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An Investment plan that you can make to
work.
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
Marriott is a finance writer with more than 15 years of
experience in writing financial content, including those
related to credit cards, mortgages, stocks, investments,
and funds. He has been with RNCOS, a premier financial
writing services company, for 2 years as head of
financial writing. He is also a regular financial
columnist with renowned business journals. For your
comments on the article and further financial
assistance, please contact our staff writer at
info@rncos.com
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