Building An Investment Checklist

Investment ChecklistIf you read any great investing books you’ll come across an extended investment checklist. Lynch had his simple philosophy. Fisher had fifteen points. And Graham had his portfolio policy and value formula. Even Buffett and Munger talk about keys to a great company.

The idea of a checklist isn’t new. It’s used by a number of professions, like engineers, pilots, and doctors, to prevent mistakes. There’s a reason every flight seems like a ritual. Both pilots and flight attendants go through a checklist before, during, and after each flight.

As a passenger it seems trivial, but they do it for a reason. It works. It makes sense too. Lives are on the line and anything that prevents errors and mistakes, inevitably saves lives. And all because of a simple checklist.

You can apply the same concept to your portfolio and investments. Continue Reading…

Digging Into The Stock Buybacks Vs Dividends Debate

stock buybacks vs dividendsThere are many investing debates where serious investors latch onto their choice and once locked in rarely waiver. There is growth versus value. You have index versus mutual funds. Active versus passive is probably the biggest. Yet, every investor has an opinion about stock buybacks versus dividends.

At the heart of this debate is earnings. Rather, what’s the best use of earnings for the shareholder. When a company earns money, it uses some of it to further grow and strengthen the company. What happens with the rest is up for debate. Continue Reading…

5 Bad Investing Habits To Avoid

Bad Investing HabitsThere are many do’s and don’ts with investing. Most are pretty straight forward. But some can quickly get you into trouble. Here are five bad investing habits all worth avoiding and a few that can quickly lose your money.

Buying on Margin

Margin trading is a great way to boost profits, it’s also the only way to lose more than 100% of your investment. Buying on margin is using credit to buy securities with the hopes of increasing your profits. The downside is the potential to lose everything and still owe your broker for interest and other fees.

When it comes time to pay, it’s not like a credit card where you send in a minimum payment. With a margin account, if you’re too far in the red, the broker doesn’t need your approval to sell your securities to cover the difference. Your just out of luck and money, wishing you never opened a margin account. Continue Reading…

ETFs For Rising Interest Rates

Rising Interest RatesThe recent Fed hints at ending QE means rising interest rates. It also means big changes in the markets. Here are several ETFs to protect yourself and invest in as interest rates rise.

Let’s keep this simple. Back in September the Federal Reserve announced QE3 which expanded its bond buying program to $85 billion per month and added mortgaged backed securities to its buy list. This did two things:

  • Lowered long-term interest rates by pushing bond prices higher (explained here)
  • Supported the mortgage market

This was done to spur economic growth and hiring. It wasn’t going to last forever, either, and the Fed is already planning the unwind. Continue Reading…

Stock Basics: All About The Dividends

DividendsWhether a stock pays dividends may play a big role in your investment strategy. A dividend provides a source of income. It offsets losses. When reinvested, it compounds growth. But this isn’t an argument that dividend paying stocks are better. It’s an introduction to dividends, giving you an idea of what to expect and what to watch out for when owning dividend stocks.

There are three things a company can do with its profits. Reinvest it to further grow the company. Do a share buyback, which should increase the stock price over time. Or return the money to shareholders in the form of a dividend. Most companies combine the three to offer the best return for shareholders.

What Is A Dividend?

A dividend is a piece of a company’s earnings paid out to shareholders. When a company pays a dividend it’s usually done quarterly. There are a few companies that only pay annually or bi-annually, but it is not the norm. Continue Reading…