Monday, June 27, 2011

Dividend Investing Weaknesses

I want to talk to you guys about some of the risks and drawbacks to dividend investing...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

As I mention in the video, I really hate when people only tell you what they want you to hear about a topic. Especially when its linked with selling a book, video, or newsletter subscription. I'm all for people wanting to sell a product or that believe their information is worth charging a price. Everyone needs to make a living. But at that point selling a product is or is in danger of becoming the primary motivator for what the person does or doesn't say.

So while I am an avid fan of dividend investing, I have to keep in mind that everyone watching and reading what I have to say is where I was many years ago. Forming their own ideas about how to build their own portfolio.

On the other hand I presume you arent watching and reading me because you want a textbook like experience. Presumably you want a living working exchange in watching the decisions a person makes and what the think about. So here are some ways to mitigate the risks.

Dividend cuts and eliminations: Keep an eye on what the company is doing. Are they saving money, growing the company, buying others? The dividend will be safer. If they are firing top management, involved in product recalls and lawsuits, and have a lot of debt then that increases the odds that a dividend will be cut.

Too much tempting capital gains: This one will have to come with experience in the markets. And to be honest? Its not a bad position to be in all in all. Sell a 100% gain position or keep a great yield on cost. I certainly am not complaining of having had to make the choice so don't get me wrong. But its something that will be encountered from time to time.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

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