With the elections in Greece going the way investors had hoped,
many were expecting a big spike in today's open. However, with the
rally fizzling in Europe, we saw some carryover to the U.S. indices
for much of the day. The higher beta names on the Nasdaq did fare
well during the session.
Looking at the financials, weakness in shares of Deutsche Bank (
), Citigroup (
), and Morgan Stanley (
) put a damper on what was supposed to be a positive result to the
Greek elections. Steelmakers closed mostly lower ollowing some
lowered guidance from the likes of Steel Dynamics (
) and AK Steel (
). U.S. Steel (
some tepid commentary
following the earnings warnings. A couple of the early highlights
to the upside included shares of Phillip Morris International (
an analyst upgrade
and also PetSmart (
announced a dividend hike and expanded share buyback
Social Security Tidbits
This weekend's Barron's magazine had a piece that focused on
Social Security. Some of the interesting notes centered around
recipients who qualify for the highest payouts. At age 66, the
monthly benefit is $2513 a month, a third higher than if you
started receiving benefits at age 62. Assuming there were no cuts
and you waited till age 70, your monthly benefit would be $3350 a
month. Again, you see how drastically higher the payouts are the
longer you wait. If you can afford to delay the payments, you'll be
maximizing the system as best you can.
Most retirement worries center around a few key issues.
Near-retirees fear whether their employers will be able to meet
pension obligations. Another common fear is whether Social Security
benefits will eventually run out, as concerns mount around the
potential insolvency of the system. Finally, most retirees worry
they are behind in their retirement savings objectives and if they
can really afford to call it a career.
If you are already retired, you need to use a smart strategy
regarding the money you withdraw from your accounts to cover
everyday living expenses. Many financial advisors tend to use a 4%
annual withdrawal rate when discussing retirement savings
withdrawals. With this approach, investors withdraw 4% of their
retirement balance in the first year of retirement, or let's say
$20,000 from a $500K portfolio. The dollar amount of the withdrawal
could be adjusted each year to keep up with inflation. So whether
you are deriving income from dividend-paying stocks, bonds, bank
CDs, or other sources, you can at least have a starting point (4%
withdrawal rate) to factor from.
Doing the bare minimum (for example, saving a set amount each
month to invest, but never pushing harder to raise the amount you
invest over time) will likely leave many short of an enjoyable
period later in life. Some may think that their current financial
obligations will eventually wind down, and then they'll really
begin to stockpile away money for their golden years. Unfortunately
that is almost never the case. Too many unforeseen events can
happen (divorce, a family death, getting laid off, illness, etc.),
and you can't afford to lollygag when you could be doing more - all
the while still enjoying life's finer moments as well.
Building wealth requires you to set aside funds and invest them
in income-producing assets (we focus on dividend-paying stocks, but
you can also invest in a business or buy a property that's
cash-flow positive). If you are already retired, you may need to
rejoin the work force part-time to ease the amount of money you are
withdrawing from your savings. If you are unable to work because of
a disability, it's possible you could figure out some kind of work
to do from home. You also need to stay active as an investor.
Regardless, taking charge of your financial profile is paramount to
getting the most out of your later years.
Why Trading is Irrational
As traders watched stock futures jump all around this past
weekend, we saw clear evidence of investors being more confused
than anything else. Several weeks ago, we saw the markets pulling
back relentlessly, not on fundamentals, but on European economic
concerns. The recent snapback was once again not based on
fundamentals, but instead on hope the announced Greece bailout
package and pending election results would quickly fix the problems
plaguing the region.
Over on The Big Picture finance blog this past weekend, Barry
Ritholtz shared some recent trader data done by Paul Farrell. Mr.
Farrell found that 95% of traders fail and give up on trading,
while 80% of all day traders lose money. Also, active investors are
found to turn over their portfolios excessively (258% annually),
while generating less than 12% on their money. Meanwhile, passive
buy-and-hold investors with only 2% portfolio turnover had
significantly better returns.
If you are determined to not miss every nugget of business news
and headlines, you will almost certainly get drawn into the trading
game. As the facts above show, the trading game is a losing game
for nearly everyone who plays is. The plethora of sensationalist
headlines can easily inspire you to trade your portfolio more.
You'll begin to think that timing the market is the only way you
can outperform, and you'll probably lose money.
Slow and steady wins the race that is the road to building
wealth. Be irrational at your own risk!
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I hope everyone had a chance to check out our
members-only weekend articles , including new features that
highlight some of the biggest winners and losers from the week that
was, such as analyst upgrades/downgrades and earnings/story stocks.
These articles are a great way to catch up on the week that was in
the markets. We also have a rundown of how various Dividend ETFs
performed on the week.
Thanks for reading everybody. I'll see you tomorrow!
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here