Tag Archives: dividend investing

Smart Ways to Invest: A Quick Overview of Some of the Smartest Things You Can Do With Money

Guest Article By George Botwin

Do you suddenly find yourself with a bit of money and want to know about some smart ways to invest? How can you best put that money to good use? The most important thing to do – if you haven’t already done so – is to pay off your debts. Get that out of the way. If you still have debts when you invest, any interest you might earn from the investment will just equal out the interest you’ll have to pay on the debts. Holding onto debt might even be more costly than any profit you might make from investments.

Once you’re all clear with debts, then you can consider making smart investments. Investment bonds are usually considered a good idea for those who are afraid of taking on too much risk. The potential for returns is quite lower than those of stocks, but you will still get some interest over time, whether you invest in US government bonds or foreign bonds. Just do the right research first to find out which foreign bonds are likely to be the most profitable over the next decade.

Learn about the different types of mutual funds and decide if they are smart ways to invest for you. They are categorized by asset class: cash, bonds, and stocks, and then further categorized by objective, strategy, or style, such as stock mutual funds, money market mutual funds, and so forth. The downside to mutual funds is lack of ownership. The investor actually doesn’t own the individual stock, and therefore lacks perks such as voting rights.

Smart Ways to Invest With Diversification

While you don’t have to put all of your money in a single bank account, it’s still considered wise by many people to open up a Certificate of Deposit account with a reputable online bank that offers a high APY – even higher than a regular savings account. The drawback? You have to agree to let your money stay in the bank for a certain period of time and won’t be allowed to withdraw any of it prior to that time without getting penalized.

Dividend-paying stocks can be among the smart ways to invest for intermediate and advanced investors. Dividends are a portion of a company’s profit that are paid out to shareholders (usually quarterly). If you own a dividend stock, you can earn cash in the short term as well as the investment itself through market appreciate during the long-term.

As for the smart ways to invest in individual stocks and a few other opportunities, it’s best to join a group of insiders where you will get picks from the true professionals and experts. Having access to high-quality investment analysis, such as that offered by Capitalist Exploits, is a great way to gain an edge in investing.

To get closer to financial freedom, visit George’s website: https://www.financiallygenius.com/capitalist-exploits/

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Harnessing Stock Market Volatility

Guest Article By Steve Selengut

If you were to Google “stock market volatility”, you would find a wide range of observations, conversations, reports, analyses, recipes, critiques, predictions, alarms, and causal confusion. Books have been written; indices and measuring tools have been created; rationales and conclusions have been proffered. Yet, the volatility remains.

Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day’s gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.

The only question I continue to have about all this comical hubbub is why don’t y’all just relax and enjoy it? If you own only high quality income generating securities, diversify properly, and adopt a disciplined profit-taking routine, you can make stock market volatility your very best friend (VBF).

Decades ago, a nameless statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. “In the real world”, he said, “there are liars, damn liars, and any member of the groups just mentioned”. An economist or a politician, armed with a battery of statistics, is an ominous force indeed.

Well, now, all economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.

  • But the volatility (and the uncertainty it either causes or results from, depending upon the expert you listen to) persists.

Modern computers are so powerful, in fact, that economists and statisticians can now calculate the investment prospects of just about anything. So rich in statistics are these masters of probabilities, alphas, betas, correlation coefficients, and standard deviations, that the financial world itself has become, mundane, boring, and easy to deal with. Yeah, sure it has.

Since they can predict the future with such a high degree of probability, and hedge against any uncertainty with yet another high degree of probability, why then is the financial world in such a chronic state of upheaval? And why-o-why does the volatility, and the uncertainty, continue?

I expect that you are expecting an opinion (yet another opinion) on why the volatility is as pronounced as it seems to be compared with years past. Frankly, Scarlett, I can’t really make myself give a damn. The uncertainty that we are asked to believe is caused by volatility just simply is not. Uncertainty is the regulation playing field of the investment game… and of life, actually.

The more you invest in higher risk securities, the more you speculate on future directional change, the more you ignore growing income, and focus only on market value, the more uncertain your investment environment becomes. So risk, speculation, poor diversification, low income generation, and up only market value expectations combine to exacerbate uncertainty, but nothing can eliminate it… only that is certain.

Volatility, on the other hand is simply a force of nature, one that needs to be embraced and dealt with constructively if one is to succeed as an investor.

But this machine driven, hyper-volatility that we have been experiencing recently, has been magnified by the darkest forces of the “dismal science” and the changes that it has encouraged in the way financial professionals view the makeup of the modern investment portfolio.

On the bright side, enhanced market volatility actually enhances the power of the equity and income security trading disciplines and strategies within the Market Cycle Investment Management ( MCIM ) methodology… an approach to market reality that embraces market turbulence, and harnesses market volatility for results that leave most professionals either speechless or in denial.

  • MCIM focuses on the highest quality equity securities and well diversified income security portfolios, creating a lower than normal risk environment where price fluctuations can be dealt with productively, without panic. Higher prices generate profit taking transactions; lower prices invite additional investment. The underlying quality, diversification, and income generation create a more tolerable “uncertainty quotient” than other methodologies.

But, with no statistical data necessary (or available) to support the following opinion, consider this simplistic rationale for the hyper-volatility of today’s stock market.

Volatility is a function of supply and demand for the common stock of a finite number of dirty, evil, greedy, polluting, congress corrupting, job creating, product and service providing, innovation and wealth developing, foundation supporting, gift giving, tax-collecting corporations.

Those of us who trade common stocks in general, Investment Grade Value Stocks in particular, owe a debt of gratitude to the real volatility creators: the hundreds of thousands of derivative products that bring an entirely speculative kind of indirect supply and demand to the securities markets.

Generally speaking, the fundamental, emotional, political, economic, global, environmental, and psychological forces that impact stock market prices have not changed significantly, if at all.

Short term market movements are just as unpredictable as they have ever been. They continue to cause the uncertainty you need to deal with, by using proven risk minimization techniques like asset allocation, diversification, and profit taking.

The key change agents, the new kids on the block, are the derivative betting mechanisms (Index ETFs, for example) and their impact on the finite number of shares available for trading. Every day on the stock exchange, thousands of equities are traded, a billion shares change hands. The average share is “held” for mere minutes. No one seems to we seek out analysts who spin tales of “fundamental” brilliance, profitability, or income production.

On top of derivative trading in real things such as sectors, countries, companies, commodities, and industries, we have a myriad of index betting devices, short-long parlor games, option strategies, etc. What’s a simple common share of Exxon to do? I’ve heard financial talk show hosts warn listeners to never, not ever, buy an individual equity!

  • Is today’s movement in any individual equity the result of demand for the company shares themselves, or demand for the multiple funds, indices, and other derivatives that track or include the company in their “model”? How many derivative owners have a clue what’s inside their ETF?

We are in an environment where investors feel smarter dealing in sectors than in companies; where 401k “retirement” plans (they really are not retirement plans, you know) are banned by regulators from offering even reasonably high yielding investment opportunities, and where government fiscal policies have forced millions of actual retirement savings accounts to seek refuge in the shark infested waters around Wall Street.

Market volatility is here to stay, at least until multi-level and multi-directional derivatives are relocated to the Las Vegas casinos where they belong, until regulators realize that 7% after higher expenses is better than 2% after minimal expenses, and until interest rates are allowed to return to somewhat normal levels… and this is what feels to some like an elevated level of uncertainty.

For the discernible future, we’ll need to find a way, a methodology, that makes both of them our VBFs.

My articles always describe aspects of an investment process I have been using since the 1970’s, as described in my book, “The Brainwashing of the American Investor”. All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.

Article Source: https://EzineArticles.com/expert/Steve_Selengut/12786

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Compounding Is The Best And Least Time Consuming Strategy

Guest Article By Gregory Neil Smyth

Time in a Compounding strategy is your biggest friend. The longer your investment is allowed to Compound, the bigger your Account becomes.

If you have a ‘super’ busy life, and have a lump sum to invest, after making the initial investment there is nothing more to do. Get on with your life and watch your dividend reinvestment strategy build up.

Compounding involves adding to your original capital invested every year, and then that new balance to be added to in the next year, and so on. Buy solid dividend paying companies, like the Dividend Aristocrats, and you are assured of the best Compounding strategy available.

Not only do Dividend Aristocrats pay dividends every year, their dividend history through all sorts of market upheavals, their dividends also Rise every year. This means a Growing dividend Yield for the Compounding strategy, and when coupled with dividend reinvestment, you have 2 strategies in one!

Most pay Rising dividends 4 times a year, so no matter the current state of the market, reinvestment is taken care of by these companies for you. No temptation to sell in a big drop, just let the reinvestment strategy take care of itself, and LET IT COMPOUND.

Your Time is your own, after the original investment is made, just ‘put it in the bottom drawer’ and watch it Compound for as long as you like.

In the last big ‘drop’ in the market (2008-2009), 10 Dividend Aristocrat stocks were delisted from the Dividend Aristocrat Index because of changes to their dividend policy(they cut their dividend), so make sure to only invest in the ‘biggest and best’. The longer they have paid rising dividends and stayed in the Index the better.

Companies like McDonald’s, Johnson & Johnson, 3M, Wal Mart, who have paid rising dividends for decades, through all sorts of economic shock/upheavals, are the ones to invest in.

If you are investing through a savings plan, you are probably adding to your investment once a year, so again your Time is yours.

Even if you have 10-20 years to go till retirement, don’t ‘put off’ this strategy, as Compounding is the best ‘hands off’ strategy there is. Even if only your bills in retirement are taken care of, that is a huge bonus, the alternative is not pretty.

The best holding period for this strategy is ‘forever’, but when you eventually need the money, there is no need to sell, just change the reinvestment part to cash dividends, and everything ‘is sweet’. No capital gains tax, as no shares have been sold, you are receiving a ‘GROWING’ income stream for ever!

Time is your FRIEND in a Compounding investment strategy, so start NOW.

For a website dedicated to creating wealth by compounding, and creating long term wealth, go to [http://www.wealthbycompounding.com] This article has been written by Gregory Neil Smyth, who has just released an eBook ‘How To Create Wealth By Compounding’ and is available for purchase at the above website.

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Income Investing Fantasyland: High Dividend Equity ETFs and Mutual Funds

Guest Article By Steve Selengut 

Several years ago, while fielding questions at an AAII (American Association of Individual Investors) meeting in Northeast NJ, a comparison was made between a professionally directed “Market Cycle Investment Management” (MCIM) portfolio and any of several “High Dividend Select” equity ETFs.

  • My response was: what’s better for retirement readiness, 8% in-your-pocket income or 3%? Today’s’ response would be 7.85% or 1.85%… and, of course, there is not one molecule of similarity between MCIM portfolios and either ETFs or Mutual Funds.

I just took a (closer-than-I-normally-would-bother-to) “Google” at four of the “best” high dividend ETFs and a, similarly described, group of high dividend Mutual Funds. The ETFs are “marked-to” an index such as the “Dividend Achievers Select Index”, and are comprised of mostly large capitalization US companies with a history of regular dividend increases.

The Mutual Fund managers are tasked with maintaining a high dividend investment vehicle, and are expected to trade as market conditions warrant; the ETF owns every security in its underlying index, all of the time, regardless of market conditions.

According to their own published numbers:

  • The four “2018’s best” high dividend ETFs have an average dividend yield (i.e., in your checkbook spending money) of… pause to catch your breath, 1.75%. Check out: DGRW, DGRO, RDVY, and VIG.
  • Equally income unspectacular, the “best” Mutual Funds, even after slightly higher management fees, produce a whopping 2.0%. Take a look at these: LBSAX, FDGFX, VHDYX, and FSDIX.

Now really, how could anyone hope to live on this level of income production with less than a five or so million dollar portfolio. It just can’t be done without selling securities, and unless the ETFs and funds go up in market value every month, dipping into principal just has to happen on a regular basis. What if there is a prolonged market down turn?

The funds described may be best in a “total return” sense, but not from the income they produce, and I’ve yet to determine how either total return, or market value for that matter, can be used to pay your bills… without selling the securities.

Much as I love high quality dividend producing equities ( Investment Grade Value Stocks are all dividend payers), they are just not the answer for retirement income “readiness”. There is a better, income focused, alternative to these equity income production “dogs”; and with significantly less financial risk.

  • Note that “financial” risk (the chance that the issuing company will default on its payments) is much different from “market” risk (the chance that market value may move below the purchase price).

For an apples-to-apples comparison, I selected four equity focused Closed End Funds (CEFs) from a much larger universe that I have been watching fairly closely since the 1980s. They (BME, USA, RVT, and CSQ) have an average yield of 7.85%, and a payment history stretching back an average 23 years. There are dozens of others that produce more income than any of the ETFs or Mutual Funds mentioned in the “best of class” Google results.

Although I am a firm believer in investing only in dividend paying equities, high dividend stocks are still “growth purpose” investments and they just can’t be expected to generate the kind of income that can be relied upon from their “income purpose” cousins. But equity based CEFs come very close.

  • When you combine these equity income monsters with similarly managed income purpose CEFs, you have a portfolio that can bring you to “retirement income readiness”… and this is about two thirds the content of a managed MCIM portfolio.

When it comes to income production, bonds, preferred stocks, notes, loans, mortgages, income real estate, etc. are naturally safer and higher yielding than stocks… as intended by the investment gods, if not by the “Wizards of Wall Street”. They’ve been telling you for nearly ten years now that yields around two or three percent are the best they have to offer.

They’re lying through their teeth.

Here’s an example, as reported in a recent Forbes Magazine article by Michael Foster entitled “14 Funds that Crush Vanguard and Yield up to 11.9%”

The article compares both yield and total return, pointing out pretty clearly that total return is meaningless when the competition is generating 5 or 6 times more annual income. Foster compares seven Vanguard mutual funds with 14 Closed End Funds… and the underdogs win in every category: Total Stock Market, Small-Cap, Mid-Cap, Large-Cap, Dividend Appreciation, US Growth, and US Value. His conclusion:

  • “When it comes to yields and one-year returns, none of the Vanguard funds win. Despite their popularity, despite the passive-indexing craze and despite the feel-good story many want to believe is true-Vanguard is a laggard.”

Hello! Time to get your retirement readiness income program into high gear and stop worrying about total returns and market value changes. Time to put your portfolio into a position where you can make this statement, unequivocally, without hesitation, and with full confidence:

“Neither stock market volatility nor rising interest rates are likely to have a negative impact on my retirement income; in fact, I am in a perfect position to take advantage of all market and interest rate movements of any magnitude, at any time… without ever invading principal except for unforeseen emergencies.”

Not there yet? Try this.

*Note: no mention of any security in this article should be considered a recommendation of any kind, for any specific action: buy, sell, or hold.

My articles always describe aspects of an investment process I have been using since the 1970’s, as described in my book, “The Brainwashing of the American Investor”. All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the process.

Article Source: https://EzineArticles.com/expert/Steve_Selengut/12786

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The Right Ideology

A few days back I saw a tweet that stated that stacks that were selling for under $5 didn’t double in price any faster than those stocks selling for over $100. I responded to that tweet with the following comment: “This is very true. But I can buy more shares of stocks under $5 as long as the fundamentals are solid and the dividends are consistent.”

Well, that comment brought out all of the arrogant investors who felt that THEIR way was the only way. I get responses from “Why does more shares matter? Shouldn’t the total amount of dollars invested be what you look at?” to “…it depends on the company equity dilution plus never invest for dividend if u live in a high tax region like india where dividend are taxed @30 %”

The answer to the first response was – No, because I’m a dividend investor and dividends are what is key to me and my strategy. Doing anything else is just pure gambling in that you hope the stock price goes up. And if you want more shares you have to buy more stocks instead of just re-investing your dividends. This is the way you create a sustainable passive income stream.

The latter responder didn’t seem to know what my investment strategy and assumed that I just invested money willy-nilly into anything that paid a dividend. Again, if they had bothered to take the time to read and understand my investment strategy there wouldn’t have a point of them to bother to respond to my comment. Now I didn’t bother delving into their investment strategy because I wasn’t interested in their strategy. It was obvious that they were a value investor and that wasn’t the direction I was interested in going with my investments.

Why do I say they’re arrogant? Because nobody responded with a question asking my rationale for my statement. Everyone assumed that my investment strategy has to be like theirs. Many of those that responded I would presume were value investors (buy stock and wait for the stock price to increase). That’s fine for them. But that’s not my strategy. They could have accessed my blog (there is a link to it in my Twitter profile) and they would have been able to read the blog entry that detailed my investment strategy here and here. A lot of my tweets are about posts/articles on my blog. To fully understand what I am investing in and how I am investing, you’d have to follow my blog.

Lastly, I am NOT a financial planner or advisor. You need to complete your own due diligence and research in which stocks to buy. You need to determine your own strategy. This last part is important even if you have someone who manages your investments for you. Otherwise, you’re using someone else’s strategy for their purposes and not yours.

Accumulating cash

I’ve been very quiet on my blog so far because there’s nothing happening for me in the investing world. I’m holding my current positions and I have recently received dividend payments on some of my stocks. Those payments I’ve taken and re-invested into the same stocks. At this point I am waiting for the rumored stock market crash so that I can pick up some bargains and to increase my positions on the stocks that I currently own.

In the meantime, as my funds for investments come in I’m just accumulating them into my investment cash account. My focus is to acquire additional dividend stocks, primarily, and to increase my current positions when the opportunity presents itself. This is my sub-strategy for the next 8-12 months. Then I plan on changing gears to focus more on increasing my current positions, primarily, and then to acquire additional dividend stocks when the opportunity presents itself.

But so far all I have been accumulating has been investment funds. I’m looking to find stocks or ETFs that pay dividends on a monthly basis. All of my other criteria still are in place whenever I research where I should invest.

Modifying Your Investment Strategy

I’ve decide that it was time to modify my investment strategy. Not because it was wrong but because it wasn’t moving things along fast enough. Again, as I’ve stated before I have a timeline that is considerably shorter than the normal “rule of thumb” timeline of 30 years. My timeline is only 5 years, albeit a rolling 5 years. One cannot turn back the clock and try to redo the past so all we can do is work with what we have. My goal is still to stop working and live off of the dividends. To do so I have to have a extremely larger amount of money invested than I do presently. To this end I am putting any discretionary funds into investments.

I have outlined my strategy previous but now I’m going to be adding another point. And that is that I will be focusing on companies and funds that pay dividends on a monthly basis. Quarterly payouts are nice, but monthly is much better. If you are a believer in compound interest then you know what I am getting at. Why wait for the quarterly dividend in order to re-invest when you can re-invest the dividend on a monthly basis. All other criteria in my strategy still holds.

My focus will be Exchange Traded Funds (ETF). This will allow me to diversify and to minimize my risk. I get to own a little bit of everything instead of trying to own everything all at once. I also don’t have to keep a constant eye on the market value to determine when the stock no longer performs to meet my goals. Someone else does that. Yes, I’m willing to pay someone to do that…to a limit. I still have my criteria of not getting ETFs that charge over 0.6% in costs. There is a high yield ETF that has a dividend yield of 7.77%. Seems good. Except that the Expense Ratio is 1.25%. Morningstar rates the Risk as Above Average and rates the Returns as Low. So, I am not going to blindly invest just on a high dividend yield. I am not a great risk taker. Especially with an abbreviated timeline. I like my risks to be Average or Below. The returns should be rated Average or Above.

So, what caused me to tweak my strategy? I had viewed the video 5 Monthly HIGH Dividend ETFs (5%+) ETFs that Pay Monthly Dividends that I had posted on my blog previously. This video is put out by Learn To Invest. He does put out quite a few useful tutorial videos about investing. This one got me to thinking that his presentation of ETFs could help me accelerate my investment activity and thus increase my investment values at a higher pace.  So, I have to determine if I should liquidate all or some of my individual stocks and put the proceeds into ETFs or do I just invest my money solely into ETFs going forward from now on, leaving the individual stocks untouched.  

So, follow my blog to learn what I end up doing. Maybe you’ll get something out of this taht you can apply to your investment strategy.

Not All Dividend Stocks Are Created Equal

As a dividend investor, dividends are the key factor in deciding if I want to invest in a company or not. As I’ve mentioned in my previous posts there are other additional factors that go into my decision making process to invest or not to invest. But in this post I want to focus on the aspect of dividends. Many investors are growth investors. They buy the stocks of a company for the purpose of selling for a profit within a specific period of time. Others, like myself, invest for the long term to capitalize from a company’s increase in revenues and thus profits, which then translate into dividends. But again, not all dividend stocks are created equal. Some companies pay very low dividend payouts while others pay a substantially higher amount.

One of the key things I look at is the dividend payout relative to the company’s stock price. This is referred to as the Dividend Yield. This is the amount of dividend you will receive for every dollar you have invested. Some are very low, such as Dollar General ($DG), where the yield is 0.67%. Their last dividend payout was $1.44/share. To get that $1.44 you’d have to spend about $218 to buy 1 share.

Then you have McDonalds who just increased their dividends. Even with the last payout being $5/share, this is still only a little over 2% in dividend yield. You’d have to spend about $224 to buy 1 share of stock. That one share would then pay you the $5 in dividends.

There are many similarities between growth stocks and dividend stocks when it comes to deciding if the company is worth investing in or not. But with dividend stocks you’re looking for a continuous income coming in. The growth stock investor is also looking for income but they have to sell all or a portion of their holdings to generate the income. This means that they have to constantly be on the lookout for their next “Deal”. They have to replace the stocks that they sold.

This is the reason that I prefer dividend investing. Once I have researched a company and I have decided that it is worth investing in, all I have to do is hold my investment and collect the dividend payments. As long as there are no drastic or catastrophic changes to the company, there is no reason to sell the stock. Once you decide to buy the stock the only things left to do is 1) collect the dividends and 2) decide when to buy more stocks in the company. This last part is for another post in the future dealing with buy on the DIP (drop in price). After buying the stock and the dividend yield drops, you may want to just hold onto the stock shares you have. If the yield increases that may be a good time to increase the positions you hold. Again, other factors come into play here.

But back to the original premise of the initial dividend yield and how it is a factor in deciding to buy. As I stated before the dividend yield is the key factor for me. I want to get the maximum dividends for the least cost (i.e. stock price). The only time that share price is important is when I am looking to buy more shares. I’m not looking to sell my shares any time soon. As long as the stock price stays fairly stable, I am happy. As long as the dividend keep growing, I’m happy. As long as the company doesn’t reduce the dividend payout 2 periods in a row, I’ll hold on to them shares. My whole focus is to own the maximum number of shares for the least amount of money.