese regulations hurting the stock’s price. But FNArena’s survey of analysts still has this $12.75 stock targeted at $20.25, which would be nearly a 59% gain if they’re on the money!

However BAL is a speculative play where the gamble is on the unpredictable calibre of the company’s management, and the troublesome regulations that this outfit has had with Chinese rules.

All this navel gazing by yours truly was made relevant about April 4 when my stock market-listed SWTZ’s unit price fell to $2.43. It came as the income distributions were lower than I expected and all up, the Switzer Dividend Growth Fund had been a tad disappointing.

One lady called Helen emailed and ripped into me and asked what I was going to do about it (I might have referred to Helen’s email in a previous story but I’ve had time to think about my response). I told her at the time that when the big banks get re-loved, the unit price should rebound, but I did not rub into her that even though the current performance was a little disappointing, the overall strategy of dividends plus growth is a sound strategy.

Recently, I asked my team to answer the big questions you should ask of a fund such as SWTZ, and here’s a summary of the answers:

• Price: $2.50 on 30/6/17; Price $2.62 on 29/6/18 = 4.8% capital gain.
• Total distributions for FY18 = 14.27c (64.8% franked).
• Distribution yield (based on $2.62 closing price): 5.45% pa.
• Distribution yield grossed up: 6.96%.

This means the total return for an investor would have been 4.8% plus 6.96%, if you included franking credits — that’s an 11.76% pay off.

In April we would’ve been lucky to be up about 8% for the financial year-to-date. But old man time and a great June, with the banks feeling some re-loving as commodity prices remained elevated, turned a disappointing performing ‘stock’ into a damn good one!

And that’s my point — anyone who got fed up on April 4 and sold out of SWTZ missed a significant 7.8% gain. The reason they might have exited was not because SWTZ was a dumb strategy, but because they couldn’t take what the market was up to at that point in time.

Sure, some investors stick with a stock too long hoping for a turnaround, but there could be structural issues that will make that business lose forever. That once great US company Toys”R”Us, and its shareholders, has recently learnt that lesson.

Margin loan players often go long this strategy at the wrong time in the stock market cycle and get burnt, but that doesn’t mean the strategy is not worthwhile at the right time.

In the case of SWTZ, it was designed to deliver income first and foremost. It should rise more slowly in a boom because we’ve chased income over capital gain, but we should fall more slowly in a crash whilst still coming up, which trumps when it comes to income.

And this makes me ask you: “How good is your investment strategy?” I know some SMSF investors have asked investing experts to objectively assess their portfolio of assets and have been shocked when they’ve heard that their portfolio has “concentration risk,” “excessive exposure to risky assets” or are “too conservative”. As a consequence, they could run out of money if they’re ‘unlucky’ enough to live so long!

Picking the right stocks at the right time is always an important consideration but having the right investment strategy and reviewing it regularly is even more important.

And it’s crucial that you don’t get caught up in the moment when the market is sending you either too negative and even too positive signals. I’ve often said “the trend is your friend until it bends”. Even more important than that is having the right investment strategy.

In a nutshell, my strategy is to buy quality companies that pay a good dividend. And I try to buy them when the market is treating them unfairly or irrationally, for example, SWTZ at $2.43. It drove my buying in late 2008 and into 2009 and then every time I told you to have the courage to buy the dips when markets were overreacting to short-term fears.

We’re now in a tricky time for stocks as this cycle has gone on for some time. The trade war threat is a curve ball I don’t know exactly how to play and Donald Trump is an even bigger curve ball.

I don’t think the catalyst for a crash of stocks is there right now, but even if I get it wrong and I fail to see the ‘unseeable’ black swan, I’m confident my investment strategy will see me through nicely.

I hope you can hold your hand on your heart and say the same thing. If you can’t, then maybe you need someone to take an objective look at what you’ve been up to.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.