|
A Stock Market Investment Plan That Never Lets You Down
By: James Marriott
The bulls and bears of the stock market are both tempting and scary to the
investors. Speculators are enchanted by the stock market’s potential to help
them in making quick money with a big M. While those who tread with care and
caution, often shy away for fear of losing. However, the stock market is not all
about speculative gains or black Tuesdays. It is a place where committed
companies look for raising money to fund their activities. Serious investors can
actually create wealth not only for themselves, but also for the companies and
the nation. A wise way to invest in the stock market is to empower your self
with information. You have to know and learn about the company you invest in,
from past records and future plans.
Irrespective of what the Wall Street Gurus predict or what the economic
indicators like Dow Jones Average say, a simple and foolproof way of knowing
that a company is doing well is to keep a track of how much dividend income does
it pay to its share holders every year. If the dividend rates have been rising
steadily every year, you know you have a safe bet. To benefit from the future
prospects of such companies, it is a good idea to rollback the returns into the
company. Which means, instead of adding the dividends to your savings, you can
invest them in the shares of the same company. That way, you can ensure that the
dividends you receive are always higher than what you got last, with a larger
number of shares getting added to your investment portfolio every time.
With this kind of an assured investment plan in place, investors with a gambling
streak begin to think beyond making a quick gain. While those who were afraid to
take risks get wiser.
Let us find out why companies that give ever-increasing cash dividend income are
a good choice for investment:
Your Share Holding Goes Up And So does Your Dividend Income.
Your income begins to escalate with your owning more shares every year and the
dividend income rising correspondingly.
Your Dividend Income Increases Even If Stock Prices don’t.
You are no more at the mercy of the market. Irrespective of what your shares are
worth, you keep earning additional cash dividends. In fact, even if the market
price dips, you are still at an advantage, as that allows you to reinvest to
purchase more shares.
You are not hit by Inflation.
With the dividend income rising every year, you offset the effects of a rising
inflation. This particularly provides relief to people who have retired and
depend on a regular cash inflow to help them meet their expenses. At this stage
one need not rollback the investment into further shares, instead, the cash
dividend can be used as a kind of regular pension money.
Start Young
The ingenuity behind this investment strategy is that it protects you from the
fluctuations that generally occur in the market. A lower stock market rate only
means you buy more to increase your dividends more. It is advisable to start
this strategy early in life while you are still working, so that your wealth
builds up gradually and constantly over the years. And you are assured of a
regular income, as you grow older.
Remember, the success of this proven investment plan depends significantly on
the track record of the company you invest in. It should be one that declares a
higher dividend at the end of each financial period. A simple way to find that
out would be to calculate the dividend yield. You can do that by dividing the
annual dividend per share by the price per share. Of course, no investment can
be totally free of risks, neither is this one. Keep an eye on the dividend
yield, and if that dips, it’s a signal for you to opt out of the investment.
About the Author:
James is a regular finance columnist with RNCOS (http://www.rncos.com)
. He writes on a wide range of topics, including mutual funds, taxes, credit cards,
and IRAs. For further suggestions and comments on the articles and bad credit
loans, feel free to question our staff writer at info@rncos.com.
|
