Without much of a clear reason, except maybe being a bit
oversold, the indices were all up strongly this morning. We did
some better-than-expected economic data out on retail sales, but
the data has been highly volatile the last few months, so I
wouldn't put much stock in the latest results.
Electronics retailer Best Buy (
BBY
) surprised some market watchers with its earnings results this
morning, and with that shares moved nearly 5% higher by the close.
Wall Street analyst upgrades moved names like Wynn Resorts (
WYNN
), Nordstrom (
JWN
), and State Street (
STT
) to close in the green. Financials managed to stand out yesterday
in a mixed tape, and did well in today's action. MasterCard (
MA
), Franklin Resources (
BEN
), and Prudential (
PRU
) led the way higher. Cyclical names like DuPont (
DD
) and Caterpillar (
CAT
) took in the rally as well. We saw a huge move for shares of
retailer J.C. Penney (
JCP
) on news the company has landed Apple Retail Executive Ron
Johnson, who pioneered the success of Apple's (
AAPL
) retail stores. Lastly, tobacco-maker Lorillard (
LO
) gained nearly 12% on a potential positive outcome regarding an
FDA decision on menthol cigarettes.
Let's dig into the second half of our 2-part series highlighting
reasons why people fail to achieve financial independence.
1. Being Clueless About Money Issues - This shortcoming is a
trap that tends to affect people with a high net worth more often
than you may think. Often times, people inherit bad financial sense
from an older parent or relative. It's sort of the "it worked for
them, why should I question it?" mentality. The recent Bernie
Madoff scandal illustrates this point to the tee. Many wealthy
people were blind to the problems in Madoff's scheme that should
have raised obvious red flags. What really struck me was that his
clients were not allowed to question Bernie Madoff about his
strategy or anything related to his investments. If an advisor EVER
requires conditions like those to handle your money, run - don't
walk - out of his or her office and never go back. The other big
red flag was that Madoff's investment returns were as steady as
they came, regardless of the market's returns. No one who operates
"on the level" in this business will be able to achieve those kinds
of results. Having a quality money manager is all well and good -
just make sure you understand where your money is going.
2. Investing in Areas You Don't Understand - Ignorance is a huge
problem for individual investors. Whether it's being a silent
partner in an business you know nothing about, or buying high-risk
penny stocks, investing money in ares you don't understand will
almost always come back to haunt you. Far too many investors think
buying businesses and having others run them will be an easy way to
grow their financial net worth, but many don't realize businesses
tend to do better when the owners are more hands-on. Passive
investing is very over-rated. There are tons of books that make it
sound so simple though! Buy a business, hire people, show up at the
end of the day and count up the register. Ha! If it only was that
easy. When it comes to financial advisors pushing new investment
products, you need to do your own due diligence so you are not
being sold products that are commission-friendly instead of
positive returns-friendly.
3. Letting Fear Paralyze Your Investment Goals - Much of the
blame for this shortcoming lies in focusing too much on the
day-to-day (or minute-to-minute) happenings in the markets. Watch
any of the big business channels (CNBC, Fox Business, etc.) and you
will be fed numerous storylines about why now is the time and now
isn't the time to be in the markets. We always advise readers to
down the volume for the most part on the various pundits that grace
the screen on any given market day. Doing nothing is as risky as
doing something, especially when the banks are paying little in the
way of interest (savings accounts, CDs, etc.). Your wealth will
continue to deteriorate if you don't start to acquire
income-producing assets. Taxes and inflation (despite what the
government says, prices ARE higher for many everyday items) will
chew up accounts of the savers.
4. Ignoring Reality - You don't have to look far to see the mess
many Americans currently face when it comes to real estate and
foreclosures. Throw in a tough jobs market as well, and many are
financially ill-prepared for the coming years. Facing a crisis
head-on is the only way struggling Americans will be able to get
back on their feet. Sometimes you have to rebuild and start fresh
in life. You have to dig down deep. I know it's tougher to do than
to say, but many have come back full-circle from huge financial
setbacks. The more you want to help yourself, the more you will see
that people will want to help you. Communication is a must for all
that stand to be affected. Your spouse and especially your kids may
not show their concerns all the time, but don't overlook how
financial struggles affect them. The example you set during times
of trouble will be what shapes your legacy - perhaps even more so
than what you do once you've become financially successful
again.
Dividend investors that are looking for income should not be
distracted by the flavor-of-the-day headline grabbers. Instead,
look for opportunities in companies that are currently on our
Best Dividend Stocks List
. Our main focus is on quality dividend names with attractive
yields, and this should be the focus for all those that are hoping
to build income for the long-term. We will continue to parse
through our data to make sure only the names we like best remain on
our recommended list. Remember, if we downgrade stocks from the
list, it is not a sell call! Only in very rare instances will we
advocate liquidating positions in a formerly recommended name. We
just want to have the best names from a risk/reward standpoint on
our recommended list for new money at all times. Investors should,
however, utilize their own sell strategy in the event a company you
own drops 25% from its 52-week high and there are company-specific
problems that could cause additional significant underperformance
for that particular stock.
Thanks for reading, and I'll see you tomorrow! P.S. Please pass
this e-mail on to someone you think can use some financial
motivation as well as being kept in the financial news loop that
could affect them.
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
.