The following post is a guest contribution. If you would like to write for My Money Design, please feel free to contact me.
There’s all sorts of things to do when it comes to retiring, and it’s important to understand what annuities are. Here’s a crash course on understanding their benefits.
If there’s one stock evaluation metric that people love to throw around, it’s definitely the old staple: the PE ratio. Just open up any money magazine or financial article, and this will usually be one of the first values that they highlight. But even though there’s really not much to the PE ratio formula, its importance is warranted because it can reveal a lot about the company and investors belief about its future.
The following is a guest post from Matt Becker, founder of Mom and Dad Money. Matt is a proud father and husband, and his site is dedicated to helping new parents build financial security for their family.
Although Matt and I have somewhat different personal opinions in regards to dividend strategies, I thought it might be fun to invite him to take the stage and share his perspective on why he thinks Total Return Investing would be better. I’ve always maintained the message on My Money Design that there is more than one way to reach financial freedom. If you can keep an open mind and not reject something just because it is different than what you use, then maybe you might just learn something.
Go ahead Matt ….
I’ll take the whole pie thank you!
If you have paid any attention to the investment world since 2008, you have undoubtedly heard of dividend investing. A dividend investing strategy is simply one in which an investor chooses to put his or her money in stocks that have a strong history of paying consistent dividends.
An alternative to a dividend strategy is called total return investing. With a total return approach, an investor is looking for returns from any source, including but not limited to dividends. Specific to stocks, this essentially means that an investor will view capital gains as an equally appealing source of returns and will proceed with the sole goal of maximizing returns for a given level of risk, without preference as to where those returns are coming from.
It is my view that a total return strategy is superior to a dividend approach in several ways.
Time and time again on this blog we’ve proven that we sometimes don’t know we can do something until we ask for it. That was exactly the case this week when I learned that I can DRIP stocks with my broker. Until now I didn’t think that my account had this feature, but I was glad to find out that it does and I will certainly be putting it to use.
For those of you who don’t know, DRIP stands for dividend reinvestment plan (or program). It is also sometimes abbreviated DRP. When people say you DRIP stocks, they are usually referring to some system you enroll in where instead of receiving your dividend payments by check or cash each quarter you instead automatically buy more shares of that same dividend paying stock. There are a lot of really strong reasons as to why this is a big advantage to you.
As part of my love affair over the last year with investing in dividends, I’m going to continue to introduce posts that focus on one particular aspect of evaluating a particular stock prospect. So this week, we’ll be looking specifically at the dividend yield formula and what it can tell us about the stock or company.
What a wild ride the last 4 months have been! It’s been a while since I’ve done a dividend stock portfolio update, and I thought this would be a great time to report (i.e. celebrate) my earnings.