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Weekend Edition – The Wealth Checklist

How quickly the finest on Wall Street abandon ship! Does anyone remember when LinkedIn ( LNKD ) debuted with a $10 billion-plus valuation? Some analysts came out at the time and said stocks like Netflix ( NFLX ) trading in the $200′s was actually undervalued when you factor in the newly-anointed market cap of LinkedIn.

Fast forward to this week, when Netflix dropped an earnings bomb on Wall Street. The company warned that earnings will fall short because of weaker-than-expected subscriber growth. The same analysts that were setting up target prices in the $300′s couldn't find the exit door fast enough, as NFLX was nearly cut in half from its 52-week highs by yesterday's close.

As I always say, investors should exercise extreme caution when evaluating business media's coverage of momentum stocks. As popular as Netflix is, and as good of a brand as they've been able to build, the company doesn't actually own or create any content. That means the barriers to entry to remain quite small for anyone else looking to mimic the company's strategy.

As the decade progresses, and streaming media becomes even more prevalent, the barriers to entry become even smaller (Cable, Satellite, Internet, etc.). Analysts point to Netflix raising their subscription price as the main turning point for the earnings disappointment this week. Having to be the cheapest doesn't make for a long-term sustainable business model, but when you technically don't produce or own any of the product you sell, you are going to be at the mercy of well-funded and nimbler competitors sooner or later. I'm sure there were some analysts out there that may have been warning about this, but when the stock price is screaming higher, voices of reason tend to be laughed at rather than being heard.

A Country That Makes Nothing?

This point leads me into a growing problem in corporate America (and maybe the country as a whole). The whole business of outsourcing our manufacturing has finally come home to roost. How many millions of American jobs have gone overseas in the past 10, 20, or 30 years? I understand that corporations have shareholders to answer to and must maximize profits accordingly. But in the long run, if Americans aren't working, who will be buying all those must-have products being made overseas?

And it didn't stop with outsourcing. Look at the numerous startup companies we all hear about these days and the infatuation with creating widgets, or apps, or who knows what's next. You are talking about "businesses" where the the root of all monetization is almost always advertising. Do you really think all these start-ups will eventually turn a profit just from selling ad space?

Companies need to get back to solving real problems with real products, rather than the endless streams of empty hype coming from venture capitalists. And don't get me started on the insane startup valuations that are set by the VC's themselves! It's no wonder Warren Buffett sticks to buying "real businesses."

The same concept applies to investors looking to put their hard-earned capital to work. The best route for almost everyone is to invest in solid dividend-paying companies. And if you're the entrepreneurial type, by all means, explore some business ideas that can actually produce sustainable revenue. Great ideas don't often translate into great businesses, however. Keep that in mind before you jump into anything headfirst. Do your homework to make sure people are willing to actually pay for whatever your product or service is.

Again, I consistently bring these points up to shed light on what could eventually get the economy on a self-sustaining road - and to keep investors on the right path to wealth and success.

The Wealth Checklist

Have you ever considered writing down your personal rules for building wealth? Many people find it difficult to stay consistent and accountable in their financial lives.

The hunt for the "magic solution" is always exciting when you are searching for the secrets to becoming rich. There are scores of programs in the marketplace today that are designed to get one started on building wealth, but the thrill is usually gone by the time the books and DVDs arrive. The world is full of starters, but the prize goes to those who are finishers. If you are stuck at the start (for instance, if you still don't have an online brokerage account opened yet), you need to put together a checklist of routine tasks. Then you can start to make your own magic happen.

The simple task of writing your routine down is sometimes all it takes to progress beyond just sitting on the sidelines and watching the markets. Put a checklist together of tasks to complete to get you on your way. Many of these processes are one-time events, like opening a brokerage account or automating how much money will go from your weekly salary or savings account into your investing account. You should then pick a day where you will log on to Premium and target your favorite dividend stocks to buy in that particular month. Put them in your custom watchlist and add your current portfolio holdings in there as well. The goal at a minimum should be to buy one stock per month. Within a year, you'll have the 10-12 dividend stocks that make up the initial core of your holdings.

The investments we make in ourselves each day by learning all we can about relevant topics will pay an enormous dividend not only in our own lives, but the lives in our own family's future generations. The lessons to be learned are all around us. I'll be sure to share as many as I have learned and continue to learn myself.

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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