Tag Archives: strategy

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.

Article Source: https://EzineArticles.com/expert/Gregory_Neil_Smyth/2345474

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Top 7 Things to Consider Before You Start Investing

Guest Article By Linda Terrill 

Be it investors, potential investors or general public who is looking to start investing, everyone gets excited the minute they have extra cash on their hands and one of the usual plans is to invest it for quick profits. People want to start making their money work for them and that’s a very understandable and rational thought but sure enough one needs to be practical about their finances as well. There is a lot of due diligence and groundwork that goes into understanding the financial markets before one must start investing and it’s for their best as well!

An investment making company will generally help you get started with your investment and offer you end-to-end insights into how to make more money and how to invest money to achieve your financial goals. However, there are a few things you as an investor must consider before approaching any Asset Management Company or getting started on your investment journey.

Here are the top 7 things one should consider before they start investing to make more money:

1. Pay Off Prior Dues

No investment can start without you actually being done paying off your dues and clearing your credit. A clean slate for all your debts is very essential to begin investing stress free and focusing on returns.

2. Create Cash Emergency Fund

Before you start investing it is very important for you to have a separate cash fund prepared just in case of emergencies. There is no questioning the volatility of the market and you can’t really depend on redeeming from market when in dire need. Having an emergency fund lets you start your investment journey with a bit more ease.
3. Create Financial Goals

One of the most important questions often asked is how to invest money and earn quick profits! However, there is much more to investing than just expecting returns. It is equally important to have your financial goals set it place and invest accordingly. Be it buying a dream home, car or saving for retirement, an investment making company will know exactly how to help you get started.

4. Understand Financial Instruments

There are tons of financial instruments in the market which offer numerous benefits. The bigger question often is what you as an investor wish to achieve, quick profit, long term stability, lesser risk or just saving for the future? It’s not tough to make more money with your investments as long as your priorities are already quite clear.

5. Due Diligence on Investment Options

Asset Management Companies have a variety of financial instruments that an investor can pick from and ensure that they make more money. If you want to know how to invest money wisely on the other hand then it is best if you do your due diligence on all the financial products in the market and then make an informed decision to earn quick profits.

6. Research on market trends

How to invest money wisely is indeed a question every investor should be asking themselves or the investment making company who is helping them build a portfolio. Keeping updated about the market, staying on top of news in the world markets and knowing the current business trends makes it easier for the investors to pick their financial instruments for investment.

7. Evaluate your risk bearing capacity

Every individual has their own risk bearing capacities. An investment making company will often ask you the risk level your profile fits in as an investor as it helps them decide where and how to invest money and earn quick profits. How to invest money is often a question answered at the expense of how much risk are you willing to take for the same,

As simple and lucrative investing and making quick profit sounds, the truth is that unless you have a foundation in place and thorough research to build up, your investment portfolio won’t be solid.

Asset Management Companies are there to help investors with their portfolio, right from researching and investing to managing and reinvesting investors’ wealth. If you are new to the world of investing then these pointers will make sure that it doesn’t seem intimidating anymore!

Megacoinwealth is a leading Asset Management Company. Our top professionals guide you on making sound investment decisions to help you achieve your financial goals.

Article Source: https://EzineArticles.com/expert/Linda_Terrill/2561984

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How to Start Investing Today With the Money You Spend Right Now

Guest Article By Jason Moser

Many people enter a job market right after school and jump right into life feet first. Money comes in from a job, then goes right out to liabilities, food, entertainment… all necessities and pleasures in life. This is often called being stuck in a “rat race”. Every month is the same thing… money comes in, money goes out. Once you’re stuck in it, it’s very difficult to get out. But not impossible.

Now, money you make in your job is dependent on your ability to perform a task or function and amount of time put into that task or function. Essentially, it is trading time for money utilizing a learned skill. But this can’t possibly go on forever, can it? What happens when you get too old to perform these same tasks required for a job?

Unfortunately, for some people it goes on for a very long time. And when people who don’t invest in things that will bring in income whether they work or not can’t work any more, they don’t have anything to help them live as comfortably as they are today.

Until most people get into a career job that offers good benefits (including a 401k), money is rarely put toward investments. Money is made and spent as fast as it’s made, giving a person necessities and comforts of life at the time – and then some, but not allowing much for a prosperous future once job income stops.

Everyone at some point in their life must face the reality that a job is not going to give them everything they want or need in life – especially a life after retirement age. Investing is something best figured out early in life.

To understand how important investing is, you must first understand what investing is. An investment is a method of making money from a one-time effort. Sometimes this effort can be intense and take some time, but it can provide income for many years to come without having to put forth that same effort or time.

If you do a bunch of research to buy a house to use as an investment, you only have to do that research one time. Once you buy an investment, it will make money for you with very little effort. If you write a book and put it on a website to sell, you only had to write a book one time and it will make money for as long as it is active on the website or in a book store. If you research a company stock and find a perfect one, investing some money in it, money then starts doing work and making money without you having to do anything.

These are just simple investment examples that do take some effort. The point is that making money from investments is a lot easier than making money at a job if you know what you’re doing. A huge difference between an investment and a job is how much time and effort someone has to put into making money. Cool thing about investing in the stock market (whether it be traditional buy/hold/sell trading, 401k investing, or options) is that you only have to learn how to do it once, keep repeating what you learned, and let each dollar you invest do all of the rest of the work for you so you can enjoy life as it was intended.

Of course there is one HUGE problem that everybody faces before they can invest. Where do you get money to use to make money? When living life in a “rat race”, you eventually get caught up in an impossible circle that is very hard to get out of.

Don’t worry!

You have money… you just don’t know it yet!

There are ways to make a few changes in your life to start building up “capital” for investing – no matter what type of investing you are looking to start. It will be slow at first, but it will definitely morph into something you won’t believe possible.

One way to build up investment capital fairly quickly is opening a “Round Up” Savings Account. This type of capital growing account actually helps you save and build money based on your every day purchases. You attach your checking accounts or credit cards that you spend money on to your Round Up account and for each purchase you make, this account rounds up to the nearest dollar and deposits that rounded up cash into an investment platform that helps your savings grow faster. Not much work, is it? This special investment account does the rest.

For example, if you spent $20.57 on something, it rounds that up to $21.00. The round up, or $0.43, is placed in your account which is divided among several stocks based on account settings.

If you make 50 purchases from your checking account in a month averaging $0.35 a round up, you will save $17.50 in that month. That’s $210.00 in a year saved just by rounding up these purchases.

Money invested in this round up account goes up and down with stock market movement. At 5% gain in a year, it will go up by $10.50 more. And some stocks that your money is invested in earn dividends that are automatically reinvested into your account.

This doesn’t sound like much, but over time, it will continue to grow. This is an investment in itself and can grow pretty fast if you are consistently adding to it. If you have extra money you’d like to save during a month, you can also make deposits to apply them to your account to grow your account even faster.

A Round Up Savings Account is simply a stepping stone to get you to a higher level of investing, which can be a stock trading, option trading, a retirement investment account, real estate, or anything else you can invest that money in to make more money.

Once you build up some good investment capital in your Round Up account, you can withdraw it whenever you want and use it to purchase assets (things that earn you money – unlike liabilities) or to invest in stocks to make even more money over time.

Jason Moser is an author and stock market investor, specializing in extreme trading techniques. Learn more about Round Up Investing to help build investment capital on his Stock Market Hacks website or Charting Signals Facebook Page.

Article Source: https://EzineArticles.com/expert/Jason_Moser/18449

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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.

Due Diligence

Whenever you come across a company that you’re interested in investing into it is best to make sure that you do your due diligence before you invest. The reason you want to do this is to:

  1. Minimize the risk of losing your investment. All investments have an element of risk associated with them. But a smart investor wants to minimize that risk.
  2. Know something other than the company’s name and stock price. How is the company doing? Is it a good investment? This last point is based on your pwn investment criteria.

In order to do either of the above you need to access the company’s fundamental information. From there you need to be able to calculate certain benchmark data. There are many benchmark calculations that are suggested but in this post I will highlight the ones from the Income Statement. I may not look at all of these but these are the most common ones investors suggest.

  1. Net Revenue (Revenue – COGS)
  2. Gross Profit Margin (Gross Profit – Operating Expenses)
  3. Operating Margin (Operating Income /Revenue)
  4. Post-Tax Income (Pre-Tax Income – Income Tax)
  5. Net Income Margin (Net Income/Revenue)

I may not check each and everyone but I am interested in a company’s Gross Profit and their Net Revenue. This tells me how well the company is doing in its market niche and how well they are managing/controlling their operations. The benchmark for these is up to each individual investor to establish. I usually don’t calculate these for single companies but as a comparison between multiple companies.

I have limited funds available to invest so that if the other criteria benchmarks are relatively close with each other I use these benchmark data to narrow down my selections. The reason that I use benchmarks, even though I am a dividend investor and growth in stock price is secondary, because I want to make sure that the company will be around for the long-term. I’m not looking to invest for the stock price to jump up within a relatively short time. I’m looking to capture a passive income for the long-term. Once I buy a company stock I’m reluctant to sell unless the company cuts their dividend payout 2 times.

Here are some other calculations you can use to narrow down your selections:

What is my investment strategy?

In discussing investments with others I am asked what is my investment strategy? I am going to try to outline my strategy here but you must remember that the strategy is a bit broad and in special cases I will make exceptions to certain criteria.

I only invest in:
1. Long standing, existing businesses. I tend to avoid emerging/startup companies and IPO’s.
2. Companies that pay dividends. This is the rule that is pretty much set in stone. No dividend then no investment from me.
3. Companies that have a dividend yield of between 2.5 to 5%.
4. Companies that have at least a 5 year history of dividend payouts.
5. Companies that show a positive dividend growth.
6. Companies that are rated at Average or below in risk and Average and above in returns.
7. Companies whose stock price allows me to maximize the quantity of share that I own.

The above points are all relative. Such as the dividend yield. If a company is paying out a dividend of $6/share and it’s stock price is $200, this gives me a yield of 3%. This passes my criteria.for dividend yields but does not pass my ability to maximize the number of shares that I own because I am limited by my investment budget. If I have only $200 to invest each month, buying the one stock for $200 only gets me that 1 share. But if I can buy another stock that sells for $50/share and pays 3% dividend yield I can get 4 shares. The dividends I can get will be the same for both at $6 but when I re-invest the $6 I can only get 0.03 shares of the $200/share stock but 0.12 shares of the $50/share stock. I try to maximize shares owned and maximize dividends earned.

I am focusing on the growth of my stock investments based on share growth in addition to any increase in stock price value. Share growth is more critical to me than share price growth. I will increase my position with a specific stock if the share price drops or increases no more than 10%. If the share price increases more than 10% I will just hold and wait for the next DRIP.

I’ll be detailing my different strategy points in later postings.

Rule#1 by Phil Town

This is another book that I seriously recommend that you read. The book is called Rule 1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! written by Phil Town.

In this book Phil Town goes through the different calculations and math of determining the best investments that meet your strategy and criteria. He expalins things in terms that anyone can understand. He also explains how he’s used the different calculations and what his criteria is that he used. This book is one that every newbie investor must have in their library.

The Money Game

As as newbie investor (I just got seriously started this year) I make a point of finding books and articles that are informative and allow me to learn more about investing. One such book is The Money Game by Adam Smith.

I came across this book and got interested because it deals with Wall Street and how it functions. It details stories about people making money on Wall Street. A way to learn is to understand how others have made their money on Wall Street and then try to apply certain aspects of their strategy to our own.

Which Advice To Follow?

Every since I started on my journey in dividend investing and trying to learn what I can, to develop a strategy that works for me to attain my financial goal, I have come across a myriad of financial advice. But which ones should I heed? Which ones will help me reach my financial goal? As with any aspect of life you will always find people that will want to tell you what to do…usually for their own benefit.

That’s not to say that there aren’t people that can actually help you. I always wondered about those that tend to hawk specific stocks and funds. I always ask “What’s in it for them? Are they just being altruistic?” General advice should be such that it makes you think and analyse about what they are advising. Not to just blindly follow without question. As an example I see many posts and comments regarding specific stocks. If you followed each one then at some point in time, in the very near future, you’d run out of investment funds. But be very wary of anyone telling you that a certain stock is a sure thing. The only way I can explain it is to relate a story from my past experience in my first ever foray into stock trading.

This goes back to over 10 years ago and my wife was working in a casino. At the gaming table she was working at was a young guy playing. During the course of the game he began to talk about stocks and things with his job as a broker. One of the things he brought up was that there was a stock coming out that was a “Sure thing.” He mentioned that stocks name during the conversation and my wife made a note of it because he was super confident that the stock price would sky rocket. He told a few people at the gaming table that they’d be foolish not to invest in the stock.

My wife came home and told me about it and we discussed about investing in that stock. We scraped up the money (yes, we were not overloaded with cash) to invest and I opened a Charles Schwab account in order to buy the stock. I don’t remember the exact details except that in the end, we lost all of our money. How? It seems that many people were interested in the stock and were buying it, thus driving the price up. I bought it one day and didn’t check what was going on with the price for a couple of days. I was very, very ignorant about stock trading in those days. What happened was that about a day after we invested in that stock, there was a massive sell-off of it and the price dropped down below the price that we initially paid for it.

The lesson here was to make sure that you have a basic knowledge of stock trading and the nuances involved. After the fact, we felt that we were scammed. We were used, as many others were, to beef up the price and then when it hit a certain price or timeframe, the stock was dumped and someone made a handsome profit. Again, this is just conjecture of ours at the time but we stayed away from stock trading for a while.

That is, I stayed away until I learned the basics and developed a solid strategy for my investing activity. And this blog is not to give advice as it is to detail what I have done right investing, what I did wrong in investing, and detailing information that I found to be useful to me. I never recommend a specific stock or fund because everyone’s strategy is different. We all have different comfort levels when it comes to risk. I’m hoping that when you read me blog it will help you with your investment goals.

Why I Prefer Mutual Funds & ETFs

As I mentioned previously, before you start investing you should spend some time learning the different options available to investors. One option is to invest in stocks. Another is to invest in mutual funds and ETF (exchange traded funds). Just so you have a basic understanding of those 2 options, let me recap:

ETF – “An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.”

Mutual Funds – “A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.”

I prefer these because they include multiple stocks, not just a single stock. If you buy one stock and its share price tanks or the company ceases to exist then you have nothing. With mutual funds and ETFs there are multiple companies within the funds so if one starts to tank it can be replaced with a better performing one. You don’t lose that much value or shares.

With a single stock if the company decides to split its shares your stock price get diluted (price per share goes down). If the company does a reverse split you end up with less shares (not good if you’re looking for dividend income). With MF (mutual funds) & ETF (exchange traded funds) you never see this because these funds are managed for you. You do pay a small fee for this service but as long as the activity within the fund is low, so is the fee.

I do own a couple of individual stocks but the majority of my investment activities are with mutual funds and ETFs. I invest my 401K money with Vanguard 500 Index Fund Admiral Shares. My ETF investments are with Vanguard Real Estate ETF and Vanguard High Dividend Yield ETF. Yiu can pretty much surmise that I lean toward Vanguard funds. It’s pretty much a hands-off situation with those investments. I just invest more when I have the funds available and make sure I buy at the lowest price possible. That’s not saw that I don’t review the status of those funds but I don’t feel I have a need to be tinkering around with them.

I also have money invested in a mutual fund with my bank, FT Innovative Technology (FKUVBX). Again, I don’t concern myself as much with the share price as I am with the dividend payout. Especially with the mutual fund because the you need a minimum/increment of $1000 to add to the fund. This, to me, is the one drawback with mutual funds. At this time I can’t come up with $1000 to add to the fund. My investment fund is increased by $60-$200 at a time. Whenever I transfer any amount into the investment account, I like to have the money invested within a few days. I prefer to have my money working for me instead of just sitting and “collecting dust”.

So, to recap my basic strategy:
1. I want to add money into my investment funds in order to have funds available to increase my current holdings or to take advantage of a unique opportunity.
2. I want to invest in stocks that have a high dividend yield.
3. I prefer individual stocks to be priced below $20/share and ETFs to be priced below $100/share. The purpose here is to maximize the number of shares owned. I will trade off a higher price per share for higher dividend yield.
4. In the short term (within the next 5 years), reinvest the dividend back into the stock/fund. Grow the amount of shares owned.
5. View drops in price for shares as opportunities to increase number of shares owned because dividends are paid per share.
6. Keep a watchful eye on the declared dividend amount. If a company reduces the amount paid twice in a row, stock is a candidate for replacement. This only applies to individual stocks owned. Mutual funds and exchange traded funds are managed for you.