Earlier this week the US Federal Reserve (fed) decided the economy was not as robust as it first thought it was and decided not to cut back on its stimulus package. This means interest rates will stay low in the US and elsewhere for the next couple of years There was an interesting reaction to this announcement – an Equities Managing Director at Barclays on NPR Business show said to the effect “the announcement will do nothing to help the economy. Investors had moved great amounts of money to companies which pay dividends and leaving growth companies to languish at lower prices” This blog disagrees with the statement. For investors who actually want returns on their investments the announcement is a very good thing. Investors have been buying profitable companies which pay dividends and companies with large cash balances have been paying income to shareholders. It is important to note the Equities person  has a bias is for new issues which generates much more fees to the investment company, but not necessarily to regular investors.

Linking to dividend paying companies, one of the best things to put in practice is to keep the bulk of your investments in profitable companies  which earn a good return with lower risk attached to it and to pay limited fees Over time that formula has proven to be the best one for the average investor. If you consider yourself above average, use part of your dividends to buy growth companies. Most will not be profitable, many will lose money on the share price,  but you never know which one will make up for all the others.

There are more questions than answers, till the next time – to raising questions