As soon as you make money, you have choices. Since it is your life, the choices you make are good ones, but not all choices are the optimal ones. In order to have the optimal ones, you sacrifice something. Sometimes the trade off is worth it, sometimes the trade off is not so good, but there are always different ways at looking at things.

In our society most of us have debt for our lifestyles and income do not always coincide. If you have no debt – congratulations and as you live your life as long as it is good, that is the best way. For the average person, the optimal choice is to look at what it costs to pay off the debt and what you need to earn if you do not pay off the debt. An example is if you have a loan at 4% and are in the 30% tax bracket, how much do you need to receive before paying off the loan is a good idea?

For every dollar of the loan you pay off is worth the interest cost, technically you earn 4%. If you are in the 30% tax bracket, you will be paying off the loan with after tax dollars or with 70% of your income.  The formula is  4.0 is divided by .7  = 5.7%. or if you can make more than 5.7%, it is technically better to invest. If you are making less than 5.7%, the best economic choice is to pay off the loan. If the loan is 15% then 15 divided by .7 equals 21.4%. Being debt free is a very good thing, but there are choices to be made.

Linking to dividend paying stocks, on a dividend yield basis, most make dividend stocks make less than 5.5 % although the total return can be higher. It is always good to know the ideal optimal answer because life has choices. In the world of financial planning, after you make the basics, there are choices to make and we all have reasons why we do or did something. The formula above is a quick method to show want versus need can be expensive. On the other, perhaps you enjoy life more and as long as you can  maintain it, you made a good decision.

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

In many people’s lives after marriage, the two biggest investments are the home to live in and the car. In an ideal world, if you choose a good area to live in and it stays good for the next 50 years plus, then the house will gain value. In terms of the car, not long after you come home with it, the value begins to go down quickly. However if  you have a 20 year plus version of the same car and it is it good working order, the value rises. For cars that are mass marketed to thousands, at 20 years they will not be many left because most were not designed to last that long. The older version is more valuable because to a wide selection of the general public, they have memories of the car. It can be dates, independence, trips, making decisions, family, friends, and everything in between. Those memories translate into rising prices.

Linking to dividend stocks – the issue is over time the cars became valuable.With dividend paying stocks they also grow in value over time, with the extra benefit of regular payments to your bank account or to buy more shares. Over time as the company continues to make money and pay dividends, the compounding affect takes place and your shares increase in value. As you do your search for good companies to invest in, the number of years of payment of dividends allows you to see the company is profitable and continues to provide the needed goods and services it provides at a healthy margin.

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

In the world of the stock market. the greatest focus is what will go up? it is easier, it makes money for those who sell the shares and those who own the shares? but the focus is will the stock rise? Apple reported their earnings and last year was a great year for them, revenues of $ 54 billion, profit of $ 13 billion and they sold many ipads and  iphones. The problem with growth stocks is what will they do this year? will the stock price increase? will they sell as much or more than last year? or will the competition and there is great competition among the top tier companies push down margins (margins have been pushed down from 44% to 38%) and will Apple will sell less. If they sell less, but still a substantial amount, should the stock be valued as a growth stock?

Linking to dividend producing stocks, the difference with the analysis of dividend stocks is the first question is the dividend safe? will the company earn enough or grow the dividend? When the answer is yes, then the questions can examine will the stock price grow? All stock prices tend to trade in a range unless something substantial changes for example the company sells a major division to refocus on a core holding, what opportunities will it pursue? in the case of resource companies has the raw material increased in price? if they were making money at the lower price, they should be making even more at a higher price of the raw material. You can begin to do all sorts of permutations, but if you focus first on the dividend whether Apple makes $13 billion or $10 billion as long as it makes money to pay its dividends is a different way to focus on whether you should buy Apple or something else.

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

US President Obama officially started his second term of office and it is a reasonable to look back on his first term. In a nutshell, the first time the President won the race he wond by being hopeful. For those of us who follow politics, the first campaign was a refreshing wonderful change that just maybe, future campaigns were also going to be hopeful ones. According to reports, 4 years ago while the President was dancing around Washington, the opposition side made a battle plan to say no or delay anything the President was recommending. The hopeful President starting using his political capital without being cynical enough, he truly believed the words from the campaign. Then he ran into the opposition and the delays and nos came fast and furious which ended up in the last Presidential election being more nasty and costly than any previous campaign. The hopeful political way was long gone, but the President won a second term. This time the President should know how Washington really works.

Linking to dividend producing stocks, unlike Washington politics, most of the time shareholders are hopeful because the company has a strong competitive stance from which it leaves the starting gate. This competitive stance has a near monopolistic structure but there is competition to keep the company on the straight and narrow. In Washington which is generally anything but hopeful, often times by doing nothing, it helps the most. By doing nothing, leaders do not talk about changing the laws which in some cases helps the dividend producing stocks. While, it is hoped President Obama does whatever drove him to become involved in politics in the first place, as the US economy begins to show more and more signs of recovery, it is also hoped he does not derail any of the stocks you may hold.

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

Whether you own or rent, invariably there is a room or two you would like to do something with. In the the writer’s case it was the kitchen, over the Christmas holidays the room was cleaned and painted. Originally the action was to be a cleaning, but along the way paint was added and soon the kitchen was painted and it looks good. This action is similar to many home repairs, a small correction grows to more work and that is why most of us do not do all the time. Renovation seemingly has more tangents involved and most of the time, we are missing a tool or two, which causes a run to the hardware store. When you get there, other projects come into being and the cycle is repeated.

Linking to dividend paying stocks, fortunately for this group multi purposes is a really good thing. You can buy for the long term growth of the stock price or the continual growing dividend and you would be correct either way. When the stock goes up you look good, when the dividend gets paid, you look even better.

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

In the neighbourhood the writer lives in, similar to many neighbourhoods there are dog walkers. People who have a dog as a pet and need to take the dog for a walk for exercise and to clean their bowels. The dog walkers develop a routine with their dogs for walking. Every morning or evening or something in between – it allows for a walk, sometimes a chat, the ability to observe what is happening in the neighbourhood and other good things. The dog walkers are an important part of the daily activities in the neighbourhood.

Linking to dividend paying stocks, similar to dog walkers routine,  the payment of the dividend is a good thing. Consistently coming to set the calenders by and reflecting the good of what the company is in business for. To service its customers and make money for its shareholders.

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

Every year, a trip to the Doctor’s to receive a physical is done, fortunately besides doing a number of tests, the results have been a good checkup. The things that were done right whether by accident or design, the Doctor encourages me to keep doing them.That is helpful advise because it means with a few adjustments here and there, the likelihood of doing them in the future is very high. Unlike my dentist who wishes flossing would be done more. Somehow that is just not in my daily routine, even though steps have been made to make it easier.

Similar to a physical checkup, it is a good time with year end and the beginning to file taxes to do a financial check up. If you have debt – pay it down till you are either comfortable with it or the debt is paid off. Think of the debt similar to investing, what is the rate of return? for example some credit cards carry an interest rate of 19% so your return is – 19% if you make payments. If your investments make greater than 19%, then it is offset. If the debt is not offset, either the investments have to be raised or debts has to be lowered and in 99.9% of cases, the lowering of debt is the easiest method.

Linking to dividend paying stocks – it is good time to look at your investments. You picked them for a reason, at the time the reason was good. Similar to months of the year, the reasons change. There are good dividend paying companies which are relatively consistent in their returns year over year. Those types of investments would be the ones to gravitate towards. Being positive on a year to year basis increases your total return and that is a good thing.

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

The other day, an university sent a supplement in the mail, it was designed to raise its profile and act as funding vehicle. The university is located to the west of the city the writer lives in and I have been to it a couple of times in the past, once to see where it was. The reason it is noted to the west, when I typically leave the city, 95% of the time I go east towards the sea, which means the familiarity with those institutions is higher. Looking through the supplement, leads me to believe the services, programs and people are of the same high quality as the eastern institutions but still the car typically drives east.

Linking to dividend paying stocks, we all have biases and it is ok. We have biases in where we live, in the stores we choose to spend our money at, and the way we live. It makes us who we are. The trick is recognize the biases, and every once in a while see what you are missing because of them. The writer remembers when Wal-mart came into the market area, some people said they would never shop there, others looked at the consistently higher number of cars in the parking lot and bought the stock. They both saw the same thing and both were correct.

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

The industrial revolution was started with the manufacturer of cloth to be sold around the world. It meant the price of clothing went down, most of us know that, but have you ever been into a textile shop? The writer was in such a shop which was filled with thousands of different types of cloth or textiles. From the conversation the shop owner was having with customers, I could tell the owner knew where all the different cloths were and equally important what he did not have. From an observation point of view, it was very interesting.

Linking to dividend producing stocks – each of us knows something more than others, either from where we receive our money, our interests, but something. Similar to looking at all the different types of cloth in the textiles shop, there are many stocks that could be invested in, when you start with dividend paying stocks the field is quickly narrowed. It is the opinion of this blog it is important to narrow the field to companies that make profits to pay the dividend. By starting with these companies, the result will be to ensure what you know most about, you can continue to do.

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