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Inflation is everywhere you look. The price of gas, food, and just about everything you need and want to live–all rising relentlessly. The “experts” say it is just temporary. Here’s the problem: had the current administration taken action to foresee and preempt supply chain issues, things might not look so dicey. And, if Congress wasn’t looking for ways to weigh us down with trillions of dollars of new debt, we could be a tad more optimistic.

But optimism–like hope– is never a strategy, especially for retirement money. As philosopher William Arthur Ward once said, “The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”  It’s time to adjust the sails.

Your financial plan can get blown off course in a major way by inflation

For the past ten to fifteen years, inflation has been rather tame. De-flation was more prominent. Deflation is when prices of things come down, and they did, courtesy of cheap goods from China and the move toward automation. During deflationary times, interest rates are forced lower to stimulate borrowers to spend. When the Fed is trying to get the economy out of a slump, it typically moves to “stimulate” the economy by lowering rates even further and adding to the money supply.

The balance between INflation and DEflation is touchy.

Our economy may be in the process of switching from deflation to inflation

Why is inflation a problem for those planning for a comfortable retirement? Obviously, the cost of things will be far higher in the future than you might have planned–so you will need more income than you think. That could mean you may need to change course in the way you think about money and investments.

How To Invest For Income That Can RISE With Inflation

For many decades, smarter investors preferred dividend stocks over growth stocks. But because the Fed has over-stimulated the economy and injected so match capital into the markets, growth stocks have taken over. But when the facts change, smart investors change. Right now the facts are pointing a clear direction: inflation is a risk that can no longer be ignored. Conclusion: It may be time to get a little old fashioned with your money and return to the common sense of investing in rock solid dividend paying stocks.

Investing in companies that RAISE their dividends every year is a proven, math-based strategy to battle inflation

Investing, DONE WELL,  is a long term proposition, so it is important that you feel good about whomever is managing your assets.  How do you KNOW if your money is being managed well right now? Well, there are few questions to ask:  First, do you TRULY understand the STRATEGY being used by your manager? Have they taken the time to make sure you understand what class of stocks will be bought and which avoided?  You don’t want to “micromanage your manager”, but you should know what their investment style will be, so you can keep your expectations in line.

The future is arriving daily–your retirement strategy should include a way to secure higher amounts of income in the future

Make sure your investment strategy is consistent with your view of the markets, the economy, and your tolerance for risk.

You want the strategy to be consistent, and to be ready to handle the ups, downs, recessions, and inflationary cycles that are bound to occur over time.

That brings us to the next question: Does the strategy truly make sense to you, or are you simply going with the flow? This is a tough one because if you want to delegate a task, it requires confidence in the person you are dealing with. You may truly not want to know all the details of every aspect of the management process—THAT after all, is WHY you hire someone.

A large sailboat can look small on a big ocean when a storm hits. The market is an ocean of money. Your portfolio needs a strategy to navigate the storms and rise above trouble.

Why Not Just Throw Your Money Into An Index Fund? There are some dividends there, right?

Indexing is sold as a cure-all for investors. But todays S & P 500 index looks nothing like that of 20 years ago, when dividends averaged 4% or more. True there are “some” dividends to be had in an S & P 500 index fund, however the dividend yield of the S & P has fallen in a big way. Because the big indexes have added non-dividend paying tech stocks, the dividends are never as strong in an index fund as they are in a clearly defined, intentionally managed dividend portfolio. 

You may find, like many investors that, that investing where there are strict rules about the quality and size of the company, the investment grade status of the company, the price to earnings ratio, and the rate of growth of each company’s dividend is part of the strategy.  You likely would also prefer owning a portfolio with the requirement that the dividend of each company in the portfolio GROWs every year.  The IQ Wealth Black Diamond Dividend Growth Portfolio employs all of these rules.

The IQ Wealth Black Diamond Dividend Growth portfolio invests strictly in companies that raise their dividends every year

Index funds no longer pay enough dividends. While many people are attracted to the low fees of Index funds, the loss of dividends is immense by comparison to a well managed dividend GROWTH portfolio.

Once upon a time, the dividend yield of the S & P 500 hovered in the range of 4%. Today it is 1.49%. The annual growth rate of those dividends?  Standard & Poors reports that the dividend growth rate currently of the S & P 500 is sad: only 0.69 PERCENT!

By contrast, the dividend yield of the Black Diamond Dividend Growth portfolio is well over 3% at entry but is designed to grow to 5%, 7%, and 10% during the first five to ten years of ownership. Because we only select companies which raise their dividends every year–targeting a 7% growth rate–you fight inflation with a steadily rising dividend, even when the market falls. The longer you own the portfolio, the higher your dividends. Fight inflation with the Black Diamond—come and see how.

We believe we can prove that a much higher dividend yield—with a “pickier” selection of stocks giving off higher dividend growth rates — can result in significant Alpha for the investor.  Our fees are low: less than 1% annually all in, with no junk fees and no transaction fees.  A recent Morningstar report comparing the stocks comprising the Black Diamond, with dividends reinvested vs. The S & P 500 with dividends reinvested through July of 2021 showed this result:  $100,000 in the Black Diamond would have grown to over $963,000. $100,000 in the S & P would have grown to approximately $512,000.

With a combination of Dividend Growth stocks and Next Generation Fixed Income annuities, you can dance more and worry less.

Another key factor: you want to own a strategy that can actually benefit from corrections and bear markets

When the market is down, and you own a high grade dividend growth portfolio, you are “scooping up bargains” when markets fall. Your consistently growing dividends keep buying you more shares of quality companies at lower prices. Because you are getting cash on the barrelhead every quarter–you become a more systematic investor. You keep on accumulating higher quantities of ownership of companies that are leading their industries.

The Black Diamond seeks to invest in the leading companies in the most necessary and relevant industries. These are companies that Warren Buffett has always referred to as “Virtual Monopolies.” They have better “mousetraps”, a better distribution system for getting them into the hands of consumers, and better management that concentrates efficient management, profits, the bottom line, and consistently growing dividends.

How To Battle Inflation With Dividend Growth

Although inflation had been in check for years, that is no longer the case.  In the borrow-and-spend environment we find ourselves in,  investors need a way to battle inflation in the years ahead. In the past, gold was a possibility, but it is flat. Cryptocurrency has stolen its thunder apparently. But who in their right mind would throw a major part of the retirement portfolio into volatile cryptocurrency?

A better answer with a proven track record

Investing in a solid portfolio of companies that perpetually raise their dividends gives you a hedge against the rising cost of living. At work, its always nice to get a yearly raise from your boss. When you are  the boss of your money, one proven way to get a raise every year is with a high grade dividend growth portfolio, wherein the term “growth” refers to the growth of the dividend every year. With the IQ Wealth Black Diamond Dividend Growth portfolio, each company raises its dividend every single year without fail, or it is eliminated.

Steve Jurich is an Accredited Investment Fiduciary and heads IQ Wealth Management In Scottsdale. He is the designer of the Black Diamond Dividend Growth portfolio, custodian Fidelity Institutional.