I am no stock market guru-but I will tell you what I am doing.
If it makes sense to you-you may check it out.
Let's face it-short of working 2 or 3 jobs or buying real estate(with all the headaches of managing investment property)-the stock market is the only game in town.
CD's and money market-you will be lucky to get a 3% yield-inflation makes that a negative instead of a positive.
There are many ways to make money-or lose money in the market.
The conventional investment scheme is too invest through some mutual fund-where someone who supposedly knows what they are doing picks stocks-and buys or sells stocks to create an increase in your account value.
Okay, so your account value went up-now what? You are probably fully invested-or at least fully invested in the market to the extent you feel comfortable with. To invest more-you have to sell something-then buy something else. Stocks have a "run"-they increase in value until the price is high enough so that investors no longer see them as a bargain-after which they trade sideways or decrease in value. To consistently profit you must pick the right market sectors, the right stocks in each sector-and know when to buy-and when to sell-all this is very complicated-and even those who know what they are doing-get it wrong about as often as they get it right.
Okay, let's assume that you picked the right stuff-and you made some significant money-but you didn't really make anything-why-because you haven't sold the stock. That stock can go down faster than it went up-so your gains are strictly on paper. You are investing so that you have money to pay the bills in retirement-but to get the bucks-you have to liquidate the stock. The market is up and the market is down-if your money needs happen to coincide with an up market-lucky you-if the market is down and down big time-then you are going to have to work longer.
Since the whole purpose of investing is for income in retirement-it just makes sense to invest for income. Stocks that pay dividends tend to be less volatile-are usually paid by older, larger, well established companies with very large cash flows-that don't need that cash flow for expansion.
Dividends don't lie-they are money in your pocket-to spend to reinvest in that stock-or to buy another stock. You have money coming in to invest-if you buy more dividend stock your dividends increase-which gives you more money to invest-and so on-and so on.
If the market takes a dump-you still have those dividends coming in-which allows you to purchase more dividends at a lower share price. You are compounding your money at an even faster rate-because the "yield" is higher at the lower share price. Yes your account balance goes down-but if you picked out good companies-you are setting yourself up for even larger profit when the market comes up.
Because the market is down-coming up quick-but still well below its highs a year ago-you can easily get yields of 6-7%. As the market comes up-these yields get smaller-but your money is locked in at this higher rate.
The little known market-most people don't know that much about this segment of the market-CEF's,MLP's,Reits, etc.
CEF-CLOSED END FUND
MLP-MASTER LIMITED PARTNERSHIPS
REIT-REAL ESTATE INVESTMENT TRUSTS
These types of investments are all about dividends-their whole reason for
existence is paying dividends. Many of these pay monthly dividends. When the market was at it's peak-most of these paid around 6%-now yields are as high as 20%
Risk-if you want to make money-you have to take some risk-but you can limit your risk through diversification. It doesn't really make any difference whether one fund pays me $100 per month-or four funds pay me $25 each-except I have spread my risk out-and thereby reduced it.
You can check out some of these investments at ETF.com-if you are interested you read up on these investments-so you know how they work.
I started doing this back in October-I have 3 accounts(IRA,ROTH IRA, and one composed of mostly Tax Free Municipal Bond Funds)-have have been reinvesting my dividends every month-I now own 1000's of shares-in 37 different funds. My monthly dividends are about $1500 per month-and growing very month-I plan to continue this throughout retirement.
I plan to check out the ETF.com website you mentioned. Your point about dividends is well taken. Again, I am only familiar with mutual funds, but in general, I would think this would be a good time to start buying, whatever the investment vehicle is.
Im new to this board but i was able to get a financial advisor to help me for free on my portfolio by logging onto www.annuityinvestorsonline.com
I do agree there are investments like real estate investment trust, however i was more concerned with safety of my principle with growth. They placed my holdings in a security that yields 15 percent, hope this helps.
