Investing101 Archives - Page 4 of 6

Why you should consider Dividend Investing

The average savings account pays only .50 percent interest with traditional banks and 1% with online banks. When you compare these paltry rates to that of dividend stocks the average is closer to 2.5 – 3%, wouldn’t you want to make your money work harder for you? The only reason money should be placed in a savings account at a traditional bank is if the money will be used within 1 year to buy something you are saving for, otherwise dividend stocks are very liquid and provide you a premium above any other alternative.

Take for example a stock like AT&T (T) depending at what price you purchase this bad boy, your yield will vary from 3-6% and is protected as long as AT&T is in business. If a number like this does not intrigue you or make you second guess why you have your money earning so little yield, then something is wrong. My example in this post is AT&T, which has been in business for over 25 years, but believe me they are not the only dividend stock out there giving away 3% plus in interest.

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Investing When the Markets are High?

If you are investing when the markets are high you could be setting yourself up for major losses in the future. Many people think backwards when it comes to investing, they buy when stocks are going up instead they should be buying when stocks are crashing. Reason I say this is because the facts do not lie, when things are going good in the markets, people want to ride the roller coaster and get some easy profits. Billions and Millions of new investment money is thrown into the markets when things are going good, and when things are gloomy in the markets people run for the hills.

But if you think about it in its simplest form, would you buy milk for $7 dollars because you noticed the price going up? The answer is no because milk usually costs $3.49 a gallon so why would you pay double for the price for milk? Unless there is a shortage of milk nobody should ever consider paying more for it, and the same should go for stocks. Three years ago Verizon stock was listed for around $30 dollars a share and now it is steadily close to $52. I personally prefer to pay the $30 dollar per share price, what about you? Not only do you risk buying at the high point only to see capital most likely drop, your yield will be less if it is a dividend paying stock.

OK now that we got that out-of-the-way and you fully understand when people should be buying. What do you buy when the markets are high? The options are index funds, ETF’s, REIT’s, bond funds, and stocks that are trading in the lower range of the 52 week moving average. As of right now the picking might be slim, but the deals are out there. How can you find these investments? Look in Google Finance, Morningstar, or CNN Money. These sites offer a ton of financial information on where to place your money when things are bullish. But I am going to give you some examples of where I would put my money when the markets are high.

Investing When the Markets are High:

SDIV – ETF

GOV – REIT

GE – Stock

Pimco Bond Family – Bond Funds

These choices are either priced relatively low or not affected as much price wise by the recent bull run. For example GE back before the major recession was trading between $40-50 dollars a share. As of this posting the stock is currently trading at 21 dollars a share. The stock still has a long way to go to even come close to trading at those high levels. REIT’s are always a good buy because they pay such a high dividend yield, this particular investment is still trading in the 20 dollar range, compared to some of its competitors who are over $45 dollars a share. The Pimco bond funds have ticked up a bit in price since 2010, but not as crazy as the blue chip mutual funds, you can safely park your money in those bond funds and wait to see if the market corrects itself, (aka crashes) then at that point you will move back into equities.

Did you expect me to list Bit Coins, gold or maybe Greek debt above? I hope not, because those types of speculations are for the birds. When it’s all said and done you can always just save it in an online account and have the cash ready to strike when the next market crash hits.

Comment if you have a favorite stock, bond, ETF, REIT, or Mutual fund you invest in when the markets are high.

Rich Uncle EL

Stocks Vs Bonds

Hey guys do you struggle to decide between stocks vs. bonds when you are about to invest. Well you have to ask yourself a simple question? Do you want to be an owner of a company or a liability to a company. If you own stocks you are a minority owner by holding a specific amount of shares in a public company. This also means that you shall have voting rights for major board approved and shareholder allowed company wide decisions every year. I recently received a proxy for a company and two of the board members where being either reelected or replaced from one day to the next, depending on the shareowners votes. I have also received a proxy for me to vote and asked to approve CEO compensation packages. Stocks can also give you a quarterly dividend if you select a company that returns earnings to shareholders. But if you don’t then you will have to depend only on capital appreciation by way of stock price. Always remember buy low to eventually sell high.

If you own bonds the company owes you a specific amount for a specific number of years. In addition to this total amount owed to you, the company shall pay you Semi-annual coupon aka return on your investment. The average amount of years for a bond is either 10 – 20 years, but I have come across a few bonds that the term is 40 years.

If the company goes bankrupt bondholders have priority for getting their money back before stockholders something you should consider if you are deciding between the two investments. The majority of the time though most stockholders will never see a dime in a company bankruptcy situation. This is a brief synopsis between what it means for you as an investor. But if you want a more in-depth financial analysis between current stocks and or bonds see the links below.

CNN Money Article: Here

CNN Money Article about investing in Apple Stocks or Bonds: Here

I tend to invest in these in the order listed below:

Index Funds
Mutual Funds (10+ years of history)
Bond Funds (Monthly dividend)
Dividend Paying Stocks (Quarterly Dividend)
REIT’s
Bonds (Series EE and II only, I have never bought an individual Bond)

So this is my preferred investing style, but as I get more comfortable with investing and my discretionary play money grows, I will take a chance with individual bonds one day. I have bond index funds and bond mutual funds that give me the diversification I need with bonds as of this moment. I understand and have heard that municipal bonds offer tax advantages and a reliable income stream for many retirees. This is another consideration for my future portfolio to help me retire early. As of right now I am ok with the index funds, mutual funds, stocks, and Reit’s that I own.

What do you think about stocks vs bonds? Which do you prefer to invest in?

Rich Uncle EL

5 Steps to Prepare Your Finances for an Uncertain Future

This is a guest post.

Financial hardships can hit at any time. The best way to make sure you can weather the storm is to thoroughly prepare yourself for unexpected financial disasters ahead of time. These 5 steps will give you a solid financial foundation that can support you through an uncertain future.

Evaluate Your Budget

You must have an intimate understanding of your financial situation to prepare it for the future. If you have only a vague idea of what you spend on gas, groceries, bills, and entertainment each month, you may have a lot of work ahead of you. Comb through your budget until you can account for every penny you earn and spend. With the cold hard numbers in front of you, you may find many areas where you’ve overspent without knowing it.

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Portfolio Tracking by CNN Money

portfolio tracking by CNN Money

Would you give up all your investment / retirement account passwords to a website that is known for money and stock market news reporting? They track data from various sources; then report the findings eventually in random posts / articles. So how do you actually know if your portfolio tracking data will be safe? I think for me it is a real issue because I am always hesitant to trust another online entity tracking my accounts. It took me almost a year before I could allow myself to even sign up for Mint a few years back. Mint worked well and has a very respectable firewall and security features in place, but one issue I had all the time was several accounts did not link up correctly aka update when I would log on. The website left me with the wrong account info from time to time. I just got used to it, but maybe this service by CNN will not have the same bugs. (Fingers Crossed if I decide to sign up one day) Handling financial information might be a bit daunting, but Portfolio Tracking by CNN Money will help you keep up with your investments.

Details of the Portfolio Tracking by CNN Money:

– One View of all your Accounts: Sync and Track

– Real Time Quotes: Can help see buy and sell opportunities

– Your Portfolio Insights: Measure performance against Indexes.

Now CNN money wants to get all your passwords and help you keep track of all your investments, with some tools to help you become a better investor in addition to being your online portfolio manager. (They Say) How comfortable would you truthfully be, to allow them access to your precious retirement figures? What if they share your data with competing investment websites, who now continually pester your life with ads by email, hoping you will switch on over to their house of stocks. I appreciate the simplicity of this service, but I still feel some trepidation with releasing all that precious password info.

On another happier note, if they save your information by the last time you logged in, should that be considered another source of backing up people’s data. If an investment company happens to have a major computer meltdown and they were to lose all traces of your accounts, you can hopefully provide proof of the missing funds by asking CNN money to remember the last time you checked your accounts and the figures you held in those accounts. That is one of the positives I can see with this service, besides the stock analysis and stock market research data you can get from this service. It should be noted of course that the CNN service is just a portfolio tracking service (as well as offering stock analysis and research data), if you’re looking to actually trade stocks independently then you will need a stock trading platform such as this one offered by AVA Trade.

Many of you have already signed up with CNN money to track your stock and mutual fund accounts in 1 place, but if you have not, what other features might get you to sign up for a similar portfolio management service?

What additional concerns might you have that you can share?

Leave info about how Portfolio Tracking by CNN Money might benefit you?

Rich Uncle EL

Pic credited to: CNN

The Doom and Gloom behind News Media

Everyday does not go without the doom and gloom behind news media centralized on our nations financial conditions. I cannot tell you how many times I heard the term fiscal cliff in a span of 4 months and still counting, I am running out of fingers and toes. I ask myself why does all this doom and gloom crappy news sell or for that matter why do people want to hear it? I even got a random email from a coworker who could care less about his finances or being responsible with money, asking me what I thought of the fiscal cliff. I gave my explanation to him that it’s all hoopla based primarily on the elections. But that still doesn’t even begin to answer the question; why is there so much doom and gloom coming from all the media outlets and why do people care to hear it.

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Master Limited Partnership

Do you want to learn about an investing idea that you probably have never heard of? Well you have found the perfect place to get your knowledge up. They are called Master Limited Partnership companies. I like to refer to them as the connectors of natural resources to the people who use the resources. Why you ask? Because they own the pipelines and the technology to effectively extract gas, coal or oil from the ground and transport them to refineries.

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Dividend Stocks

I think that investing in dividend paying stocks needs to be a necessity for anybody who is serious about retiring early, wishes to gain wealth, and hopes to be a decent philanthropist in the future. Many people understand the concept behind dividend stocks, but at the same time are scared to pull the trigger and become an owner of a publicly traded company. Why you may ask?

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