Profitable investing involves practical thinking. It also involves finding ways to keep it simple. There’s a lot to remember as an investor. Once upon a time, investors lacked the data required to make informed decisions. Today, we are drowning in data.
How do you sort out the information needed to make right choices you’re your money today, that will lead to better outcomes tomorrow?
There is one good place to start—and it’s a rule that never changes. This rule applies to the stock market, the bond market, and the real estate market, and here it is: Demand drives price. If people suddenly don’t want what you own, you lose. If people can’t get enough of what you own, you win.
Investing in Stocks Wisely…
Now, let’s talk about investing in stocks wisely–getting it right by avoiding common mistakes. There are several approaches that are working right now in this generally rising market.
Method #1: You can invest in the companies that have made money over the last decade and continue to make money because of the business they are engaged in. For example if you surmise that people will always need to eat food, heat and cool their homes, communicate with each other, store data, move from point A to point B, entertain themselves, heal their wounds, treat their illnesses, buy or rent homes, and keep their surroundings clean, you can invest in companies who are expert leaders in those industries.
Let’s face it–these industries are not going away for at least a hundred years. That likely suits your time horizon just fine.
So, how do you invest wisely in these areas of our modern world? Choosing to own a piece of companies that have the market cornered in each area is one prudent approach.
The demand for these services and products best serving human needs in these areas could be good investments over the long haul. For at least part of your investment portfolio, it may be wise for you to hold well priced companies that are leaders in these areas, AND, that pay you a dividend to own them, come rain or shine.
The IQ Wealth Black Diamond Dividend Growth™ Portfolio does just that. The portfolio seeks to discern the most profitable established companies in these sectors, plus several others.
But it doesn’t stop there. It selects only those companies that reward owners of their stock with the PAYMENT OF A STEADY DIVIDEND. Going one step further, the portfolio selects and keeps only those companies which have INCREASED that dividend every single year for a minimum of ten consecutive years or longer.
It can be thought of as a more conservative to moderate strategy because the goal is to invest in what Warren Buffett refers to as “virtual monopolies” in their categories. If you want to own companies that have the best mousetrap and firm grip on market share, this strategy is for you.
A Word of Warning
A word of warning to thrill-seekers, however: These may be somewhat slower-growing companies. That said, the growth can be steadier over time, and is based on an OLD-FASHIONED CONCEPT: owning only those companies profitable enough to keep paying a larger dividend every year, come rain, shine, or market crash.
Companies can cook their books to look more profitable, but DIVIDENDS don’t lie. They are cash on the barrelhead.
In the world of sports, we have often heard the phrase that “defense wins championships”. Growth and momentum stocks are fine—as long as they have growth and momentum. Value stocks, on the other hand, keep churning out profits. They pay you to own them in cash, and trade on their ability to keep doing just that.
The Good News
The good news is that you can hire professionals who will not only select companies meeting these strict guidelines in the beginning, but who will also toss a company that fails to live up to the rules.
Crashes and setbacks happen. It’s important to know how investments you are considering performed during recent recessions.
The stocks in the Black Diamond increased their dividends in 2008 and 2009 while the stock market was melting down. The companies kept on selling necessary goods and high-demand services for a reasonable profit in every town in America and many places around the world. Stocks in the Black Diamond can be considered value stocks because they are built around solid business fundamentals and good-looking balance sheets.
Growth and Moderate Risk
If you are looking for a moderate risk way to grow future wealth that pays you in cash—explore the IQ Wealth Black Diamond Dividend portfolio. It is an excellent complement to a smarter financial bucketing strategy. You want to skate to where the puck is going, not getting stuck on where it’s been.
Looking ahead to what could be a turbulent decade, it is decision time. How do you invest? Where do you invest?
Those questions can best be answered with a third question: WHY are you investing? Is it to get rich by next Thursday, or to steadily grow your financial reserves over time? Are you looking for income? Safety? Liquidity? It’s time to get serious about identifying your goals and setting up buckets to address each of your needs. The purpose of your money dictates its placement.
With a bucketing strategy, you can insulate yourself from major crashes and recessions by keeping ample cash equivalents in one bucket, fixed income retirement annuities in a separate bucket to address safety, liquidity, and lifetime secure income.
In a third bucket, your growth bucket, consider an allocation to dividend growth stocks (like the Black Diamond Dividend) and/or an allocation to technology companies that will take us to the future, wherever it is going (the IQ Wealth Blue Diamond Dividend + Growth.) Technology investing is Method # 2. More on the Blue Diamond and the Blue Alpha in the next post.
Steve Jurich is an Accredited Investment Fiduciary®, a Certified Annuity Specialist®, and a Kiplinger Wealth Creation Contributor. His popular radio show Mastering Money™ can be heard daily at 8am & 11am on Money Radio in Phoenix. Podcasts here.