For generations, people have invested substantial savings in bonds and CDs, knowing that these investments and their subsequent social security checks would provide comfortable retirement.
Unfortunately, the days of six and seven percent yields are long gone. In a tough economy, in which the Federal Reserve holds down interest rates and floods the banking system with money, people are wearier than ever about investing.
The best investment advice for this year, from the country’s top analysts, is to invest where no one else is looking. As these investments are frequently referred to as “out of favor” investments, many people avoid them, believing that something is wrong with them. Nothing could be further than the truth.
However, the trick is finding them. The good news is that with a few simple tips, you can maximize your income and appreciation while steering clear of devastating loses.
- Consider the entire stocks list. It is easy to check out the first listing and ignore everything else. While stocks further down may pay smaller dividends, they are likely to be just as solid and significantly less volatile.
- Big doesn’t always mean bad. It is crucial to find companies that are doing well within their industries and who have substantial dividends, even if they are not ranked number one. It takes time and patience to find these stocks but it is well worth the effort.
- Potential growth should outweigh interest-rate sensitivity. If the dividend is not the sole market price driver, the investment won’t change dramatically during a significant drop or rise in interest rate.
- Understand the role of various sectors in a down market with rising rates. You will decrease your risk when you focus on defensive sectors. Companies can have great dividends with appreciation and growth but they might not be solid investments when the economy isn’t doing well.
- Buy and hold instead of trading frequently. While the cost of trading is relatively low, there are other costs that come with trading, such as higher taxes for short-term trades. Active trading also requires paying close attention to changes in stock prices.