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Secrets of Investing

By Chantal

A wise old saying goes thus, save for a rainy day. Saving, did worked only in the past, but it is not the case today which is governed by investing and no longer saving. It is clear that saving and investing are two different things. Saving is actually part of one’s income that is kept aside regularly which meets just short term needs and does not necessary provide returns. Investing on the other hand does grows one’s capital thereby providing returns which would help one to attain set financial goals. Investing can help one prepare for emergency, financial security, fighting inflation, fulfilling financial goals and creating wealth.

Dividend investing is just as old as the stock market itself. When it comes to dividend investing, invest just in high quality businesses that do possess a long term proven record of stability, profitability and growth. No reason is found for owning a mediocre business when you can own a high and great profitable business. When it comes to dividend investing, invest just in stocks possessing as from 25 years and more of dividend payment without reduction. Therefore invest in businesses that do pay the most dividends so you can thereby increase the dividend income stream. Always rank stocks by their dividend yields. There exists no margin of safety when a company is eventually paying out all its income as dividends. The dividend must be reduced whenever there is a business downturn. Always see on investing in businesses possessing higher income than dividends, this is to insure dividends won’t be reduced in anyway during business downturns.

All the investors presently seeking to accumulate enough capital so as to realise an income stream later might just be so well frustrated by the low interest rate environment. This present era of little yields does not only reduce current income from yield oriented investments but it also comes with the alarming threat that rates might eventually rise. This exerts pressure on income oriented investments.

Historically both bond and stock investing were much more focused on generating income. During the last century, income generation was indeed for most investors a key point for investing. It was not until the bull market euphoria which took place by the 1980’s and 1990’s when there was loss of income credibility. This was because companies and investors similarly took to the notion that growth was actually superior to income.

Dividends have been the main contributor to the total returns for equity investments over the long term.

Dividend and inflation

All conservative income investors are so often faced with a choice between dividend and bond paying stocks. Bonds which are also known as fixed income instruments, do possess a particular benefit of paying a fixed rate of interest. So many others do believe that this fixed rate of interest is actually an advantage.Companies may reduce or even eliminate their dividend payments when tough times arise. But these companies do raise their dividends as earnings grow with time. Dividend paying companies have a consistent and impressive track of dividend growth.

The ability of all dividends to grow eventually provides the ability to indeed outpace and offset all the financial damages caused by inflation. Historically inflation has grown at low rate than dividend. Moving from the end of 1940 through April of 2015 dividend growth has significantly outpaced the rate of inflation by as more than three and half times. This actually means that after the inflation, 100 dollars in dividend paid in 1940 would have significantly grown up to more than 350 dollars after the inflation. To be clear and realistic, there are years coming when inflation will seriously outpace dividend growth. Over a long run we observe that the rate of inflation is of no match for the historic rate of dividend growth which has been significantly greater than the rate of inflation. Thus it can be said with confidence that dividend growth will obliterate inflation.

Risk of rising rates

All increase in interest rate environments are not generally favourable to any income oriented investment. This is a certain truth for most of the existing bonds whose prices are strongly negatively linked with changes in interest rates.

Dividend investing in a Bear market

For the fact rising rates may generally not cause a decline in all dividend paying stocks that does not mean one shouldn’t worry about the market decline. We have the volatility of the equity markets, so all foresighted investors eventually need to consider the effect of a declining equity market on part of their investment strategy.

All declining markets can be of high favour to dividend investors. Not to look surprising there are some caveats to the above statement. All investors who are reinvesting their dividends can eventually benefit greatly from flat or even declining markets. An explanation for this is because the reinvested dividends do accumulate more shares at lower prices. The famous key here is to understand the downward price movements can actually be beneficial for building a good and prosperous future income stream.

Dividend is not just about the dividend

A strategy often referred to as the dividend aristocrat’s strategy which is not actually bad but has a serious flaw. One amongst the many attributes of the dividend aristocrats is the fact that once a company has achieved aristocrat’s status, management keeps on seeking to increase the dividend each year so as to maintain that status. That is completely acceptable by all for once a company does falls of the list it will take at least 25 years to return back. Investors may be missing the more important attribute just by focusing on the dividend as the key attribute which is actually the ability to generate the required earnings.

Dividend builder fund

In order to be considered for the Dividend Builder Fund companies must have achieved at least 10% or even greater cash flow return on investment for each one of the previous 10 years. It is clear that for each given year about 20% or even more of companies are actually able to achieve a CFROI of 10%; which is something very difficult to achievefor10 consecutive years. Only a few companies are eventually able to meetthese requirements.

All investors holding a portfolio of high quality dividend paying stocks should see on taking the following seriously;

  • They should expect to see their dividends grow over time at a rate eventually exceeding the rate of inflation.
  • They should recognise the fact that a declining market can be highly beneficial.
  • They should not be fearful of the rise in interest rate.

In all highly competitive business environments, responding to all the needs and wants of current customers require the creation of goods and services. For any already existing or newly created business to survive in such an environment, it must be able to create for itself useful and necessary information. That is information which shall be used to create, improve and provide the necessary goods and services to the current customers in the market place. It is actually such useful and vital information that is referred to as trade secret. It has been observed so often that competitors rather get access to such information so easily by winning over or actually hiring away one’s key employees. The key employee here refers to one who created or did  have access to such vital information which gives one’s business a competitive edge. So as to prevent such erosion of the competitive edge, a successful company has to safeguard all its confidential information. The purpose of this section is to help and assist all to understand the nature of trade secrets and the reasons why trade secrets should be protected; to bring forth practical challenges in identifying trade secrets and protecting them jealously.

Basics of trade secrets

A trade secret can well be defined as any piece or pieces of information that is;

  • Actually not known by all the relevant business cycles.
  • Capable of bringing some sort of extra benefit to the owner. This benefit must come from the fact it is not generally known by all.

What we refer to as a trade secret actually continues for as long as the information is kept hidden from the outsiders. Anything that can just merely be disclosed by the observation of a product in the market cannot be considered a trade secret.

The reasons for protecting trade secrets

  • Worldwide trade secret law seeks to maintain while promoting commercial ethics and commercial fair dealing in all trade activities.
  • One of the key objectives of trade secret law is to provide an encouragement for businesses by safeguarding the substantial time together with the capital invested in developing competitive advantageous innovations. These competitive advantages could be both technical and commercial, especially all those which do not merit the cost of patenting at all. 
  • Competitors could still use their different innovations without actually having to shoulder the burden of risks and cost involved in developing the innovation. This is in the case where they are not protected by the trade secret law.

Type of information that could possibly be a trade secret

Virtually any type of information one possesses may possibly qualify as a trade secret

  • A trade secret could possibly consist of information which is relating to a formula, device, pattern or other compiled information actually used for a noticeable period of time in business.
  • So often, talking of a trade secret is talking of a technical information used to carry out the manufacturing processes of goods.
  • Not to forget is the fact a trade secret could as well relate to export or sales strategies and marketing. Could possibly be a particular method of book keeping or some other business management routines not known by all. Could possibly include the use of some particular software for the accomplishment of a task unique to the company alone.

We could as well have some other possible potential secrets being technical, financial or vital financial information. Such could be business plans, list of key customers, business processes, list of special suppliers who are reliable, characteristics of products, and product specifications together with the purchase price of their key raw materials. Nevertheless we could also have test data, technical drawings, proprietary receipts, engineering specifications, formulae content of the laboratory notebook and salary structure of the company. We could still list more being product pricing and advertisement rates, object code, source code, electronic data base compilations and databases, marketing agreements, promotional and all marketing material under development. So all the above should be taken good care of.

Do investment treaties actually facilitate investing in land for foreign investors?

  • Most investment treaties do bar investing in land by non-nationals by preventing them from acquiring land for agricultural purposes.
  • Investment treaties do require governmental authorisation before the acquisition of any by non-nationals.
  • Investment treaties on investing in land provide shorter or maximum lease durations for non-nationals.
  • When it comes to investing in land, investment treaties actually restrict the allocation of land rights to non-nationals for specific forms of land investments thus reducing the amount of investing to be made on land.

In other to gain wealth, one can decide to save now for future use. Saving is easier if one commits self in doing it. Anyone aiming to gain wealth should see on setting personal goals, which would eventually bring him/her into such a state of being wealthy. Because too little investment risk is just as dangerous as too much investment risk, anyone who wishes to gain wealth should see on ensuring enough risk on a portfolio. Anyone aiming to gain wealth should consider budgeting as an important tool to help them manage their personal finance and most especially their cash. Anyone wishing to gain wealth should see on investing in different businesses, thus allowing his/her money work for them. Another possibility is starting up a business.

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