recently asked why I didn’t write more about the stock market, since this is
the field I worked in for most of my career – and, presumably, that I know
best.I answered that I didn’t want to
play the role of investment advisor, but on reflection, that was a cop-out. So
are risky. No matter how much you think you know about a company, there are
people who know more, and these are the people who want your money. Forget the
rules that say if you plug your age into a formula, you will know what percent
of your wealth should be in stocks and what percent should be in bonds. The
risk is the same whether you’re 35 or 75.
of mine (and my mentor in the 50s) told me that he had two stock portfolios,
one specializing in stocks designed to generate capital gains, the other
investing in stocks that paid high dividends. And – funny thing – the
yield-oriented portfolio had a consistently higher total return!Moral: Stocks that pay a dividend are almost
always better, and the results are even better if the dividend is well
protected (i.e., a smaller percentage of estimated earnings).
course, one can always point to exceptions. You could have made a killing if you
bought some Netflix a year or two ago, and Apple (a dividend payer, now) has
been a good long-term investment. I have a small percentage of my investments
in such speculations. I read all the business papers and am reasonably well
informed, but you know what? The yield portfolio out-returns the trading portfolio,
just as it did for my mentor in the 50s. Some things just don’t change.
initial advice is this: Look for a well-protected yield. That’s especially
timely now, when bank yields are so low. Second, use the low-cost, on-line
brokerages. You can buy or sell a stock for $8 a trade or less, which is a
small fraction of what I paid 20 or 30 years ago.
I’ve broken the ice, I will indulge in more “stock talk” in future blogs.