Strategies
There are many different ways of making money in the stock market. Drip
programs have already been discussed. Now we need to discuss developing a
portfolio with different strategies to maximize your investment dollars.
Capital gains as they are called are the most common way of creating wealth.
Basically it is an increase or gain in value. If a stock goes up one point, a
dollar per share is made. It is as simple as that. Now remember in figuring out
the profit, Uncle Sam wants their part in taxes. Capital gains are figured at a
different tax rate than earned income from your job if you own the stock over a
years period. So this helps out for the totals at the end of the year if held in
a long term period. Now for the good news, the only time you pay taxes on this
type of an investment is when you sell them and get the money. Dividends are
taxable and are declared yearly, the company will send you a statement of your
income.
Drip programs are the easy way of making money. Something to think about is
using capital gains with them. Generally speaking, companies that pay higher
dividends will not have much movement in the value of the stock.
Now let us look at setting up a portfolio and getting started. Utility
Companies and telephone companies are a good conservative investment, a good
basis for steady income. Get these set up first and establish a dividend basis.
These are always a reliable and steady income with in a portfolio for long term
investing. Being conservative is the smart way of starting out. You have worked
hard at saving so let’s not throw it away.
After getting your base started, then expand the portfolio. Set up about 6
Drip accounts and maximize adding to them. This all takes time, so do not get
discouraged. It is tempting to change and pull money out of these accounts for
any number of reasons. Well the decision should be for investing in a better
strategy. Use one of these Drips for this purpose then. Sort of like a savings
account that pays better that a bank. This money is not liquid and can be pulled
out on a whim; it takes paperwork and a few days to get to. So it gives you time
to really think about spending it.
Once a good base is established, look at other possibilities for making more
money. Now go after a stock that has better capital gains and or a higher return with the dividends. Look
into REITs. Real Estate Trusts for example.
We need to cover share lots. This is where you need some money to get started. Odd lot purchases, (other than 100 share lots), are
acceptable. Try to stay with numbers of 10, 20, 25, 50, 75. Brokers do not
really like to do this, but will do it. With an online do it yourself brokerage house, it is no problem.
Divide up the portfolio with different types of strategies and dividend yield percentages.
It is called diversifying the risk factor. If one looses, it will not have a
totally bad effect overall. Don’t keep your eggs in one basket is the general
idea. Spread the risk out depending upon your own personal risk factor. If you
are younger, keep about a 40% conservative, 30% middle risk and 30% aggressive
factor within the portfolio. With age increase the conservative percentage
amount.