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Weekend Edition – Time for Investors to Stay Focused

We are coming off, frankly, an atrocious week for the global markets. It was the type of action that happens during times of what's called "forced liquidation." Forced liquidation happens when numerous money managers make aggressive bets (using margin) and the brokers automatically sell them out of their positions when they couldn't fund their accounts further. There are probably still too many cowboys on Wall Street!

Also late Friday, credit rating agency Standard & Poor's pulled the trigger on the rumored U.S. debt downgrade. It was just last month the S&P placed the U.S. rating on "CreditWatch with negative implications". Despite the debt ceiling resolution raising the debt limit, S&P is concerned about the goings on in Washington and the lack of a plan to clean up the country's balance sheet. It should be interesting to see how Wall Street reacts come Monday as the downgrade was certainly not a shock to those who have been following the storyline. The biggest concern we see is if the downgrade will result in higher borrowing costs for consumers as well as businesses. The other major debt agencies, Moody's Investors Service and Fitch Ratings have said they will hold off on a downgrade for now, but will act if the economy deteriorates further.

Following Thursday's sell-off, it was reported the S&P index had the most stocks hitting 52-week lows since March of 2009. At Dividend.com, we successfully rode out the storm of 2008 through the spring of 2009 by tightening up on the names we were recommending for new capital. It's about allocating money to the best positions possible during various times of the investing cycle. We have been making numerous changes to get our "Best Dividend Stocks" List in the best shape possible for any prolonged downturn. We don't advocate blindly buying every stock's drop - which is what most of Wall Street's research tends to want you to do.

During times like this, I like to remind everyone of the long-term mission we are all on. As we bounce from crisis to crisis economically (the next one could likely occur in the fall, as millions of jobless Americans' federal unemployment benefits are set to run out early next year), we can't lose sight of the fact that income needs to remain front and center. We can't sit around like deer in headlights. If we get a period of hyperinflation, as some think we will, we will need to be invested in companies that can grow profits and pass on those profits to shareholders in the form of higher dividend payouts. Despite the poor market conditions we saw this week, there were numerous companies out still hiking dividend payouts. This is certainly a bullish sign to take from the week that was. I understand the jobs report was better-than-expected Friday morning, but those reports have lacked any sort of trend from month to month. I don't drink from the same "Kool-Aid" cup or wear the "rose-colored glasses" when it comes to economic data that many economists do.

Whenever things ever appear momentarily bleak, I like to remember a quote from 19th-century author Henry David Thoreau, who said "Most men lead lives of quiet desperation and go to the grave with the song still in them." If this doesn't jolt anyone (male or female), then something is seriously wrong. The idea of just getting by and blending in is what should actually scare you. That fear is the one that drives me.

Spending money usually won't bring you happiness. We all go through the "must have this" stage when it comes to material goods. Some people can never conquer the spending demons, and unfortunately will have to pay to price one day for getting hooked on the drug of materialism. Now I don't want anyone to think spending money is a horrible thing. The problem is when you have to go into debt over and over to do so. I often read about millionaires who learned to spend when they had numerous income sources coming in that could cover any new expenses. Now that's a gameplan we should all consider. Anyone who has been reading my work knows the story about my dad's friend Dominick the barber, who at age 77 bought his first home. He never gave up the dream of accomplishment, and to him it was about being able to buy his home free and clear, no mortgage. If we invest wisely and consistently, the hope is we can all buy and do the things that would make us "complete" at an earlier age.

No matter how bad things ever get, keep the quote above handy to help jolt yourself into taking action. Investors need to remember to scale into positions, which avoids any ensuing panic when a stock you just bought falls in price. For many that are subscribers to our service, the goal is to build wealth and a new income source. This will not be a 40-yard dash, but instead it should be a steady jog. The idea is to consistently make money available that can go to work for you. Here's an example of the beauty of compounding interest that dividend stocks can provide: investing just $3000 into dividend-paying stocks over the course of 5 years and re-investing the dividends over the course of 56 years, will grow to over $1 million (Based on historic 11% annual returns). Now most people may not be thinking that far out, but when you think about only having invested $3K to get to that total, what could you do when you commit to putting more money to work, year after year?

Thank you for sharing part of your weekend with me and please be sure to pass this post on to anyone you think we can get inspired and educated about money, building wealth, and using common sense to do so.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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