Collecting capital to fuel your investments Before you can invest in anything, you need some cash. . Subtract 3 percent for inflation, and stock appreciation alone produced an annualized average return of only 2.5 percent. If you see CFP, CFA, or ChFC after an advisor’s name, that person has been professionally certified to have met certain education and ethical requirements, but none of these designations guarantees the person is a fiduciary. ✓ The new shares have a new purchase date. Some online brokers offer automatic investing with lower commissions and fees per trade, which is perfect for a dollar cost averaging strategy. Chapter 6: Choosing the Right Approach for You ✓ Is the stock down because it’s not in a sexy industry? Chapter 19: Buying and Selling Dividend Stocks: Where and How A trained, skilled, and experienced full-service broker who’s committed to serving your best interests can save you loads of time, energy, and worry while potentially boosting your portfolio’s earnings more than enough to cover his fees and commissions. Chapter 5: Setting Goals and Making Plans Saving for nest eggs and rainy days Everybody should have a little bit of saver in them so that they have some cash on hand to deal with necessities and emergencies. We stuck this material in a box (actually called a sidebar) for the same reason that most people stick stuff in boxes — to get it out of the way, so you wouldn’t trip over it. Knowing which companies qualify Companies in the utilities sector provide electricity, gas, heat, and water. ✓ More stable companies: Companies that pay dividends tend to be more mature and stable than companies that don’t. Invest $1,000, and all of that money goes toward the purchase of shares. Some companies may even let you set up automatic debits from your bank account to purchase shares on a regular basis. As I explain in Chapter 20, you have to be careful about your timing when you’re buying mutual funds so that you don’t end up paying taxes on profits that someone else collected. You have no assurance that the company is likely to pay dividends in the future (as in, after you purchase its stock). When the market closes, the fund obtains the endof-day price for every equity held in the portfolio and multiplies each separate value by the number of shares the fund holds of that particular equity to determine its value. Prior to investing in a REIT, consult a tax advisor to determine the net effect on your tax bill. If you really like the stock, a direct purchase may still be the more cost-effective way to buy shares. ✓ Earnings scandals: The stock market crash of 2000 also exposed the dirty underbelly of the bull market. Stocks that offer only capital appreciation through rising stock prices have little chance of providing a positive return when stock prices are falling. In the world of investing, conservative means careful. Big banks with many branches have economies of scale by spreading costs over a large network of branches. The stocks also need to meet certain liquidity requirements. www.Dummies.com/go/iphone/apps from your phone. Full-service disadvantages Enlisting the assistance of an expert always comes with a price tag. Chapter 5: Setting Goals and Making Plans. (That’s why stocks are also called equities.) After all, companies have to spend money to make money. In order to prevent a financial calamity with millions of retirees having no money, the feds have put programs in place to encourage citizens to start saving for retirement. Part III Exploring IncomeGenerating Industries S In this part . Every company is different, too, operating in a specific industry, offering unique products and services, and being managed to varying levels of success. In the following sections, I describe the unique tax advantages (and some drawbacks) of real estate investment trusts (REITs) and master limited partnerships (MLPs). Chapter 2: Brushing Up on Dividend Details Standard & Poor’s 500 Better known, as the S&P 500 or just the S&P, the Standard & Poor’s 500 Index holds 500 of the largest companies in the U.S., but not necessarily the top 500. They may indicate potential problems or opportunities, but they don’t reveal what’s causing those problems or making those opportunities available. Gaining two ways to win With dividend stocks, you have two ways to win: when the share value rises and when the company cuts you a dividend check, paying you a portion of its profits. ✓ No load: No-load funds charge no load when you buy or sell your shares. With a limit order, you know how much profit you want to earn, so you place a limit to sell your shares at the specific price that locks in that profit. Like any trust, a REIT has beneficiaries — the shareholders. ✓ High yields: Yield is the ratio of annual dividends per share to the share price. . You can find a list of the 30 Dow stocks at most financial Web sites, as well as TheWallStreetJournal.com and www.Djaverages.com. Chapter 22 Ten Dividend Investing Mistakes and How to Avoid Them In This Chapter ▶ Sidestepping buying pitfalls ▶ Relying on your own due diligence ▶ Managing your portfolio I n the world of investing, you can never completely eliminate risk, but you can reduce it by making more good decisions and fewer bad ones. ✓ Dollar cost averaging: Dollar cost averaging is investing a fixed amount of money at regular intervals (such as monthly) toward the purchase of a particular investment. Companies with large capital needs, such as utilities, financials, and real estate companies, realized this strategy was so advantageous to them that they encouraged investors to reinvest (continued) 207 208 Part IV: Checking Out Dividend Investment Vehicles (continued) their dividends by offering discounts of as much as 5 percent off the share price. Aliexpress Cheap Store Slovakia However, the banks that do come back will be much stronger. ✓ The tightening of regulation: Increasing regulation remains the major issue for utilities. If you don’t have contact information for the transfer agent, visit the company’s Web site. If the ratio rises, is it because the bank has no opportunities to invest the money and grow the company, or is it having a bad year? U.K. customers visit www.wileyeurope.com or call (0) 1243 843291. Unless Congress extends the deadline again, the dividend tax break ends on that date, and dividends go back to being taxed as ordinary income at rates up to 35 percent. . Deregulation led to more competition in the electricity industry. ✓ 12b-1 fee: ETFs don’t charge a 12b-1 fee — at least not yet — which saves about .25 to 1 percent of a fund’s assets.
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