It isn't how much you make
. . .It's how much you keep!
Archive for Stocks
Periodically, you should reassess your portfolio, finding ways to increase your comfort level with your stock investments. Consider the following
tips:
Develop a stock investment philosophy. Approach investing with a formal plan so you can make informed decisions with confidence, knowing you have carefully considered your options before investing.
Remind yourself why you are investing in stocks. Write down your reasons for investing in each individual stock, indicating the long-term returns and short-term losses you expect. When market volatility makes you nervous, review your written reasons for investing as you did. That reminder should help keep you focused on the long term.
Monitor your stock investments so you understand the fundamentals of those stocks. If you believe you have invested in a company with good long-term prospects, you are more likely to hold the stock during volatile periods.
Review your current asset allocation. Revisit your asset allocation strategy, comparing your current allocation to your desired allocation. Now may be a good time to rebalance your portfolio, reallocating some of those stock investments to alternatives.
Determine how risky your stocks are compared to the overall market. You can do this by reviewing betas for your individual stocks and calculating a beta for your entire stock portfolio. Beta, which can be found in a number of published services, is a statistical
measure of how stock market movements have historically impacted a stock’s price.
By comparing the movements of the Standard & Poor’s 500 (S&P 500) to the movements of a particular stock, a pattern develops that gauges the stock’s exposure to stock market risk.
Calculating a beta for your entire portfolio will give you a rough idea of how your stocks are likely to perform in a market decline or rally. If your stock is riskier than you realized, you can take steps to reduce that risk by reallocating.
Keep the tax aspects of selling in mind. While you may be tempted to lock in some of your gains, you may have to pay taxes on them if the stocks aren’t held in tax-advantaged accounts. You’ll have to pay at least 15% capital gains taxes (0% if your income is under certain limits) on any stocks held over one year. If your gains are substantial, it may take longer to overcome the tax bill than to overcome a downturn in the market.
Consider selling stocks if you have short-term cash needs. If you are counting on your stock investments for short-term cash needs, look for an appropriate
time to sell some stock. With short-term needs, you may not have time to wait for your stocks to rebound from a market decline.
Don’t time the market. During periods of market volatility, investors can get nervous and consider timing the market, which typically translates into exiting the market in fear of losses. Remember that most people, including professionals, have difficulty timing the market with any degree of accuracy. Significant market gains can occur in a matter of days, making it risky to be out of the market for any length of time.
Remember you are investing for the long term. Even though short-term setbacks can give even the most experienced investors anxiety, remember that staying in the market for the long term, through different market cycles, can help manage the effects of market fluctuations.
Please call if you’d like help implementing strategies that may make you more comfortable with your stock holdings.
Frankly Speaking
“Democracy is the process by which people choose the man who’ll get the blame.” -Bertrand Russell
“Everyone is a damn fool for at least five minutes a day; wisdom consists in not exceeding that limit.” -Elbert Hubbard
By now the election has hopefully been resolved, (like it or not). Democracy is attributed to Greece but didn’t really work, and we’ve spent 244 years proving them right. Or have we? The U.S. is a Democratic Republic, a democracy first and foremost, which is a government by the people; a republic second, having a division between the federal government and the states. If you didn’t vote you have no right or reason to complain. If you did but ‘your party’ didn’t get in, you have 4 years to help change things.
For an element of perspective, please call or email me. Remember, my job is to be here for you when things are bad!
If you would like more information or to discuss your financial concerns
The last time the yield on the 10-year Treasury note was above 1% was on 3/19/20 or 7 months ago today. The 10-year note yield closed at 0.74% last Friday 10/16/20 (source: Treasury Department).
Preferred Apartment Communities has paid a consistent 6% dividend since inception, Q1, 2012. For more information on How To Invest, Please call Frank.
If you would like more information or to discuss your financial concerns
No matter how often you prefer to monitor your stocks’ performance, there are certain items you should consider. Here are five things to review as you monitor your stocks’ performance:
Earnings — Pay attention to the company’s quarterly and annual earnings statements, which include comparisons with the recent past and often reviews of what management expects for the next quarter and year. Review the stock’s earnings trend and how the company performs compared to analysts’ estimates. Watch out for earnings surprises, which can cause rapid price changes up or down, and may indicate the start of a new stock price trend.
Price and dividends — Follow
the stock’s price compared to its
52-week highs and lows. Examine its trailing total returns year to date and over the last one-, three-, five-, and 10-year periods. Look for changes in the absolute dollar amount of dividends and the current yield (the annual dividend divided by the current price).
P/E and PEG ratios — Price to earnings (P/E) and price/earnings growth (PEG) ratios are often better indicators than the stock price as to how relatively expensive or cheap a stock is.
The P/E ratio is useful for comparison to other stocks and the market, while the PEG ratio is a strong indicator of whether the stock is overpriced or underpriced compared to its projected earnings growth rate over the next five years.
Insider transactions and stock
buybacks — A company buying
back its own stock or whose senior
executives and directors are accumulating more shares is a bullish sign.
On the other hand, when insiders are selling off major holdings of their own stock, it’s quite often an indication that the stock price has peaked.
Sudden and large price changes
on high volume — When a stock
makes a sudden, high-volume move
— particularly when it opens much
higher or lower than the previous day’s high or low — it can be the start of a new, long-term trend.
For help monitoring your stocks’ performance, or if you need to make a change to your investment portfolio, please call.
Dividend Investing
Dividend investing creates both an income stream from dividends as well as portfolio growth from asset appreciation.
The first thing dividend investors look for is safety, which is measured by the dividend coverage ratio. Typically, dividend investors
don’t want to see companies pay out more than 60% of their profits as dividends to investors to ensure the company has the resources for operations. Dividend investors look for companies that have good cash flow and stable income, because they can get a higher payout ratio and don’t have to worry about the company’s ability to pay the dividend.
When an investor follows the high dividend yield strategy, he/she is investing in companies with yields at the top of the range that will provide a predictable income stream. Investors who focus on a high dividend growth strategy are investing in companies whose dividend payments are significantly lower than average, but the company is growing at a very fast rate.
After a period of time, these fast-growing
companies can increase dividends to an equal or much higher level than what would have
been collected using the high dividend yield approach.
Financial Thoughts
In a recent survey, 9% of non-retiree respondents said that they knew for certain what their Social Security benefits would be, 41% had a guess or estimate, and 49% had no idea how much their benefits would be (Source: AAII Journal, March 2020).
A recent study found that individuals with children have 10% less wealth by retirement age than individuals without children. However, individuals with children were
just as satisfied with retirement as those without children. One of the reasons for this
difference is that retirement saving goals differ in meaningful ways between the two groups. (Source: American Enterprise
Institute, December 2019).
Consumers worldwide put an average value of $35,000 on digital assets stored on their mobile devices, which includes photos and videos (Source: Journal of Financial Planning, April 2020).
About 81% of U.S. adults age 72 and older have a healthcare power of attorney, while only 41% of millennials have one (Source:
AARP, 2020).
Approximately 20% of baby boomers who receive an inheritance of $100,000 or more spend the entire inheritance. (Source:
Journal of Family and Economic Issues, 2020).