When it comes to investing income, the best companies are the ones paying the most income.
Hundreds of Studies Show Stock Picking Doesn't Works Long Term
Many stock market investors pick stocks, or follow stock picking gurus such as James Cramer, or allow other people to pick stocks for them (mutual fund managers.)
I advise you to forget this approach.
You just can't predict the future. That's especially true for people who claim they are experts at finding the companies whose stock prices will go up, but it's also true for income investors.
Unfortunately, You Can't Know the Future of Companies
My advice is to buy income investments and never sell them, so long as they keep on paying that income.
The trouble is, I realize that stock dividends are not guaranteed. Companies can and do run into financial problems and reduce or stop their dividends. In the 1970s it happened to a huge utility -- Con Ed.
Prior to the financial crisis of 2007-2009, financial sector stocks had a great record of paying dividends. So did Real Estate Investment Trusts.
However, in 2009 many banks -- especially the biggest such as Bank of America and Citibank -- were hard hit by the subprime mortgage crisis. And the government allowed Real Estate Investment Trusts to issue stock dividends in lieu of cash dividends. That's find for people who are still accumulating wealth, but it's a disaster for retired people living off those cash dividends.
I Can't Tell You What Companies Will Survive Through Your Lifetime
Therefore, I must point out that, although it's a good sign for companies to pay dividends (it's means they're well-established, and therefore likely to remain in business in the future), there are no guarantees. They can -- and some will -- go out of business.
I urge income investors to reduce the risk of income investing the same way that fund managers have learned to reduce volatility -- diversification.
This means, never put all your eggs in one basket.
Or even in ten baskets. Or into baskets of the same type. Or in the same location.
Reduce Your Risk
If you decide that the XXY Company is the greatest Real Estate Investment Trust, Master Limited Partnership, utility stock or brand name consumer company and buy only shares of that company, you're risking your entire portfolio on the fate of that one company.
Not smart.
Diversify As Many Ways As Practical for You
I urge you to diversify. Don't buy just one company -- buy many. Don't just buy one type of income producing investment -- buy them all. Don't just buy income investments in your country -- buy them all over the world.
I realize that if you're just starting out and don't have a lot of money, you can't begin with this diversification.
However, as time goes by and you add to your portfolio to buy new investments, keep buying new types. Start off with utility stocks, then buy Master Limited Partnerships, then corporate bonds, then Real Estate Investment Trusts, then TIPS bonds, then brand name stocks, then foreign utility stocks, then foreign sovereign bonds . . .
It'll take years to diversify your portfolio as much as possible. I'm not there yet myself.
But I let my investing income accumulate, then buy more and different income investments.
Author Resource:
You can build a permanent, income generating retirement portfolio. Click here to get the information you need to effectively make money from your investments whether the markets go up or down. If you're ready to discover how investing income can help you too retire with financial security, visit this page, enter your email address into the form and click on the Submit Button. Then go to your inbox and verify that. It's free for the taking. http://www.incomeinvesthome.com/.
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