Today I want to talk about an investing topic that may seem a little dry. But make no mistake: It’s one of the most important determinants of long-term investing success. They say it’s not what you make. It’s what you keep. And understanding the tax implications of different types of investment accounts can help income investors keep more. I get a lot of questions from my Daily Paycheck subscribers about which holdings in my premium newsletter are appropriate for the many different types of brokerage accounts. I’d like to briefly review the different types of accounts… Read More

Today I want to talk about an investing topic that may seem a little dry. But make no mistake: It’s one of the most important determinants of long-term investing success. They say it’s not what you make. It’s what you keep. And understanding the tax implications of different types of investment accounts can help income investors keep more. I get a lot of questions from my Daily Paycheck subscribers about which holdings in my premium newsletter are appropriate for the many different types of brokerage accounts. I’d like to briefly review the different types of accounts and which types of securities are most appropriate for them. Now before I go any further, I know this might seem like an odd time to think about investment-related taxes. But I find this is the best time of year to review your investment accounts. For one thing, it gives you time to minimize your 2015 tax burden. If you had a capital gain or loss in a taxable account during the year, you may want to find an offsetting trade to make before the end of the year. Also, if you have any questions about individual securities and taxation,… Read More

Analysts have been trying to predict when the Federal Open Market Committee (FOMC) will raise interest rates for years now, but no real steps have been taken… yet. The next chance for the Fed to decide to raise rates is coming up this month, and many believe it will actually happen this time.   So how do you react? Do you play it safe and settle for whatever short-term yield you can get, or roll the dice and bet on longer-term securities with higher payouts? The more cautious approach will earn you next to nothing in this meager environment. The… Read More

Analysts have been trying to predict when the Federal Open Market Committee (FOMC) will raise interest rates for years now, but no real steps have been taken… yet. The next chance for the Fed to decide to raise rates is coming up this month, and many believe it will actually happen this time.   So how do you react? Do you play it safe and settle for whatever short-term yield you can get, or roll the dice and bet on longer-term securities with higher payouts? The more cautious approach will earn you next to nothing in this meager environment. The average 12-month bank CD is currently paying a paltry 0.27%. A one-year Treasury will only get you double that, about 0.50% — that’s just $500 in annual income on a $100,000 investment. Good luck living off that. On the bright side, at least your principal will be secure if and when rates finally do start to climb. On the other hand, you can find corporate bonds paying almost ten times as much. The average 20-year A-rated corporate bond is currently yielding 4.4%. That’s $4,400 in annual income instead of $500. Now we’re talking. Unfortunately, these bonds won’t mature for another… Read More

No matter where you look in the financial press, you see predictions about what the Federal Open Market Committee (FOMC) will do with interest rates after its next meeting.  This is nothing new, of course. It’s been happening every few months for years. And it has certainly picked up steam with many inside the Federal Reserve openly discussing the likelihood of a hike.  But journalists aren’t allowed to attend FOMC meetings, and can only report the results when the committee issues a press release.  So whenever an event like this comes up investment “journalists” and speculators are forced to create… Read More

No matter where you look in the financial press, you see predictions about what the Federal Open Market Committee (FOMC) will do with interest rates after its next meeting.  This is nothing new, of course. It’s been happening every few months for years. And it has certainly picked up steam with many inside the Federal Reserve openly discussing the likelihood of a hike.  But journalists aren’t allowed to attend FOMC meetings, and can only report the results when the committee issues a press release.  So whenever an event like this comes up investment “journalists” and speculators are forced to create the story themselves.  The New York Times — amongst many other widely-read outlets — has now made the claim that Friday’s jobs report “all but guarantee[s] that policy makers at the Federal Reserve will raise interest rates” this month. But why is that? What is a jobs report, exactly?  Can One Report Change Everything? Also known as the Employment Situation Report, the jobs report is released monthly by the Bureau of Labor Statistics  that shows how many jobs (non-farm payrolls) have been added in the United States during the previous month. It also gives information about the current unemployment… Read More

The 30-year U.S. Treasury Bond is quite possibly the worst investment option out there right now… even your Uncle Dave’s coin and baseball card collection might offer better long-term returns. Let’s forget for a moment about the Fed’s intention to raise interest rates, possibly as soon as December (which will put downward pressure on bond prices). And let’s forget that the longer a bond’s duration, the greater its sensitivity to interest rate movements. So with every basis point uptick, nothing will feel the pain more acutely than the 30-year “long bond.” Let’s even forget that Uncle Sam’s credit rating has… Read More

The 30-year U.S. Treasury Bond is quite possibly the worst investment option out there right now… even your Uncle Dave’s coin and baseball card collection might offer better long-term returns. Let’s forget for a moment about the Fed’s intention to raise interest rates, possibly as soon as December (which will put downward pressure on bond prices). And let’s forget that the longer a bond’s duration, the greater its sensitivity to interest rate movements. So with every basis point uptick, nothing will feel the pain more acutely than the 30-year “long bond.” Let’s even forget that Uncle Sam’s credit rating has already been downgraded by at least one ratings agency in the past… Even if interest rates don’t rise and Congress miraculously balances the budget — a best-case scenario, if you own Treasurys — you’re still tying up your capital for the next three decades at a paltry rate of around 3%.  But here’s the kicker: when your principal is finally repaid in the distant future, those dollars will have lost much of their purchasing power. Just ask anyone who bought one of these bonds back in 1983. Let’s say they loaned the government $30,000 — enough money to buy three… Read More

If there’s one topic that has defined investing this year, it has been investor fear of rising interest rates. After more than six years of historically low rates, it was all but inevitable that the Federal Open Market Committee (FOMC) would finally begin to increase rates starting this year. That fear has lead investors to sell their stocks in rate-sensitive sectors such as utilities and consumer staples. Traditional thinking says that higher interest rates could put the dividends for those investor staples at risk. As for the rest of the market, many worry that higher borrowing costs would weigh on… Read More

If there’s one topic that has defined investing this year, it has been investor fear of rising interest rates. After more than six years of historically low rates, it was all but inevitable that the Federal Open Market Committee (FOMC) would finally begin to increase rates starting this year. That fear has lead investors to sell their stocks in rate-sensitive sectors such as utilities and consumer staples. Traditional thinking says that higher interest rates could put the dividends for those investor staples at risk. As for the rest of the market, many worry that higher borrowing costs would weigh on the economy and send the entire market reeling. As a result, the S&P 500 went nowhere for most of the year. Then in mid-August, with bets rising on a September rate hike, the market tumbled 11% in just over a week. While the market has recovered from that fall, the odds are back on for a rate hike after the December FOMC meeting…   But if you’re thinking it’s time again to sell your utilities or consumer staples, you’re wrong. Rising Rates Could Be Great For These Sectors While the theory that rate-sensitive sectors should underperform when rates rise… Read More

It’s been the worst of times for savers. For more than seven years now, short-term Treasury notes — and their close relatives, money market funds — have delivered close to zero yield. This unprecedented period has meant the most conservative investors have had little or no income from their excess cash. Is the money market drought about to end? I say, don’t hold your breath. Some observers have high hopes, based on the Federal Reserve Board’s clear intent to raise the short-term rates it controls in the near future — probably as soon as December. These rates directly impact short-term… Read More

It’s been the worst of times for savers. For more than seven years now, short-term Treasury notes — and their close relatives, money market funds — have delivered close to zero yield. This unprecedented period has meant the most conservative investors have had little or no income from their excess cash. Is the money market drought about to end? I say, don’t hold your breath. Some observers have high hopes, based on the Federal Reserve Board’s clear intent to raise the short-term rates it controls in the near future — probably as soon as December. These rates directly impact short-term bond rates and money-market funds, as well as the interest rates banks pay depositors savings and checking accounts. The good news is the Fed’s imminent rate-hike policy will boost yields for money market funds and depositors. The bad news: it won’t help much. In my view, it’s extremely unlikely that the Fed will raise short-term rates more than 75 basis points (0.75 percentage points) over the next 12 months. Long story short, the U.S. economy isn’t growing fast enough to warrant an aggressive series of rate hikes, and with China’s economic growth slowing and a presidential election coming up, the… Read More

When Carl Icahn speaks, people listen. In March, the legendary investor disclosed that he had bought a 52% ownership stake in a small digital marketing firm called Voltari (Nasdaq: VLTC) to his legion of 250,000 Twitter followers. One month later, the stock had already surged more than 800%. Granted, that is an extreme example. But you can understand why investors were quick to bid shares of the little-known company up so quickly. Icahn is the world’s 31st richest individual, with a net worth estimated at $21 billion. That personal wealth didn’t come from oil or computers or shipping. It came… Read More

When Carl Icahn speaks, people listen. In March, the legendary investor disclosed that he had bought a 52% ownership stake in a small digital marketing firm called Voltari (Nasdaq: VLTC) to his legion of 250,000 Twitter followers. One month later, the stock had already surged more than 800%. Granted, that is an extreme example. But you can understand why investors were quick to bid shares of the little-known company up so quickly. Icahn is the world’s 31st richest individual, with a net worth estimated at $21 billion. That personal wealth didn’t come from oil or computers or shipping. It came from activist investing. #-ad_banner-#The guy just made $2 billion on Netflix (Nasdaq: NFLX) alone, with the video streaming company’s shares soaring 12-fold during his ownership tenure. Icahn’s moves have greatly enriched his investors as well. With annualized returns of 17.4% since 2000, his fund has racked up a cumulative gain of 1,339% — crushing the Dow Jones Industrial Average, the S&P 500, the Nasdaq Composite, and even the legendary Warren Buffett. You can invest alongside Icahn through Icahn Enterprises (NYSE: IEP) a holding company with ownership stakes in a diverse array of industries, including automotive, energy, metals and gaming. The… Read More

On Wednesday, I sounded the alarm about the problems looming for some consumer staples stocks. In short, many of these blue chips have been in business for decades — if not centuries — and have had their growth slowly grind to a crawl of late. I pointed out one stock in particular that might soon have to cut its dividend — which could devastate income investors who rely on those regular checks in their retirement. Kimberly-Clark Corp. (NYSE: KMB) may still seem like a safe place to keep your money. But as I pointed out, it has some fundamental problems… Read More

On Wednesday, I sounded the alarm about the problems looming for some consumer staples stocks. In short, many of these blue chips have been in business for decades — if not centuries — and have had their growth slowly grind to a crawl of late. I pointed out one stock in particular that might soon have to cut its dividend — which could devastate income investors who rely on those regular checks in their retirement. Kimberly-Clark Corp. (NYSE: KMB) may still seem like a safe place to keep your money. But as I pointed out, it has some fundamental problems that should make you think twice before investing in KMB today. Of course, not all stocks are created equal. And it certainly doesn’t mean all income-seeking individuals should avoid all consumer staples forever.  The best consumer staples investments are those that can pass two basic tests.  These tests can also identify good income plays in other industries, such as utilities, telecoms and tobacco plays. Today, I’ve found a consumer staples stock that passes these two tests with flying colors. If you ‘re looking for a great new addition to your income portfolio, read on. But you should also know how… Read More

There are a lot of uncertainties in today’s markets. Worries about China, low oil prices, and fears of deflation are all taking their toll on investors. At the same time, more Americans than ever before are close to retirement age. According to the U.S. Census Bureau, more than 15% of the U.S. population will be age 65 or older by 2020. And most of those retirees will be relying on steady income from their investments to support them through their golden years.  So it is becoming increasingly important to regularly evaluate your portfolio holdings and make sure that all of… Read More

There are a lot of uncertainties in today’s markets. Worries about China, low oil prices, and fears of deflation are all taking their toll on investors. At the same time, more Americans than ever before are close to retirement age. According to the U.S. Census Bureau, more than 15% of the U.S. population will be age 65 or older by 2020. And most of those retirees will be relying on steady income from their investments to support them through their golden years.  So it is becoming increasingly important to regularly evaluate your portfolio holdings and make sure that all of your investments — especially the dividend payers — are safe. Of course, this problem isn’t just one for people done with their careers. Income investing is also crucial to anyone saving for retirement (or any other long-term goal). Income compounding is one of the only tried and true ways to build a nest egg. But you can’t compound anything if one day your stocks stop paying you a dividend. And some of the most popular dividend payers have started showing signs of trouble… Slowing Growth Is Signaling Trouble For This Industry One of the most popular industries that income… Read More

I read a lot of articles about retirement that make me cringe. Most of them are about people who are not on track for a financially secure retirement. But this week I read an article that really got my blood boiling. Oddly enough, it was about a group of people who have more than enough for retirement. A recent study by the Center for Effective government and the Institute for Policy Studies found that the retirement accounts for Fortune 500 company CEOs had a combined worth of $4.9 billion — equal to the retirement account savings of 41% of all… Read More

I read a lot of articles about retirement that make me cringe. Most of them are about people who are not on track for a financially secure retirement. But this week I read an article that really got my blood boiling. Oddly enough, it was about a group of people who have more than enough for retirement. A recent study by the Center for Effective government and the Institute for Policy Studies found that the retirement accounts for Fortune 500 company CEOs had a combined worth of $4.9 billion — equal to the retirement account savings of 41% of all American households with the least retirement wealth. Don’t get me wrong. It’s not that I’m jealous. I’m disappointed that many of these CEOs have retirement plan options that they don’t offer their own employees. But even that’s not what upset me most. My problem is that these kinds of articles can discourage the “rest of us” from taking steps to secure our own retirement security. People read these articles and conclude the retirement game is rigged. It’s for CEOs and celebrities. For regular folks, a secure retirement seems like a lottery — where they aren’t allowed to buy a ticket. Read More