It appeared investors were buying into a weekend global coordination event, as the markets are maintained a positive bias throughout most of today’s session.
Financials were finally able to participate in the upside as we saw gains for the likes of Deutsche Bank (DB), Bank of America (BAC), and Morgan Stanley (MS). A positive Wall Street analyst call had shares of Oracle (ORCL) posting gains on the day. Energy stocks also rallied following news that billionaire Carlos Slim has taken a stake in shares of oil producer YPF SA (YPF). Stocks like Chevron (CVX), EOG Resources (EOG), and Schlumberger (SLB) paced the gains for the sector.
In the latest numbers out from the Department of Agriculture, the average middle-class family who had a child in 2011 will shell out $234,900 to keep it fed and a roof over its head for the next 17 years. The data included costs totaled from housing, food, transportation, and of course, education.
For many future families, the onus will be on saving early and often. Investing in assets that produce income will also be a key practice for successful families. How can we best achieve the results needed to not only pay for a child’s education, but also for one’s retirement? The answer is fairly straight-forward: invest in quality dividend-paying stocks that have a history of increased payouts and solid businesses that can ride out different business cycles.
The powerful force of compound interest can help investors reap big rewards over time. Companies are raising their dividend payouts more frequently than ever these days, and the size of the hikes are getting more generous. You can bet company executives are starting to realize a good dividend payout can do wonders to put a floor under a stock’s price. Many companies are also looking to eliminate much of the day-to-day volatility that can make investors’ heads spin.
The long-term benefits of dividend investing are enormous, even if you have minimal capital to get started. Let’s highlight some examples below to illustrate the power of dividend stocks.
Investor #1 starts investing $5k a year at age 25 and does so for 40 years ($200K total invested) in Bank CDs, money markets, etc. averaging 3% a year. After 40 years, this person’s nest egg becomes worth just over $652K.
Investor #2 starts investing just over $4K a year at age 45 and does so for 20 years ($81K total invested) in dividend-paying stocks that historically average an 11% annual return, this person’s nest egg becomes worth over $653K.
Investors #3 starts investing $5K a year at age 55 and does so for 20 years ($100K total invested) in dividend-paying stocks that historically average an 11% annual return, this person’s nest egg becomes worth over $806K.
As you can see, compound interest is a very strong force when it comes to putting money to work over a period of time. Also, you will notice the danger of being too conservative with your money (as Investor #1 was). They had the right idea is starting young, but they chose too conservative an investment road. Lastly, you see that age is not really a factor when it comes to being invested properly. This example should inspire many individuals who make the mistake of thinking it’s too late to make a difference for your retirement.
As mentors to the next generation, it is our job to get them to understand investing is a marathon, not a sprint. The sooner you explain how compound interest works and why dividend stocks can be a great strategy for decades, the better off our young folks will be during their financial lives.Most of the Time, You Can’t Press “Rewind”
New York Mets pitcher R.A. Dickey today will hear the decision on his appeal to Major League Baseball. You see, Mr. Dickey recently threw a one-hit game because of a controversial first inning call. The official scorer of the game ruled a first-inning chopper to third a hit, while some feel it should have been an error. Had it been scored an error, Dickey would have pitched only the second no-hitter in Mets history.
For investors, pressing the “rewind” button usually isn’t an option. Every day that goes by without executing a wealth-building game plan represents time that cannot be retrieved.
Regardless of where we are in an economic cycle, everyone needs a plan. We still receive emails from Dividend.com readers sitting in cash who continued to watch the markets from the sidelines. These folks are confused about when they should start putting money to work. They want to time the markets perfectly. They’re afraid of the next big crash. They think the markets have run up too much already, and that they’ve missed the boat.
Ironically, when the markets the most overbought is when investors relax the most. Flip the script to when markets are slumping, and the fear index jumps dramatically — that’s when when investors tend to make bad mistakes. Their biggest mistake is thinking they can time the markets’ ups and downs. Dividend investing requires a steady focus on income-building stocks that can sometimes fall to even more attractive levels. However, some names won’t be as attractive with lower prices, simply because the company’s near-term profits may be more in question than the names that remain on our Best Dividend Stocks List.
Just because you can’t hit “rewind” doesn’t mean it’s too late to start investing. People often underestimate how long they need to have money working for them. Invest as early as you can and as long as you can. Finally, avoid letting your age trap you in under-performing investments — especially ones where yields (bank CDs, savings accounts) are detrimental to fighting real-life inflation.Our Beat The Markets with Dividend Stocks eBook Has Arrived!
We just debuted our brand new 275-page eBook, exclusively on Dividend.com! In this digital-only book, we look ahead to 2012 and the main factors that could affect dividend investors. A $39.95 value, the eBook is a free download for paid Dividend.com Premium subscribers.
Beat The Markets with Dividend Stocks contains a full economic forecast for 2012, including in-depth analysis on 65 of the biggest dividend stocks out there. It’s a great way to get prepared for your investing next year! So head over to the Dividend.com Premium homepage now to download your copy.A Look to Next Week and a Weekend Preview
Looking ahead to next week, earnings will continue to be light, but we are expecting results from FedEx (FDX), Discover Financial Services (DFS), and Oracle (ORCL), just to name a few. The focus will likely be on the economic data as well as the latest Wall Street analyst calls.
Be sure to catch up with our latest watchlist updates this weekend on Dividend.com Premium, including reports on earnings/story stocks, analyst upgrades/downgrades, dividend ETFs, and much more. And as always, you can view our current recommendations on our industry-leading Best Dividend Stocks List.
Thanks for reading, and I’ll see you this weekend! P.S. Please pass this e-mail on to someone you think can use some financial motivation as well as being kept in the financial news loop that could affect them.