Let’s face it: Ben Bernanke’s near-zero interest rate policies have been absolutely crushing conservative savers and investors.
At the same time, they have been sending pretty much all other asset classes higher and higher:
• The main gold ETF — GLD — is up 49 percent since the stock market bottomed in March 2009 …
• Junk bonds, as measured by a basic mutual fund like Vanguard’s VWEHX, have rocketed 41 percent over the same timeframe …
• And U.S. stocks themselves have been going gangbusters, gaining 98 percent since their lows of March 2009!
Over the last week, I’ve been having an ongoing conversation with many of you about all of this on my personal blog.
Some of you have been writing in about all the risks that are still out there — simmering inflation, the possibility of a renewed financial crisis, and geopolitical risks in the Middle East just to name a few.
And there’s no doubt that — despite the recent calm — there ARE still plenty of big risks out there.
Yet I don’t think it’s prudent to sit completely in cash while the rising tide carries stocks higher and higher, either …
Especially not when you’re literally getting paid nothing to sit things out!
So that brings up a very basic question:
How Can You Participate in Stocks
Without Losing Sleep at Night?
Is there a way to have your cake and eat it too? To get a stake in rising stocks without losing too much sleep at night?
I sure think so — using the very same strategy I’m using to help my own dad safely grow his $100,000 retirement account.
It will probably come as no surprise that dividend stocks are the pivotal part of this strategy. Why?
First, while many other investments are offering pitifully low yields, many blue chip dividend stocks are boasting annual dividends worth 4 percent, 5 percent, 6 percent or much more.
And unlike fixed-income yields, which never rise, dividend payments have the tendency to increase over time. That gives you built in inflation protection!
Second, dividend actions — positive moves like increases and resumed payments have been picking up from the depressed levels we saw over the last few years and I think that’s going to continue, especially because U.S. companies have record levels of cash right now.
Third, the extension of favorable tax rates on dividend payments only gives executives further incentives to continue paying out cash to shareholders and also means your payments are worth more after Uncle Sam takes his share.
Fourth, it’s been proven time and time again that dividend stocks hold up far better than non-dividend stocks during market downdrafts!
In Fact, a Well-Chosen List of Dividend Stocks
Can MAKE MONEY Even During Market Crashes!
On my blog last week, a poster named Joe asked me pointblank, “How have your picks fared over the past three years?”
Well, Joe, I’m proud to say that my proprietary approach to maximum income investing has proven so cautious and profitable, if you had followed every recommendation I’ve issued since I began publishing my newsletter in 2007 …
Not only would you have handily outperformed the S&P 500, you would have even made money during the most severe recession since the Great Depression!
There is absolutely no cherry-picking going on here. I’m counting:
- Our winners and our losers …
- Our open trades and our closed trades …
- And in times when the overall market was soaring and when it was sinking …
Through all that, my conservative, risk-averse approach to total return income left the S&P 500 in the dust!
In fact, since the first issue of my newsletter was published in 2007, my recommendations have outperformed the S&P 500 market average by a full 20 percentage points.
Not bad — especially when you consider the fact that I recommend only stable dividend-paying stocks and other income investments — never high-risk stocks.
If that doesn’t prove my point that you CAN invest in stocks with a high degree of safety, I don’t know what would!
Read more here:
Bigger profits without bigger risks?
You've no doubt heard the Bush-era tax cuts have been extended.
After much sound and fury, Congress voted to extend the tax breaks to all Americans, including those in the top income brackets. The tax cuts were set to expire at midnight on Dec. 31, but will be extended through the end of 2012.
But did you hear the great news for income investors?
Lost in the headlines was some of the best news we've heard in a while. The 15% tax cap on qualified dividends and long-term capital gains was extended as well. And a tax rate of 0% on qualified dividends and long-term capital gains will apply for investors in tax brackets below 25% (those making less than $34,000 this year).
The deal puts an end to a debate that, if unresolved, would have seen Americans facing big tax hikes in 2011. It's expected to give a major boost to the economy by providing consumers and businesses with more cash to spend.
Mark Zandi, the chief economist of Moody's, upped his economic growth forecast for 2011 to 4% from 2.7% after the deal was announced. And what's good for the economy can be good for dividend-paying stocks that use their higher profits to ratchet up payouts.
Billions more in dividends
Standard & Poor's estimates investors with taxable accounts will pocket an additional $74.5 billion during the next two years under the extended 15% dividend tax treatment. Over the nearly 10 years that income investors will have enjoyed the reduced dividend tax rate, we'll have raked in an additional $348.4 billion, says Standard & Poor's.
The favorable tax rates also are anticipated to tip the scales in favor of dividend payouts and hikes, rather than share buybacks, when corporate boards are deciding on the best use of their cash hoards over the coming months. That should help lift the share prices of dividend stocks as the increasing payouts attract investor interest.
I get asked a lot of great questions — both on my blog and through e-mails — and today I want to answer three very important ones that all relate to dividend investing.
Let’s start with a major source of concern for many Americans right now …
“What Will Happen to My Dividend Stocks
If Congress Lets the Current Tax Cuts Expire?”
Pretty much every newspaper in the country has been running stories about the Bush tax cuts and whether or not Congress will let them expire at the end of this year.
However, most reporters and pundits have chosen to focus on tax brackets, and whether higher-income Americans should be forced to pay bigger tabs. I hear very little talk of how one aspect of those cuts will affect many U.S. investors — particularly retirees — regardless of their overall income picture.