Do You Have What it Takes to be a Stock Investor?

Are you suited to buy stocks? Do you have what it takes to be a stock investor? Kelly Wright (author of Dividends Still Don't Lie) defines six important attributes that you need to have in order to be a successful investor.

I highly recommend the book "Dividends Still Don't Lie" which is based on the original book "Dividends Don't Lie" by Geraldine Weiss. Without further delay here are the six important attributes, taken from "Dividends Still Don't Lie" (Page 16):

Stocks are the best investment for the investor who:

• Desires growth of capital and income
• Ignores the "noise" of the markets
• Recognizes and appreciates good value
• Has the courage to buy at undervalue
• Has the patience to hold until the value is fully recognized
• Has the wisdom to sell at overvalue

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What is Dividend Investing? Why Should You Do It?

Mike from The Dividend Guy Blog and Dividend Stock Analysis wrote a great blog post over at My Own Adivsor that I'd like to share with my readers.

Mike discusses the benefits of investing in dividend stocks, and my favourite the section on "Index Investing vs. Dividend Investing" is a must read.

Mike writes:

"I chose dividend investing is because I wanted to count on stocks paying me more each year. When you select dividend growth stocks, you can expect to see your dividend payouts being increased year after year accelerating your wealth.  It’s a great way to protect your money against inflation and to generate passive income month after month, quarter after quarter and year after year."

You can read the complete article here.

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Don’t Have Any Money To Start Investing?

I sometimes hear from folks that they would like to start investing but don’t have any money right now. It’s true that it takes money to make money, however you might be able to invest in dividend stocks without requiring any new money.

Do you currently have mutual funds in a registered account like an RRSP, 401(k), IRA, or an employer sponsored plan? If so, you could transfer those investments into an equivalent trading account.

You need a trading account in order to buy and sell stocks. An RRSP, 401(k), or IRA trading account will also allow you to buy and sell stocks. By keeping the investments within the same type of account you will be able to transfer the investments over tax free.

Too keeps things simple lets take a look at George’s story.

George doesn’t have any new money to invest, but he would like to start buying quality dividend paying stocks. George has been working for 5 years at the ABC Company and has accumulated $15,000 in his employer’s RRSP (similar to a 401k). Though his employer matches a percentage of George’s contributions into the retirement plan the investments have languished in the poor (high fee) mutual funds.

After taking the Simply Investing Course George opens a registered (RRSP/401k) trading account at his favorite financial institution. He then fills out a transfer form, and his favorite institution handles everything, they instruct the employer’s plan to sell the mutual funds, and transfer the money to George’s new trading account.

George can now begin investing in quality dividend paying stocks, all without putting up any new money for investing!

Every year, after George receives the employer contributions, he again fills out the transfer form and moves his money over to his trading account. George is now on the road to financial success!

Resources:

How to trade stocks in 401(k) or IRA.

8 IRA Rollover Frequently Asked Questions

Note: Please check with your plan adviser, financial adviser, or tax specialist to verify your local tax laws when transferring between registered accounts.

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Monthly Blog Roundup - Bringing You The Best of the Best

Here is the monthly blog roundup for January.

There are a some really good bloggers out there, and this is my opportunity to share with you the best of the best.

Enjoy!

Dividend Growth Investor, My Dividend Growth Stock Wish List 

Dividend Ninja, Paying Off Debt Versus Investing

The Dividend Guy,  Dividend Yield or Dividend Growth? 

I have had the honor of recently participating in the following financial carnivals, have a look:

Yakezie Carnival at Narrow Bridge Finance

Carnival of Retirement at Simple Budget Blog

Carnival of Financial Planning at Family Money Values

Finance Carn. for Young Adults at One Cent at a Time

Did you enjoy reading this article? If so, I encourage you to sign up for my newsletter and have these articles delivered via e-mail once a month...and it's free!

Do You Know When To Buy?

Everyone has heard the phrase “buy low and sell high”. But how do you know when a stock is priced low? In this blog post I show you exactly how to determine if a stock is priced low. But first you'll need to know these two terms: dividend, and dividend yield.

Dividend

A dividend is a cash payment made to shareholders. For example the current annual dividend for Johnson & Johnson (JNJ) is $2.44. So if you own 100 shares in JNJ you will receive $244 each year for as long as you own those shares, and as long as JNJ continues to pay out a dividend. The dividend is yours to keep; you can spend the money or re-invest it if you wish!

Dividend Yield

The dividend yield is the annual dividend divided by the current share price:

Dividend Yield = Annual Dividend / Current Share Price

Using JNJ as an example, we can simply calculate the dividend yield:

Dividend Yield = Annual Dividend / Current Share Price

Dividend Yield = $2.44 / $69.86

Dividend Yield = 0.0349 * 100

Dividend Yield = 3.49%

3.49% represents the return on your investment. If you invested $8000 in JNJ you would receive $279 in dividends each year:

3.49% of $8000 = $279

Yield Goes Up

What happens to the dividend yield when the stock price goes down? Let take a look, suppose JNJ’s stocks price drops to $50, $45, or even $30:

$2.44 / $50 = 4.9%

$2.44 / $45 = 5.4%

$2.44 / $30 = 8.1%

Notice that the when the stock price drops the dividend yield goes up. You want to buy low because the yield will be higher which means a higher return on your investment.

When is a Stock Low

The best method for determining when a stock is low is to compare the stock’s current dividend to its average (10yrs) dividend yield. When its current dividend yield is higher than its average dividend yield the stock is undervalued (priced low) and worth consideration. It shocks me to see investors and fund managers not apply this simple principle and continue to buy stocks when they are priced high, and then they blame the stock market for their portfolio’s poor performance.

Remember there are other things to consider before making a stock purchase. In my course I cover the 12 Rules of Simply Investing, the check for undervalue is just one of the 12 rules, but it the most important one. If a stock is not undervalued you should move on and not spend any more time in valuating it further.

Buy quality stocks when they are undervalued and you will become a successful investor.

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What is a Dividend Aristocrat?

A dividend aristocrat is a company that has paid dividends consecutively for 25 years or more. Standard and Poor's (S&P) maintain a list of US dividend aristocrats.

Dividends are key to investing successfully. Dividends are cash payments made to shareholders. Once a dividend is paid it can never be taken back.

If you had invested $100 at the end of 1940 in the stock market, this would have been worth approximately $174,000 at the end of 2011 if you had reinvested dividends, versus $12,000 if dividends were not included.

Dividends also provide an immediate return on your investment while you continue to hold your stocks.

This year the S&P Dividend Aristocrat list contains 51 companies:

• AT&T Inc, T    
• Automatic Data Processing, ADP   
• Bard C.R. Inc, BCR   
• Becton Dickinson & Co, BDX
• Bemis Co Inc, BMS   
• Brown-Forman Corp B, BF.B
• Chubb Corp, CB   
• Cincinnati Financial Corp, CINF   
• Cintas Corp, CTAS   
• Clorox Co, CLX   
• Coca-Cola Co, KO   
• Colgate-Palmolive Co, CL
• Consolidated Edison Inc, ED
• Dover Corp, DOV   
• Ecolab Inc, ECL   
• Emerson Electric Co, EMR
• Exxon Mobil Corp, XOM
• Family Dollar Stores Inc, FDO
• Franklin Resources Inc, BEN
• Genuine Parts Co, GPC
• Grainger W.W. Inc, GWW
• HCP Inc, HCP   
• Hormel Foods Corp, HRL
• Illinois Tool Works Inc, ITW
• Johnson & Johnson, JNJ
• Kimberly-Clark, KMB   
• Leggett & Platt, LEG   
• Lowe's Cos Inc, LOW   
• McCormick & Co, MKC   
• McDonald's Corp, MCD   
• McGraw-Hill Cos Inc, MHP
• Medtronic Inc, MDT   
• Nucor Corp, NUE   
• PepsiCo Inc, PEP   
• Pitney Bowes Inc, PBI
• PPG Industries Inc, PPG   
• Procter & Gamble, PG   
• Sherwin-Williams Co, SHW   
• Sigma-Aldrich Corp, SIAL   
• Stanley Black & Decker, SWK   
• Sysco Corp, SYY   
• T Rowe Price Group Inc, TROW
• Target Corp, TGT   
• VF Corp, VFC   
• Wal-Mart Stores, WMT   
• Walgreen Co, WAG

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My Dividend Retirement Plan

Well, this is isn't my dividend retirement plan, but it's very close. Dividend Growth Investor wrote a great post on his blog that I'd like to share with my readers. In fact, after I read his post I realized this is exactly what I would've written myself.

Dividend Growth Investor writes:

"I invest in dividend stocks, in order to generate a sufficient income stream, that would meet and exceed my expenses in retirement. Retirement to me is the point where my dividend income exceeds my expenses, which means that I no longer have to work for money. I am a big proponent of value investing, which is why I would only consider myself financially independent whenever the dividend income stream generated by my portfolio exceeds 1.5 times my annual expenses.

In order to get there, there are several simple, but crucial principles I need to follow."

Click here it read the complete blog post.

Thanks Dividend Growth Investor for sharing your story!

The Top Ten Posts of 2012

Happy New Year!

Here are my top 10 posts from 2012.

Investment versus Speculation

Mutual Funds vs Simply Investing

$321, 000 Lost to Fees

Long Live the Dividend!

My Best Investment Yet +275%

Top 5 Reasons Why Mutual Funds Fail

Paying Dividends Since the 19th Century

Saving money for a vacation, car, or house? Don’t put that money in stocks.

Do You Think Investing is Easy?

Everything You Always Wanted To Know About Simply Investing But Were Afraid To Ask (13 Top Questions!)

Image courtesy of Amver.

Monthly Blog Roundup - Bringing You The Best of the Best

Here is the monthly blog roundup for December.

There are a some really good bloggers out there, and this is my opportunity to share with you the best of the best.

Enjoy!

Dividend Monk, Railroad Stocks Appear Attractively Valued Across the Country

My Own Advisor, Great Canadian Dividend Paying Stocks – December Edition

Dividend Growth Investor, Top Ten Dividend Articles for 2012

Dividends4Life, Tuning Out Market 'Noise' With Dividend Growth Investing

Dividend Growth Stocks, 6 Stocks Expected to Grow Their Dividends in 2013

I have had the honor of recently participating in the following financial carnivals, have a look:

Carnival of Retirement at Finance Product Reviews 

Carnival of MoneyPros at Vanessa's Money

Y and T's Weekend Ramblings at Young and Thrifty

Yakezie Carnival at My Family Finances

Carnival of MoneyPros at Life Insurance by Jeff

Yakezie Carnival at RamblingFever Money

Carnival of Retirement at Mo' Money Mo' Houses

Carnival of Financial Planning at Master the Art of Saving

Carnival of MoneyPros at Debt Black Hole

Yakezie Carnival at Making Sense Of Cents

Carnival of Financial Planning at Thriftability

Did you enjoy reading this article? If so, I encourage you to sign up for my newsletter and have these articles delivered via e-mail once a month...and it's free!

Are We in a Bull or Bear Market?

A reader recently asked:

"I've heard about Bull and Bear Market... I wonder what's the definition of each one? and how do we recognize each one?"

Great question!

THE SIMPLE EXPLANATION:

- A bull market occurs when the market as a whole is rising. For example the DOW is at 12, 750 today, over the next several months or years if the DOW continues to rise say 13,000 13,500 14,000 then we can look back and say we were in a bull market.

- A bear market occurs when the market as a whole is declining. For example the DOW is at 12, 750 today, over the next several months or years if the DOW continues to decline say 12,000 11,500 10,000 then we can look back and say we were in a bear market.

- The definition of market depends on which market you are looking at, New York Stock Exchange (NYSE), the Dow Jones 30 companies (DOW), the Toronto Exchange (TMX), London Stock Exchange, Tokyo Stock Exchange, Nikkei Index....

- Therefore you could have a situation where the DOW is in a bull market, but the Tokyo exchange is in a bear market.

- No one can say for sure if we are currently in a bull market of bear market. This determination is usually made after the fact, by looking at the historical information and then saying "oh yeah 2006 to 2009 was a bear market".

- Should you care if we are in a bull market or bear market? Not really. Because regardless of what market we are in there will always be quality undervalued companies to choose from. Focus on quality undervalued companies and you will do fine.
Generally speaking when you are looking to buy stocks you would want to be in a bear market (more undervalued companies to choose from). Alternatively when you are looking to sell stocks you want to be in a bull market (prices will be high).

- No one can time the market, so forget about even trying. Focus on buying quality undervalued companies.

THE LONGER EXPLANATION:

Definitions from Wikipedia:

Bull Market
A bull market is associated with increasing investor confidence, and increased investing in anticipation of future price increases (capital gains). A bullish trend in the stock market often begins before the general economy shows clear signs of recovery.

Examples of Bull Market
India's Bombay Stock Exchange Index, SENSEX, was in a bull market trend for about five years from April 2003 to January 2008 as it increased from 2,900 points to 21,000 points. Notable bull markets marked the 1925-1929, 1953–1957 and the 1993-1997 periods when the U.S. and many other stock markets rose; while the first period ended abruptly with the start of the Great Depression the end of the later time periods were mostly periods of soft landing, which became large bear markets. (see: Recession of 1960-61 and the dot-com bubble in 2000-01)

Bear Market
A bear market is a general decline in the stock market over a period of time.[5] It is a transition from high investor optimism to widespread investor fear and pessimism. According to The Vanguard Group, "While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period."[6]

Examples of Bear Market
A bear market followed the Wall Street Crash of 1929 and erased 89% (from 386 to 40) of the Dow Jones Industrial Average's market capitalization by July 1932, marking the start of the Great Depression. After regaining nearly 50% of its losses, a longer bear market from 1937 to 1942 occurred in which the market was again cut in half. Another long-term bear market occurred from about 1973 to 1982, encompassing the 1970s energy crisis and the high unemployment of the early 1980s. Yet another bear market occurred between March 2000 and October 2002. The most recent examples occurred between October 2007 and March 2009, as a result of the global financial crisis.

No one knows which market we are currently in (these articles don't really reach a conclusion):

Are We in a Bull or Bear Market?

3 Reasons Why The Bear Market is Back

Secular Bull And Bear Markets

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I've heard about Bull and Bear Market... I wonder what's the definition of each one? and how do we recognize each one?