Financial advisor Matt Krantz of USA Today recommends selling poorly performing stock to pay off pressing credit card debts.
Stock portfolios have generally stagnated over the past five years. If you are paying 15% annual interest rates on credit card debt at the same time it can seem like a no-win situation.
Matt wisely suggests that you should “strongly consider liquidating a big piece of your non-retirement portfolios to pay down your credit card debts”.
This translates as a guaranteed 15% annual return.
Moreover, “a 15% guaranteed return by repaying debt is just about the closest thing to a home run you’re going to find in this market”.
It’s not widely known that reinvesting dividends can greatly increase returns on share investment.
Dividends are a welcome addition to investor’s returns on their shares. They represent the portion of profits that companies distribute to shareholders.
Growth in dividends from shares in the UK has outpaced inflation over the last 20 years, according to M&G. Indeed, they have grown by 31 percent over the past three years.
Ben Willis, Head of Research at Whitechurch Securities said, “Volatility in the market can benefit the long-term investor. If you reinvest dividends you get more units for your money, which puts you in a stronger position when markets rebound.”
Reinvesting rising dividends often bring handsome returns. Anyone who invested in, for example, the M&G Extra Income fund 20 years ago will have doubled their capital and would have received total net income payments of 176 percent of their original investment, despite taking the dividends as income. Those who reinvested those same dividends would have seen their investment increase fivefold in the same period.
Last week the S&P500 hit an all-time high, throwing off years of sluggish performance.
To underline that, just compare the S&P with Britain’s FTSE100. Over most of the past seven years, the Footsie has steamed ahead of its U.S. equivalent. In the last five years the UK index has leapt 50 percent compared with 12 percent in American markets. Over the past three years, the S&P500 has returned 30 percent set against 64 in the UK.
Since 2000, the U.S. index has fallen overall by 8 percent compared with a gain of 32 percent by the Footsie.
Peter Seilern of Seilern Investment Management responds, “People talk about the trade deficit which is no worse than many eurozone countries. And if you look at valuations, the S&P500 is trading at about 18 times earnings, which is neither cheap nor expensive. America has a culture of enterprise and some of the best managed companies in the world.”
Cormac Weldon, head of U.S. equities at Threadneedle, says, “There are now sound reasons for investors to reassess their allocation to the U.S. market.”
Surveys have shown that women invest in the stock market far less than men do; they have a different view on the risks and possible gains and are much less confident of their ability to invest wisely. But, when they do try the stock market, they generally do better than men, choosing dependable stocks and ignoring the get-rich-quick options.
Kiplinger suggests that couples should invest together, thereby complementing each other’s strengths and weaknesses. The man can encourage investments in higher yield stocks and the woman restrain him from his wilder excesses.
Which seems like a good plan to me!