Myth: "It's impossible to collect income from small cap stocks."
This myth is completely untrue. There are numerous ways to collect
income from small cap stocks - if you know how. Dividend stocks are
one way. But there is another, seldom discussed yet very simple way
to collect income from small cap stocks.
My colleague recently showed me how dividends are just a small part
of income investing. I'd like to introduce you to a man named Andy
Crowder - who regularly uses small cap investments to collect huge
income checks. You've read Andy's words several times in this
letter over the past few months.
Last week Andy made $2,298 in 7 days using a little-known small cap
income investment secret.
Andy is about to start showing
Small Cap Investor
subscribers how to do the same - for themselves.
All you have to do is
to find out how.
In the meantime, I've been making some significant changes in my
portfolio - some of them related directly to Andy Crowder and his
But in general, I've been concerned about my cash savings.
So last week I called my bank.
I stated that the 0.3 percent annual interest being earned in my
money market account was ridiculous. Now, I know it's really not
the bank's fault. I'm well aware that Ben Bernanke and his low
interest rate policy are the real culprits.
Nevertheless, I instructed the bank representative to take a
significant sum of money from my money market account and transfer
it to my investment portfolio.
In all fairness, the money market account was never intended to be
an investment per say. Rather, I've always figured that it's smart
to keep some of my savings completely liquid - not in stocks or
bonds. Keeping it on the sidelines means it's available for
whatever unexpected events might occur.
Right now, I believe the 'unexpected' events coming out of Europe
may well present a tremendous buying opportunity for stocks in the
near future. The market is jumping around on European news releases
like never before.
The Euro-zone is not the driver of global growth. I'm not saying
it's insignificant, but I believe the world will ultimately handle
the issues in Europe.
As the market digests European related news, I want to have dry
powder ready to fire.
This is the real motivation behind moving this money to an
investment account, in addition to paltry yields on savings.
It used to be that money in the bank would pay an annual interest
rate of three to five percent. However, that's not the case today
(and hasn't been for some time now). With interest rates at 0.3
percent, the monthly interest received on accounts of $50,000 is
That's right - over 12 months, one could expect to earn $150 in
interest on fifty thousand dollars! That's enough to take your wife
out for a fancy dinner, but it's not enough to even be considered
real income. It's almost a rounding error on the sum in the bank.
This is the very real situation faced by any investor with cash
holdings right now. And it is why I don't think the market will go
into a sustained contraction in 2011 and into 2012. There are
simply limited options for capital right now, and I believe
attractively valued stocks are going to be ripe for the picking.
The news out of Europe is in large part what's keeping stocks down
It's for this very reason that I'm withdrawing my savings from my
bank. Don't get me wrong, I'm not saying that everything is great
and stocks will soon rally. But I am saying that for the long-term
investor we are likely in a period where accumulating the stocks of
leading global companies is likely to pay off down the road.
Perhaps you don't have money in a savings account. But the same
argument can be made for many other types of low-yield "safe"
investments - Certificates of Deposit (CDs), municipal bonds, U.S.
Treasuries, and even some corporate bonds.
The yields on these investments are so low that they aren't even
keeping up with inflation. As a result, if you own any of these
securities, the value of your savings sinks year after year.
The bad news is that there is no end in sight. Chairman Bernanke
has made it clear that he has every intention to keep short-term
interest rates where they are today - at zero percent - through at
least 2013. Keeping these rates so low is a direct ultimatum: buy
riskier assets or lose money.
As savers, we have a choice to make. We can either see our savings
dwindle, becoming worth less and less every month, or we can seek
out attractively priced investments that are likely to deliver
returns that exceed inflation.
I've decided that enough is enough for my money market fund. There
is a better way forward. There are compelling opportunities today
to invest in world-class stocks at the lowest valuations we've seen
since March 2009
If you're similarly starved for income from your "safe"
investments, then I urge you to consider taking similar action
Keep some cash on the sidelines and be ready in the coming weeks
and months as the market digests all of the negative news circling