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Understanding Ex-Dividend Dates

October 26th, 2011 No comments

When you invest to earn dividend income, you will want to know when you get paid. In most cases, companies pay on a set schedule. There is no uniformity either in how the key dates are scheduled or even how often companies pay. U.S. companies typically pay quarterly while non U.S. companies usually pay twice a year or even only once.

Three Key Dividend Dates

There are four key dates to know about as depicted in the picture below. Each of these dates has the following definitions:
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Categories: Investing Tags:

Investing Lessons Learned The Hard Way

October 25th, 2011 No comments

The following are investing lessons that would have been better learning sooner rather than later. Better late then never as one would say, and it also might be the case that some of these you have to learn yourself even if someone told them to you. In any case these are presented in the hope that you might benefit from them in your own investing situation whatever stage you are at.
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Categories: Investing, Investing Strategy Tags:

Weekend Investor: Buy An Investment…Get A Check

October 23rd, 2011 No comments

I’m old enough to remember those Chrysler commercials when Lee Iacoccca famously stated: “Buy A Car…Get A Check!” This was the 1980s when a Billion dollars was real money. Chrysler successfully lobbied the U.S Government for a Billion dollar loan, while at the same time hocking loans to consumers that promised free money. (And I thought this ‘government intervention’ in private companies was a new 2008 thing!)

I have always admired Iacocca he turned around Chrysler and he was a self made man who at his best is a pure salesman. He’s the main reason why I invested in Chrysler in my middle school investment contest. I made a lot of money (on paper anyway).

But as a financial move, you have to think that buying a car and getting paid to do it doesn’t sound like a financial move that would make sense. And of course your gut would be right because the check he gave you simply was a loan built into the car loan that he is selling you.

And unfortunately, this same kind of game is played by the Ponzi schemers parading around as investment managers. They promise big returns and what better way to demonstrate it than by providing big checks? The returns are good until of course the checks stop coming as they must.

If you are investing in great companies the best thing that they can do for you is to send you checks, because this is the best statement that a company can make to its shareholders. It’s too bad that other people parading checks are not so genuine about their reasons.

Categories: Weekend Investor Tags:

Portfolio: Get Paid Monthly

October 22nd, 2011 No comments

On SixFigure, we will publish portfolio ideas that you can use to invest. Each one has a specific goal and strategy. This is the first one, called the ‘Get Paid Monthly’ portfolio. It’s a good place to start if you are new to investing.

For the ‘Get Paid Monthly’ portfolio, as the title suggests, you get paid monthly. This is a confidence inducing portfolio because it is made up of investments that are primarily focused on the shareholder by providing a consistent, if slower growing return that you can use as a starting point in your investing.

You will earn money very quickly because the dividends are paid monthly. For publicly traded companies this is an extra burden from a paperwork point of view, but they make the effort. Mostly companies pay dividends quarterly (4 time a year) or biannually (2 times a year, usually foreign companies).

Portfolio Holdings

  • Atlantic Power Corp. (NYSE:AT) (dividend yield: 8.0%) Atlantic Power Corporation owns interest in various power projects and a transmission line in the United States. Its portfolio of assets consists of 13 operational power generation projects with approximately 878 MW generation capacity; a 500 kilovolt 84-mile electric transmission line in California; a biomass project under construction in Georgia; and various development stage generating projects. The company also sells steam under sales agreements to industrial purchasers. It serves various utilities and other parties under power purchase agreements. The company was founded in 2004 and is headquartered in Boston, Massachusetts.
  • Realty Income (NYSE:O), (dividend yield: 5.3%) Realty Income Corporation engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators. As of December 31, 2006, it owned 1,955 retail properties located in 48 states, covering approximately 16.7 million square feet of leasable space. The company also held a portfolio of 60 properties through its wholly owned subsidiary, Crest Net Lease, Inc. (Crest), as of the above date. Realty Income Corporation has elected to be treated as a real estate investment trust (REIT) under the Internal Revenue Code. As a REIT, it would not be subject to federal income taxes provided it distributes at least 90% of its taxable income to its shareholders. The company was founded in 1969 and is based in Escondido, California.
  • Eaton Vance Municipal Bond Fund (AMEX:EIM) (dividend yield: 7.5%) Eaton Vance Insured Municipal Bond Fund is a close ended equity mutual fund launched and managed by Eaton Vance Management. It invests primarily in high grade municipal obligations. The fundÂ’s investment portfolio primarily includes investments in companies operating in the transportation, water and sewer, and electric utilities sectors. Eaton Vance Insured Municipal Bond Fund was founded in 2002 and is based in Boston, Massachusetts.
Categories: Portfolio Updates Tags:

What You Need To Know About Obama, Buffet, And Socialism

October 21st, 2011 No comments

There is a battle in politics and the media going on about what the future tax rates should be and whose rate should change. President Obama and Warren Buffet are on the side that believes that the wealthy should pay more for numerous reasons. And there are political opponents who are arguing that no one should pay higher rates, especially wealthy business owners who are presumably the ones who will create the jobs that are the main goal of Obama’s Jobs Bill.

There are people who articulate the politics of this issue well enough that make it unnecessary for me to go into it here. In this article I will discuss how this issue has been misunderstood in the media, and what you should know about it concerning your own finances.

Socialism Vs. Capitalism

Unfortunately, the mass media makes mistakes in how this issue is portrayed. The most common one is that they make a link between income and wealth that isn’t as strong as they believe. There are reams of studies, political papers, and opinion written about how social standing, health care outcomes, etc are determined by your income. It’s deafening. I’ve read many newspaper articles and OpEds over the years that use the idea of income and wealth interchangeably.

People who make large incomes are not necessarily wealthy. What makes someone wealthy is what they own, not what they earn.

This misunderstanding is rooted in the difference between socialism and capitalism. In both economic systems, people earn incomes and how much they earn is determined by skills, experience, and training to varying degrees. However, in a capitalist system, the capital goods such as equity, equipment, financial instruments are generally owned by private entities whereas in a socialist economy they are owned and managed by the collective. In a Socialist system, the fight is on income because no one can own capital assets where the real wealth is.

Warren Buffet made $40M of income that was taxable, yet this is less than 1% of his total wealth. What makes Buffet wealthy isn’t that income it’s the huge stake he owns in his company, Berkshire Hathaway that is over 100X larger than his declared yearly income. Journalists usually make no mention of this either because they don’t understand capitalism or how it works. If one really wanted to tax the wealthy, the right place is to go after their wealth not their income.

Key Takeaways

  • Mass media influences public policy and they are generally antagonistic towards people who earn large incomes and muted on true sources of wealth. Focus your efforts on activities to accumulate assets that will make you wealthy. As the balance sheet of Warren Buffet shows his assets are the real story and not his income.
  • We live in a mostly capitalistic society so the engines of the economy (including Warren Buffet’s company) are for sale for anyone to own. This is the best way to achieve financial independence, buying assets that will growth and make you money over the long term.
  • Don’t concern yourself too much with these battles because the combatants are fighting over issues that are not front and center concerning the ones you need to focus on to achieve financial independence.

Determine Your Personal Wealth Factor

Buffet is one of the richest persons in the world. His income is very small compared to his assets. This naturally leads to determine a method to compare anyone’s wealth to Buffets. This is not a simple total of wealth, but a ratio of your income to your assets. If your assets are large relative to your income and they are growing faster than your income then you are on the right track. Here’s the calculation:

Wealth Factor = ( Assets – Liabilities / Earned Income )

In Buffet’s case, his assets are 40B. It can only be guessed what his actual earned income is, but it is most likely much less than his reported income of 40M because a lot of that is probably unearned, or investment income. According to SEC filings Buffet’s income from Berkshire is only 524K.

For Buffet, his Wealth Factor is 75,000. When calculated for the author, it’s 7. There is a long way to go!

Categories: Economy, Politics Tags: