Market Sectors

“Market sectors are especially important to investors trying to make sure your portfolio is well diversified”

What are the different Sectors of the Stock Market ?

There is no consensus on what constitutes a Market Sector but we are listing the major sectors and sub-sectors of the Stock Market. Market sectors are especially important to investors trying to make sure your portfolio is well diversified. By purchasing stocks from differing sectors you help isolate your portfolio from large losses should a particular sector experience a “bubble” ( a phenomenon that occurs when a particular sector is extremely overbought, usually due to speculators). It is advisable for investors to buy stocks in every major sector of the market if you can, while nothing will help with a general market downturn it can help stabilize your portfolio during turbulent market sector volatility..

Stock Market Sectors with their respective sub-sectors:

Technology Stocks

  • Internet Stocks
  • Software & Services
  • Applications
  • Networking
  • Semi Conductors & Microchips

Commodities & Basic Materials

  • Agriculture& Cattle
  • Basic Materials
  • Metals( Aluminum, Gold, Silver , Steel, Copper ..)
  • Chemicals

Energy

  • Oil & Gas
  • Refineries
  • Pipelines & Storage
  • Coal
  • Machinery & Support Services

Healthcare

  • Pharmaceuticals & Drug Manufacturers
  • Biotechnology
  • Medical Appliances & Equipment
  • Medical Laboratories & Research
  • Medical Instruments & Supplies
  • Healthcare Diagnostics
  • Hospitals
  • Medical Research

Financials

  • Banks
  • Investment Brokerages
  • Property & Casualty Insurance
  • Accident & Health Insurance
  • Life Insurance
  • Credit Services
  • Asset Management

Consumer

  • Discretionary – Leisure & Entertainment…….
  • Non-Discretionary – Autos, Food,Beverages ……..
  • Tobacco, Alcohol Products

Industrial

  • Machinery
  • Aerospace & Defense
  • Electric Equiment
  • Farm Machinery
  • Lumber & Wood
  • Small Tools

Telecommunications

  • Telephone Services
  • Internet Services
  • Entertainment Services
  • Cable TV

 

Utilities

  • Electric Utilities
  • Gas Utilities
  • Water Utilities
  • Renewable Utilities
  • Diversified Utilities

Transportation

  • Airlines
  • Railroads
  • Trucking
  • Shipping

Services

  • Entertainment
  • Home Improvement
  • Restaurants
  • Delivery Services
  • Mail & Internet Orders
  • Delivery Services
  • Department Stores
  • Specialty Stores
  • Grocery Stores
  • Casinos

REITS & Real Estate

  • Agriculture & Land REITS
  • Data Center REITS
  • Diversified REITS
  • Healthcare REITS
  • Industrial REITS
  • Infrastructure REITS
  • Lodging REITS
  • Office REITS
  • Retail REITS
  • Residential REITS
  • Specialty REITS
  • Storage REITS

 

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Keep Your Focus on the Objective

“Sometimes investors lose sight of what their objectives are”

Sometimes investors lose sight of what their objectives are. Yes, it is hard to believe I know, but even hardcore Dividend income Investors find it hard to remain focused one hundred percent of the time. This can be especially true when you see the value of your portfolio dropping like a rock.

This past couple of weeks have been especially trying for me as I am heavily weighted in REITs and other stocks that for what ever reason have been in steady declines. Our first instinct as human beings is the “Flee or Flight” response and perhaps from my own observation this tendency is a self preservation technique for most species. Given an opportunity I believe most of us as well as most animals choose to Flee when confronted  with danger. And this response makes a lot of sense when you stop and think about it. Fighting should be the last choice because of a great number of reasons not the least of which we might lose our life in the process. As Investors though, this is most  likely the wrong choice to make. We should usually decide to stand our ground and “fight”.

If you stop to think things out you can begin to focus on the right decisions even in the majority of the most trying times. Ask yourself just a few simple questions.

  • Why did I invest in this stock?
  • Has anything changed that would have persuaded me not to invest had I known prior to purchasing the stock?
  • Have I lost faith in the company and its fundamentals?
  • Will it still provide me with the income I expected?
  • Is it just this stock declining or the whole sector that is pulling back?

Why would I sell a stock just because some investors have decided that this sector might not do as well over a short period of time? Investors in general tend to panic and over-react to most situations. Other investors have different objectives than you do. If you are a Dividend Income Investor your objective is to generate high income. IF the other investor is a trader they make money by trading in and out of stocks  to maximize their profits and timing is very important for them. If you have a stock that is generating the income you desire and the fundamentals are still sound and the outlook for continuing that income then why would you want to sell?

When Stocks are on Sale – Go Shopping !

If you stop and think about it this is exactly the time you should be making stock purchases – not selling stocks. Why is it that when a stock drops in price the majority of investors run for the exits and sell their share? If you were at a regular store shopping for items you need would you turn and run out of the store because the store announce those products were now on sale for 5, 10 or 25 percent off? Of course not. buying stocks when others are selling gives you advantages over the others. You are purchasing the stock with a lower cost basis and at a higher yield than normal. Both are great for the long term.

As an example let’s look at the returns of a stock that normally yields 5% and because the stock drops in value you can now purchase it for 6.25%:

We invest $10,000 into the 5% yield of XYZ. The shares are valued at $50 and pays a dividend of 2.50 per share.

$10,000 would buy 200 shares and would provide you with $500 per year in income.

Now the same XYZ stock drops down to $40 per share and is now yielding 6.25%

$10,000 would purchase 250 shares and would provide you with $625 per year in income !

So the motto oft his story ? Stay Focused and keep your sight on what your true objectives are. it is easy to get caught up in the hype and the panic of others but if you just stay calm, take a deep breath and make the “Logical” choice as a Dividend Income Investor you will be rewarded for years to come !

 

If you enjoyed this article then I ask that you consider following me for more simple and straight forward investing advice.

I would also appreciate hearing your thoughts and comments !

 

REITS Vs Real Estate

‘Investing does not have to be complicated but it seems many of us want to make it so.’

I read an article recently where the author tried to make the point that investing in REITs (Real Estate Investment Trusts)  was better than investing in Real Estate. I didn’t buy all of his arguments and believe his conclusions were flawed. Just so we are clear I own many REITs and I have owned and still own rental properties.

Which is better ? Investing in REITs or Real Estate.  The answer – There is no simple answer. I love REITs. They have many advantages over Real Estate properties and they have many advantages over general equity stocks. While I will not discuss all the advantages and disadvantages of REITs here (Look for a future article – Why I love REITs) I will point out the number one advantage of owning a REIT – Its higher yield. Remember your two best friends? That’s right Mr. Time and Mr. Yield. Together you will probably find no better friends, at least in the investing world.

But let’s compare his arguments for REITs with that of Real Estate:

REITs are less risky, better diversified, liquid and cost-efficient

Less risky ? That is very subjective, Real Estate is not any more of a risk than REITs, in fact I would argue that Real Estate is in fact less risky of an investment when done by someone who knows what they are doing. Better Diversified? Again, this one just not make sense, but I believe I see what he is trying to say but comparing a basket of stocks with a real estate investment is comparing apples to oranges. He also states that unless you have a Hundred million dollars you cannot possibly be well diversified – I believe he pulled the figure out of a hat somewhere! Besides I know people that own dozens of properties in many locations and in some cases differing types of properties so again I do not agree. Cost efficient ? I don’t understand his argument here so I really don’t know how to respond except – ???? The one part of this statement I do agree with is that of Liquidity. It is generally much easier to buy and sell REITs than Real Estate.

REITs have historically outperformed private real estate

Pure Hogwash ! In fact in his supporting paragraph he compares the performance of REITS  to the S&P 500, and Private Real Estate Funds, not to private real estate investors. Big difference here. I have personally known private investors that have made over 100% returns on real estate deals.

REITs provide REAL passive income

Well, okay. I’ll buy that unless you pay a property manager to manage your properties you will have to put in more work, but real estate investing is certainly no 9-5 job ! But this even tries to make an argument that you will end having to take on a second job. Totally ridiculous statement in my opinion.

REITs are not necessarily more volatile

Again he tries to compare REITs with Private Real Estate without even comparing the two. He uses various metrics to point out that REITs are not more volatile that Private Real Estate but does not show any examples of Private Real Estate volatility. The thing is I do agree that REITs are not that volatile but neither is real estate. Yes, real estate does fluctuate but very few of us look up the expected price of our home or real estate investment very often. The truth is though your home more than likely will not drop in value over night because the FED has stated they may raise interest rates or because of tensions with some foreign country, or just because the whole stock market is in a general decline that day. I have no hard core proof to present, but my own experience tells me that Real Estate for the most part holds its value very well.
Then of course we have his conclusion:

My conclusion is that if you are not a professional real estate investor, forget any form of private real estate investing including crowdfunding, limited partnerships and direct ownership (excludes home, and other exceptions). And even if you are a professional investor, you might still be better off investing in REITs.

Obviously there exist many exceptions to this conclusion, and I am sure that private real estate makes more sense for one investor than another. But REITs have so many advantages over private real estate that it is difficult to argue against it. REITs are less risky, better diversified and liquid, but they have still managed to outperform private benchmarks in the past.

Read his “conclusion” carefully. It just does not make sense. Only professional real estate investors should invest in private real estate? Really? Does one have to be born into the Professional Real Estate Investing profession?

And then – Even if you are a professional real estate investor you might be better off investing in REITs?  Then he repeats his unsubstantiated arguments again to summarize his conclusion.

My Take.

I personally invest in both REITs and in Investment Properties. Yes, real estate takes more time and effort and yes, real estate can be difficult to sell sometimes, with these I agree. But no, Real Estate is not any more volatile than REITs and it is not only for “Real Estate Professionals”.

REITs are great investments also. Many of my REIT investments make great returns for me and I enjoy collecting yields ranging from 5% to 10%. Some of my current REITs are APTS, VTR, WPC, O, CCP, OHI and I am happy to own them, but they are very different than owning actual investment properties. I have generally achieved much greater returns investing in real estate than I ever could investing in only  REITs.

My advice.

If you are up to it and in a financial position to do so I recommend not choosing between the two but investing in both. Then you can experience the best of both worlds, more diversity in your investments, higher returns and still maintain some liquidity for your needs.

Investing does not have to be complicated but it seems many of us want to make it so.

Your thoughts and comments are welcome !

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REIT Guru Recommends Sell These REITS

“Brad Thomas is the author of two books”

Brad Thomas, a noted REIT expert has recently placed a sell recommendation on two popular REITS.

Brad Thomas is the author of two books “The Intelligent REIT Investor: How to Build Wealth with Real Estate Investment Trusts” and “The Trump Factor: Unlocking the Secrets Behind the Trump Empire”. He also writes articles for Forbes and Seeking Alpha , has his own Newsletter and Radio show about investing in REITS.

He is also  my favorite author and REIT expert. He has share his experience at real estate development with his readers. It is because of this real world experience I believe it gives him a clearer insight into the financial workings of REITS. With connections to several REITs he follows and his real world friendship with President Trump he is not only well schooled but well connected as well.

He has currently recommended a sell on two widely held REITS. The first is Gladstone Commercial (GOOD) and here is a quoted summary of his conclusion:

“In fact, I would argue that from a risk-adjusted perspective, GOOD shares are now expensive and investors should consider trimming or possibly selling. It is clear that GOOD is not in a position to raise the dividend and the potential for share price appreciation is muted.”

The second sell recommendation is Lexington Realty Trust (LXP)  and here is the summary of his sell conclusion for LXP:

“As you can see below, we don’t see the same “margin of safety” with LXP as we saw a year or so ago. While the company has been successful with its recycling platform, the payout ratio has become tighter, and the potential for dividend growth is less exciting. LXP is forecasted to grow modestly, but the extreme office exposure and tight payout ratio suggests it may have lost some of its sizzle”

I currently own LXP and have decided to hold my shares at this time however I certainly would not recommend buying LXP at this time.

Both REITS are popular among investors seeking current dividend income.

For more information on Brad Thomas visit his website IREITINVESTOR.com

 

Thoughts or comments? Please share them below!

 

 

8 Great Stocks Yielding 8%

Looking for Stocks to spice up your Income?

22 March, 2017


Looking for Stocks to spice up your Income?

Or, Maybe you are a new investor looking for that Dividend Income. Whatever your reason for wanting some higher yielding stocks these 8 stocks are a great place to start. Take a look and see if they might be just what you are looking for.

Stag Industrial ( STAG) – An Industrial Finance REIT that currently yields 5.65% – An as an added bonus – It pays monthly

Main Street Capital Corporation (MAIN) – A business Development Company (BDC) that currently yields 5.90% – MAIN is considered the Cadillac of BDCs. A great stock that every investor should consider owning but is a must for Dividend Income Investors. As an added bonus to paying monthly it also  usually pays a special dividend twice a year in June and December.

Preferred Apartment Communities (APTS) – A REIT that owns and operates apartment communities in 24 cities that are located in 12 states.- Currently yielding 6.69%

Hercules Capital Inc. (HTGC) – A Business Development Company (BDC) that specializes in funding debt for Technology companies. – Currently yielding 8.32%

AGNC Investment Corp. (AGNC) – A Residential REIT of Mortgage backed Securities – Currently yielding 10.96%. ( Pays Monthly)

Gladstone Capital Corporation (GLAD) – A Closed in Fund that provides financing for lower middle market companies. – Currently yielding 9.18% ( Pays Monthly)

Vector Group LTD. (VGR) – A Tobacco Company that sells discount brands of Cigarettes and Tobacco products. It also has diversified into Real Estate.Currently yielding 7.79%. In addition this special stock pays a Special “Stock Dividend” each year in September of about 5%. This means if you take the amount of shares you own and multiple them by 5% this is the amount of additional shares you will receive. So if you own 1000 shares your received shares will be 50 additional shares ! A great deal for Dividend Income Investors.

Capital Care Properties Inc. (CCP) – This is a Healthcare REIT – This REIT started in August of 2015 when it was spun off from the Blue Chip REIT Ventas Inc. (VTR). It has 340 Skilled Nursing and Senior Housing Properties. It is currently yielding 9.18%.

 

Thoughts or Comments? Feel free to share below. We look forward to hearing from you.

 

Why I became a Dividend Income Investor

When my wife died I realized I still had two minor children living at home

My main personal motivation  for becoming a Dividend Income investor was the death of my wife. When my wife died I realized I still had two minor children living at home that I now had the sole responsibility for. I had two other children that were grown and married with good jobs so I knew they would be okay but what about the two minor children? I wanted to ensure my two youngest children were provided for. Reviewing my Investments I realized that even with leaving my two youngest children the entire Insurance policy I had would not be enough to support them for more than a could make it for a minimum of six years financially to ensure their well being. So this is when I switched couple of years. My youngest child was 14 years old at the time so my thought was that I needed to ensure they I sold most stock that was paying dividends below a 5% yield. My main focus became providing enough income for them to live on should anything happen to me. This meant sticking my investing neck out and taking on some risks that I hadn’t been willing to do.  I increased my average yield from less than 4% to right at 10%! Now I know what many will say – Why be so risky buying higher yield stocks when everyone says they are “Yield Traps” or “very risky”.

Amazingly what I discovered was that my new way of investing was not any more risky than my previous “safe” style yet I was bringing in right at three times the amount of monthly income. Since I was not in need of the extra income it was being reinvested into even more stocks. In other words my income was now compounding about 2 times faster than it was previously and it did not take me very long at all to make sure that my monthly income goals of providing for my children were met.

Did I have any failures? Sure, a couple of stocks that I purchased cut their dividends but I simply sold them and bought other stocks that were paying similar , if not more in Dividends than the stocks that I was replacing. A few stocks, I kept in spite of the dividend cuts. An example is a stock that I purchased during the oil bust. I remember one in particular was paying over 30% in dividend yield and after the cut I was still receiving a yield in excess of 15% so I decided to keep it. My reasoning was that a 15% yield is great by any measure, and that the company having reduced its dividend was in much better shape financially. Of course by practicing “risk mitigation” (see chapter —-) I had not put an excessive amount of my investment money at risk, even if I had lost every penny of that stock. I am now near three years into my new style of Investing so I am sure you would ask , do I regret switching to my new style of investing that I call Dividend Income Investing? The answer is absolutely not.

My Dividend income has increased almost every single month. Now of course you have to be smart and selective and make sure not to get too greedy with the yields. A portfolio yielding 8-10 % is quite doable. One of the first things you have to look at is the yield out of whack with the Sector it is in. Many stocks like MLPs, REITs and BDCs naturally pay out more in Dividends and Distributions. This is so because they are either passing on taxes to you, or because they are required to pay out distributions as a percentage of their Revenue. The other very important step is to do a little (or better a lot) of research to make sure the company is on solid ground and is not in danger of going bankrupt or drastically cutting its dividend. You don’t have to be an expert in the Charts and financials of each company, much of which is very confusing to the average investor but I have found a great way to research companies is to read every single article you can find before investing.  I even like to read the comment sections below the articles to see if the average Joe agrees with the author’s conclusions. Once I have determined the company as a safe investment then I act upon it.

The amazing thing is my portfolio generates much more than it would otherwise and with the extra dividends I can purchase even more stock which helps to make the Portfolio safer each and every month as well as grow in value!

Now I am not an Financial Advisor, so I can’t say my method will work for you, but what  I can say it has worked very well for me.

Please feel free to share your comments below, I look forward to hearing what you think.

 

 

Investing For Specific Goals

“She wanted to earn enough money to cover the rent of the apartment for the rest of her life.”

A Poster on a popular Money Forum I follow had asked for advice. She had just sold her home and had $225,000 in proceeds to Invest. Her dilemma was that her Financial Advisor seemed to be less than enthusiastic about helping her. She was selling the home and moving into an apartment. The apartment’s rental rate was

e$1,300 per month. She wanted to earn enough money to cover the rent of the apartment for the rest of her life. Wisely – She didn’t want to be told “Invest in Bonds” or Invest in an Index Fund because she knew it would not give her the Income she needed to cover her rent.

I knew I could help her. I had recently been through a similar experience. So I shared with her on how I would handle the problem.

First thing to be done is to determine how much of a yield would be required to generate the $1,300 a month in rent.  So doing a quick check shows that she needs to earn a 7% yield from her investments in order to the required $1,300 per month.

Here was my advice:

Buy individual stocks. Use the Dividend Income Method. That is stocks that pay higher yields than most because she needs income today – not twenty years from now.

For Diversity and risk mitigation we identified 27 stocks of various yields that would help reduce the risk of losing large amounts of money should the unthinkable happen. This came out to an average  amount of $8,333 per stock. I did end up weighting the higher yields slightly to ensure she met her goal.

So what I ended up with is: 10 Stocks @ $9,000 each, 16 stocks @ $8,000 each and 1 stock @ $7,000.

Here are my choices:

Continue reading “Investing For Specific Goals”