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Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Quote:
Originally Posted by billjr
Teak and Brave Stranger....,I have lately been exploring a dividend type portfolio ...
BE CAREFUL.
You might consider some very large EFT's that specialize in Dividend returns.
Individual stocks can sink your boat in a hurry. (Bad news, bad CEO, a product recall / FDA charge...)
If you get into individuals stocks remember the benchmarks of no more than 5% in any one stock, and BE SURE to have your exit points and strategy in place BEFORE you buy. Then watch them like a hawk but stay true to your plan.
i consider all my individual stocks my speculations...i know im not smart enough to own just the right stock at just the right time,in just the right market sentiment in just the right sector..
even if i got all that right i still dont know what the competitors are doing...
one bad earnings report or missing by a penny can sometimes send you reeling in a tail spin......
theres enough market risk out there without me taking on individual company risk too.. but to each his own, some folks do well and thrive on that action.
Thank you all for your insightful advice. The next time I will need to make an investment decision will likely be tax time 2011 (when I make my IRA contribution for FY 2010). I will definitely take all these great suggestions and use the next year to educate myself on making the right decision. In the meanwhile, I'm stashing away as much as I can in the bank. A 1.29% interest rate sure sounds better than a big loss.
for ways of structuring what you own into good solid income streams without
risking selling anything volatile in a down market i suggest reading ray lucia's book ready set retire.... the 3 bucket system i tout alot works very well and lets you sleep at night .
in retirement its no longer about growing richer, its all about not growing poorer and having our nest egg last a lifetime.
I dont know if its already been mentioned, but there are different types of stock investments that arent so broad and dangerous.
If you want to go the fund way, maybe you should check out some dividend funds. You could also look at REITs, they have to distribute a certain percentage of money, which makes a number of them have pretty good returns. You could build a basket of low beta dividend stocks. Although theyd largely trace the market, over time they should pull closer to the historical average, and in addition, they will keep paying you a stream of income. Companies with consistant dividends are 9 times out of 10 pretty strong companies, so while your investment may snake up and down, there is very little chance it will fall below its fundamental price range, there are way too many funds looking to jump on stocks like that at those prices.
i consider all my individual stocks my speculations...i know im not smart enough to own just the right stock at just the right time,in just the right market sentiment in just the right sector..
even if i got all that right i still dont know what the competitors are doing...
one bad earnings report or missing by a penny can sometimes send you reeling in a tail spin......
theres enough market risk out there without me taking on individual company risk too.. but to each his own, some folks do well and thrive on that action.
There is actually nobody "smart enough" to read the market. People have been trying to figure out the magical equation since the stock market was conceived. They have developed all kinds of predictive models, and theyve got all kinds of confidence intervals, and they have mathematically been able to eliminate the maximum amount of risk, but they still cannot account for predicting what the market is going to do on any given day.
That said, invididual company speculation is still one of the biggest plays for big money. Most of the funds try to minimize risk exposure (outside of the ones that are perfectly patterned on the different indices), and obviously that dampens their overall reward potential as well.
I dont know if its already been mentioned, but there are different types of stock investments that arent so broad and dangerous.
If you want to go the fund way, maybe you should check out some dividend funds. You could also look at REITs, they have to distribute a certain percentage of money, which makes a number of them have pretty good returns. You could build a basket of low beta dividend stocks. Although theyd largely trace the market, over time they should pull closer to the historical average, and in addition, they will keep paying you a stream of income. Companies with consistant dividends are 9 times out of 10 pretty strong companies, so while your investment may snake up and down, there is very little chance it will fall below its fundamental price range, there are way too many funds looking to jump on stocks like that at those prices.
That darling dividend paying etf of wall street DVY got destroyed in the downturn falling more then the indexes ... these stocks are so sensitive to changes in dividends when they are cut or eliminated that the downsides can be a real issue. i dont consider any equity investments today any lower or higher in risk because of dividends.... as long as dividends are rising these stocks out perform but when markets are falling all bets are off in my eyes
That darling dividend paying etf of wall street DVY got destroyed in the downturn falling more then the indexes ... these stocks are so sensitive to changes in dividends when they are cut or eliminated that the downsides can be a real issue. i dont consider any equity investments today any lower or higher in risk because of dividends.... as long as dividends are rising these stocks out perform but when markets are falling all bets are off in my eyes
Obviously having dividends cut are a problem, then again, thats why you get companies that have been paying them forever, and arent engaged in speculative activities (such as the banks were).
The simple act of paying a dividend doesnt reduce the risk of the stock in itself, but it does two things, mainly provides a stream of income, and if taken in cash and held in cash, would reduce the risk of the total investment, as the cash dividends would help pad any drop in share price.
How you reduce the risk is by getting low beta stocks paying decent consistant dividends.
well we dont want to discuss this over and over but the fact is the dividends pad nothing when the stock is dropping... it just magnifies the drop as with each dividend payment the stocks price is automatically adjusted downward by the same amount.. its no different then a mutual fund dividend...
in a rising market you may not notice the adjustment as it gets lost in the market action but when things are falling it merely adds to the price drops.
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