I consider myself an amateur investor. I've been in and out of the market for about 3 years, only investing my own money. My mother is getting close to retirement age, and has all of her money in CD's. I know she needs to get into the market to get a higher ROI compared to her less than 1% return on CD's.My strategy was to have her invested in 5 well known and trusted Dividend paying stocks. I only have one trusted company in mind though, Proctor and Gamble.Any other big company, small risk dividend stocks?
A reasonable place to start is with a screened list of stocks which pay high dividends. A good additional screen is one where the companies have increased their dividends, year after year, for some "X" period of years. (That tends to indicate that management thinks the dividend is sacrosanct. Doesn't always work out, of course. GE was on that list and hadn't trimmed the dividend for 25 years, and then suddenly, oops, financial crisis: the stock fell in half and the dividend was slashed. It's coming back a little now, but... --- For exactly this reason it's wise to split up the money into a half dozen, or dozen (depending on size) different issues, and make sure they're in different segments, too. You don't want all consumer goods, or all banks, or all pharma, even if the dividends look enticing.)Anyway, here is a list of Dividend Achievers, which JackCade and/or WendyBG post from time to time on the BMW board. If the list looks complicated, just look at the ticker symbol (first column) and dividend (third column). Then, obviously, do some further research on those companies which you are thinking of buying; it's not just about the dividend, right? http://boards.fool.com/mr-goodbuy-dividend-stocks-28974519.a...If you do google searches on "Dividend Achievers" and "Dividend Aristocrats" you will find several sites which will list them for you in a variety of ways.You could spend a couple bucks and get a 13-week online account at ValueLine, which will allow you to screen by a variety of functions, including their own ratings for stability, etc.One that I notice doesn't come up on the Wendy list is Coca-Cola. That's one that most anyone can feel comfortable with; offering a 3% dividend. There are others, which is why you may want to do searches on different sites and in different ways.
As another poster stated, Google Dividend Achievers and Dividend Champions. That will get you started.And don't get taken with high dividend yield. TMF has actually had a couple of good articles recently on why high yield isn't the only thing to look at.But for some ideas, you can get a couple energy/utility companies with 5-6% yield as a base (SO and KMP for example). And then throw in MCD, JNJ, KO, and the like which might have 2-3% for know but have a long history of growing dividends. In 5-10 years that 2-3% could be 7-10% in yield on initial cost.You might want to also check the dividend investment boards here.JLC
P&G is a good outfit, but share holders took a serious hit about 2000 - I want to say 40 or 50%. The dividend was not changed, but do you really want to be concentrated in a small number of stocks? Instead you might look at some broad mutual funds. Ones that come to mind are the Retirement funds or even Vanguard's Wellington. Not very exciting, but it has a long track record and it is diversified.GordonAtlanta
Besides yield & corporation's history One might wish to screen for low beta stocks.Here is a link to an article about high quality low beta stocks:http://dividendsvalue.com/6520/11-low-beta-high-quality-divi...
... My strategy was to have her invested in 5 well known and trusted Dividend paying stocks...Don't kid yourself; even a stock with a good dividend still has lots of risks. My Mom tried this with the same logic and bought GE as a "safe" stock when it was in the 30's. It got as low as ten and is now around 18.5. GE may have been a special case but all stocks have risks and so many people have been chasing higher returns so you may be risking overpaying for the stock. A 3% dividend for a stock may look great to a lot of people now, but if you can get 5% on a government bond in a few years, that same stock will look much less attractive. ....I consider myself an amateur investor. .... One probelm with helping her pick stocks is that you could do everything right and the market could still go down 40% which would make things very awkward for both of you. Something like a retirement income fund might be a better choice and you be managed by professionals.https://personal.vanguard.com/us/funds/snapshot?FundId=0308&...Greg
Don't get me wrong, I like dividends, but.... Dividend stocks lost 50% of their value during the recent market collapse. In response, the compannies also cut their dividends, some by 75% or more. There's a lot of risk in large cap, just like small and mid cap. In today's world, the markets, including almost all of the individual stocks, trade in virtual lockstep due to index funds and computerized trading. There is no place to hide, there is no safe place, it's a whole new world out there.
ResNullis:Don't get me wrong, I like dividends, but.... Dividend stocks lost 50% of their value during the recent market collapse. In response, the compannies also cut their dividends, some by 75% or more. There's a lot of risk in large cap, just like small and mid cap. In today's world, the markets, including almost all of the individual stocks, trade in virtual lockstep due to index funds and computerized trading. There is no place to hide, there is no safe place, it's a whole new world out there.That's why my retirement port (stocks and bonds) is globally indexed as widely and cheaply as possible.
You might consider a mutual fund or ETF that concentrates on dividend paying stocks. For example, the SPDR Dividend ETF, SDY.I recently read an article by Kiplingers that suggested the following stocks to consider based on their dividends and history of paying dividends:AT&T-TChevron-CVXJohnson & Johnson-JNJMeredith-MDPProcter & Gamble-PGVF Corp-VFCBob
I like dividend stocks to, and would recommend oring old utilities. Res noted during the last downturn quite a few stocks lost money and some cut back on the dividends, but looking broadly at the utilityAEP, EXC, FE, SO, ED, and most of the other in the index the dividend was not cut - but just kept coming.. Make a basket of those and you could get in around 4%.
You've gotten several responses addressing your question. That leaves me free to question your assumptions. Particularly:My mother is getting close to retirement age, and has all of her money in CD's. I know she needs to get into the market to get a higher ROI compared to her less than 1% return on CD's.Why does she need a higher return? How much of her retirement income will come from a pension? From Social Security?What are her expenses expected to be? How much does she need to draw from her savings to meet her retirement needs?How is her health? Do you expect her to have an average lifespan? Shorter than average? Longer than average?How comfortable is SHE (not YOU) with investing in something other than CDs? Remember that this is her money and not yours. So you need to take her risk tolerance into account and not your own.I could probably keep going, but I think you get the idea.--Peter
Wow well thanks to everyone for the wonderful recommendations and help :)I will definitely consider all of the information you guys shared with me, so thank you again.Peter, my mom is 58, she has $25,000 for retirement, 10k in cd's and 15k in a savings account and that's it. She doesn't have a 401k or pension, so she's going to be working for awhile.My plan was to only have her invest 5k (from one of her cd's which comes up soon) into 5 diversified dividend stocks to hopefully build her confidence in the market and show her she can get a better return than <1%. So I'm really doing this because I've had some success in the market in the last couple of years, and it seems that dividend stocks would be a good investment for my moms money.Thanks again.-Mark
Why are you looking for dividend paying stocks? Is it to provide additional cash income and price appreciation that you will periodically sell the divided paying stock to take these price gains....or do you plan to hold these dividend paying stocks for the rest of your life or until the company begins showing danger signs of not being able to sustain their distributions at which time you'd sell the stock and redeploy the proceeds to another dividend stock.If the former, then you'd need to choose cyclical stocks with positive earnings growth and other company fundamentals that show growth potential.If the latter you need to focus on companies with moderate or slow growth potential, long divend growth histories and non-cyclical industries. Examples of these are regulated utilities, health REITS, consumer staples, fee-based revenue MLPs, tobacco and perhaps energy producing stocks.To reduce the risk of the negative effects of unexpected dividend cuts you could invest in ETFs that invest in an index of these reliable dividend stocks. Examples might include the XLU utility index, the SPY index of Dividend Achievers in the S&P 500. Index or the Vanguard REIT Index.BrucrM
Well, I did a little research on fidelity and a lot of the retirement guidance was all about investing in dividend paying stocks. It seemed that the big slow growing companies (P&G) stock price didn't budge all that much, but it still had a pretty good dividend. So my logic behind investing in them for my mom would be that she wouldn't have to worry about her money shooting up or down rapidly, and that the price will stay relatively the same, but she will get her money on the dividend return.Any other suggestions if you don't feel that would be the best way to invest?
To reduce the risk of the negative effects of unexpected dividend cuts you could invest in ETFs that invest in an index of these reliable dividend stocks. Examples might include the XLU utility index, the SPY index of Dividend Achievers in the S&P 500. Index or the Vanguard REIT Index.BrucrM I would argue for VDC Consumer Staples ETF. 2008 return VDC -16.5% 3 yr return 4.3% versus -37% 2008 return -1.2% 3yr return for S&P 500.
markkoala asks: "Any other suggestions if you don't feel that would be the best way to invest?"Here's a way to visualize the difference between investing in individual stocks and investing in a mutual fund:Have you seen the new game show called "Million Dollar Drop"? Picture your mother's money sitting on a few "good" dividend paying stocks as opposed to it sitting on hundreds, if not thousands, of dividend paying stocks. If/when one of the piles drops, where would your mother want her money sitting?-drip
Here's a way to visualize the difference between investing in individual stocks and investing in a mutual fund:Of course, the cost of this kind of diversification is a reduction..and sometimes a significant reduction, in income.If XYZ income mutual fund has an annual expense ratio of 1% and is yielding say, 3%, then roughly one third of the investor's income is consumed in fund expenses.Income oriented ETFs reduce this expense. If XYZ ETF has an expense ratio of .25%, then the investor is being charged about 8% of the fund's income.And other than original purchase trading commissions, a basket of income stocks eliminates this ongoing expense.BruceM
markkoala,You wrote, Peter, my mom is 58, she has $25,000 for retirement, 10k in cd's and 15k in a savings account and that's it. She doesn't have a 401k or pension, so she's going to be working for awhile.So at the moment your mom has at least 5-10 years to go before she could consider retiring given that she's not yet eligible for social security. Also, it seems likely she'll have to work some even in her later years, unless she's planning on moving in with her son...Also, My plan was to only have her invest 5k (from one of her cd's which comes up soon) into 5 diversified dividend stocks to hopefully build her confidence in the market and show her she can get a better return than <1%. I'm no CFP, but being a confessed investing novice, I'd be reluctant to have my mom move much of her retirement portfolio into investments she's uncomfortable with - especially individual stocks. Given that she's been holding the money in cash (CDs) and may be retiring fairly soon, I'd be inclined to advise her to put some of her money into a balanced, low-cost mutual fund. Vanguard has several that would meet her needs. Perhaps one of their "Target Retirement" or "LifeStrategy" funds would be appropriate? I have more than 3 years of investing experience, but I two of these funds as part of my core taxable holdings. I hold the Target Retirement 2030 fund (I find the Target Retirement 2020 & 2025 funds to be too conservative) and the STAR fund. Both of these are low-cost, balanced funds in which you can expect (relatively speaking) low volatility and modest growth and income.Finally, So I'm really doing this because I've had some success in the market in the last couple of years, and it seems that dividend stocks would be a good investment for my moms money.Ever hear the expression, Past performance is no guarantee of future results? There's a reason for that. Everyone that's been in the market has been making money these past couple of years. It's one thing to bet your own money on a hunch or research. Are you sure you're ready to bet a 1/5th of your mother's life savings?FWIW, I happen to agree that dividend stocks is probably a fairly safe way to play the market over the next couple of years - I just bought a block of VZ this morning myself. But are you going to be able to actively manage your mother's account? Is she going to blame you if one of the dividend issuers you buy cuts its dividend and the market punishes it by halving the share price? And what about trading costs? You're talking about investing in $1,000 increments. You have to be careful about making too small an investment as the trading costs can eat up profits when you buy in small lots.One of the nice things about getting her into a mutual fund is that there shouldn't be any per-transaction costs - at least not if you buy directly from the fund company. Also you might be able to talk her into making regular contributions with each paycheck, which could help her in retirement at least as much as the increased returns.Just my 2¢,- Joel
Also you might be able to talk her into making regular contributions with each paycheck, which could help her in retirement at least as much as the increased returns.I'll second that idea!If your Mom would do that as long as she is able that could make a hugh difference! It is never too late to take charge and make the most of a bad situation.The best to you and you Mom. I know that you both are in a tough spot with this.James
Thanks so much for the help!! I appreciate all of the comments :)
Any other suggestions if you don't feel that would be the best way to invest? ...I've had some success in the market in the last couple of years...I consider myself an amateur investor. I've been in and out of the market for about 3 years...Here's my thoughts & suggestion:You have NO BUSINESS doing what you are wanting to do with your mom's money.You are vastly over-estimating your investment skills, and all your experience is within a very short period of time.Plus you have ZERO experience in the area (dividend stocks) where you plan to invest her money.(P&G) stock price didn't budge all that muchHuh????? PG was at 72 in Sept 2008, and 45 in March 2009, and has since worked its way up to 65. In what world does this constitute "hardly budged"?The truth of the matter is that if she has only $25,000 at age 58, she is up a creek without a paddle.And if you manage to lose $5,000 to $10,000--which is quite possible--how is she going to feel about that, and how is she going to feel about you?Best thing you can do is help her select a good mutual fund from Vanguard or Fidelity and then step out of the picture.
The truth of the matter is that if she has only $25,000 at age 58, she is up a creek without a paddle.And if you manage to lose $5,000 to $10,000--which is quite possible--how is she going to feel about that, and how is she going to feel about you?Best thing you can do is help her select a good mutual fund from Vanguard or Fidelity and then step out of the picture.I was with you right up to the mutual fund. With such a small savings that is going to have to function as an emergency fund, and emergencies need liquidity. How about leaving it right where it is?
I agree and disagree with this post. I agree that she's up a creek without a paddle. I disagree that I should step out of the picture.My mom came to me, knowing that I've been having success with stocks. She's going to continue to struggle unless she chooses another form to invest at lease some of her money instead of a savings account or CD's.If I set her up with a mutual fund, I already have helped her. With the ideas from this post, I'll be able to make an informed decision to help my mom with retirement.I know that every single person should have some of their money in the stock market at any point of time in their life. My mom has zero, which is unacceptable. Also PG dropped so much, like every other stock because of the recession.
I know that every single person should have some of their money in the stock market at any point of time in their life. Not if they can't tolerate the risk. This statement alone tells me you really don't understand managing money for another person.
So no one should have a 401k, or IRA? Everyone should be involved in one of these at some point in their life.Now owning individual stocks, isn't for everyone. But the above statement is very true.Who would agree with anyone that says a 401k isn't for everyone....... it's free money.
markkoala: "I know that every single person should have some of their money in the stock market at any point of time in their life." Rad: Not if they can't tolerate the risk. This statement alone tells me you really don't understand managing money for another person. markkoala: "So no one should have a 401k, or IRA?"That is not what Rad wrote. And it dos not legically follow from her statement."Everyone should be involved in one of these at some point in their life."Which is a different statement than you first wrote. (And I am not addressing its accuracy one way or another)."Who would agree with anyone that says a 401k isn't for everyone....... it's free money."Free money? Maybe some free money depending on the plan, but you are making a gross over-generalization.All the money in my 401-k came from my paycheck; there were no employer contributions. Free my @ss.Regards, JAFO
Look the main point of this post, wasn't to argue with everyone about being "technical" in postings. About correctly posting a reply to a statement. About unqualified investors telling me what I should and shouldn't do with someone's money.This post was created to hopefully get some insight on a dividend investing strategy with some of her retirement money to help her generate more of an income than her .34% CD's. A lot of people have been generous to share some of their insight on the subject to help me make a decision and I thank them for the help.This post wasn't created for me to get approval from strangers if I should manage some of my mothers savings. So if this is where this post is heading,,,, Thanks to all of you who helped.God bless,*Mark
Do as you wish. Just for context, I am a 56 year old woman who will be widowed this year. I manage my childrens' investments at their behest. I have also posted in the olden days as RecoveringFool.
Did you really mean to respond to me ?I managed my mother's money very well from the time my father died when I was 25 until she died a few years ago.My "do what you wish" was for the original poster who wanted to mange his mother's money.If you truly meant to respond to me, I'm surprised because I usually agree with you and my life is sucking so badly at the moment, I have a hard time thinking you'd choose it to attack me.
Did you really mean to respond to me ?My "do what you wish" was for the original poster who wanted to mange his mother's money.Nope. My reply was meant to the OP. Sorry if you thought I was referring to you.By this time, I'm starting to get a bit ticked off at the OP. It seems that he seeks affirmation of a bad idea and is rejecting warnings from people with experience.
Your entitled to your own opinion, but calling me dumb and ignorant... seriously???If I was dumb and ignorant, I'd take all of my moms money and invest it in whatever I wanted to do without looking at all of my options, without trying to seek council. I have information about what to do from multiple sources, including my uncle who is a CFA. I try to get as much information as I can, pool it all together and make an informed decision. This was just one of my methods......I'm not some young and reckless kid, having fun with my moms retirement money (being too headstrong and overconfident to not listen to an internet chat board,,,,,, resulting in my mom eating Alpo.......really?? a little overboard pal). So don't assume you know everything in an internet message board.Again thanks to all who helped.*Mark
I am a 56 year old woman who will be widowed this year.I'm so sorry you're facing that, reallyalldone. My best to you,Vivienne
This post wasn't created for me to get approval from strangers if I should manage some of my mothers savings.I think the harshness of some of the responses is because they see you making a potentially huge mistake. They might be wrong, but you should consider that they might be right.If you mother is not in the market and has total savings of $25,000, then it is likely that she is not used to the gyrations that can ensue, and that's the quickest way to get chased out of the market with a loss. That would be particularly bad news for someone with so little to start with.That might not come true, but what happens if something happens (she loses her job, say) and needs some of that money to pay bills - and it just happens that people losing their jobs and the market going down often happen at the same time. Now she has a serious need for savings, and there's only $12,000 in the pot.You may have other contingencies in mind (like you helping her out or whatever) and none of us know that, but it is an issue that should be considered. General advice is to have a minimum of three months, and preferably six months savings in cash for such times.If you want to get her into stocks, you can get stable dividend payers with a decent return, maybe 4% or more. On $25,000, that's another $1,000 a year instead of $85, and yes, that's something to think about. (Heck, you can get over 6% with a few like AT&T or Altria (Philip Morris) but both have risks. Actually, they all have risks, just look at what happened to that great 'widows & orphans' stock: GE.)You can mitigate the chances of a GE by buying a dividend oriented mutual fund, or better, a dividend ETF (type 'dividend etf' into Google for an education.)Finally, I'll just say that "three years experience" is a trifle, it's close to nothing, and you should not overestimate your ability in this regard, particularly with someone else's money, particularly if that someone else doesn't have a lot and you are taking charge of all of it. That's not being snarky to you, it's just the plain truth.Which brings me full circle. Don't be offended that people have reacted as they have. Perhaps some of their choice of words could be better, but they have had these reactions for the same reason you would if your 10-year-old decided to barber the dog. It might come out great, but the chances are not wonderful and the risk is quite great. You might also consider some good quality corporate bonds, usually sold in increments of $1,000 or more (sometimes much more.) Like stocks they can go up and down in value if you need to cash out early, but if you can hold them to term (assuming the company/municipality/government doesn't go bankrupt) then your capital is returned and you get a predictable interest payment.
Mark,Peter, my mom is 58, she has $25,000 for retirement, 10k in cd's and 15k in a savings account and that's it. She doesn't have a 401k or pension, so she's going to be working for awhile.Is that money she considers to be "for retirement" in addition to other savings she has designated for emergency ? If that's the totality of her savings, then she should probably not be investing any of it, in stocks or otherwise. She could be looking for better CD or savings rates.She needs to have an emergency savings fund. A lot of people say 3 to 6 months worth of expenses. I think that's too low, especially for someone age 58 who might have a very hard time finding a job again if laid off, or who is more susceptible to disability than most. I would recommend one year of e-fund. I am much younger than 58, but that's what I shoot for.So, start by looking at all her actual expenses for the past year from 12 months bank and credit card statements, and add up every she spent. If that's over $25k, then she should not invest a penny in anything not FDIC insured.If it happens to be less, check if she paid more than 1% interest rate on anything. If so, she should pay that debt off first. Then, she can start investing the rest. It's probably a fairly small amount. Let's be optimistic and say she actually has $5000 to invest for retirement.Then figure out the proper asset allocation for that $5000. If your mother plans to retire in 7 years, look at what a target fund for 2020 might hold.For example, the Fidelity 2020 FFFDX.http://fundresearch.fidelity.com/mutual-funds/composition/31...That has 45% in domestic equity, 16% in international equity, 34% in bonds, and the rest in short-term. I think that's a lot of equities for a 7 year term, personally. But Vanguard VTWNX seems to have a similar allocation.With an amount that small, you can see how commissions on individual stocks could eat significantly at any return you might hope to achieve. The only way it might make sense if I you use DRIPs. But it's probably a lot better to use a good index fund, and will provide much better diversification. She could put $5000 in an IRA with Vanguard or Fidelity and just put it in a target 2020 fund. Even so, with such a small capital, the returns will be fairly small. Unless she adds to the capital, this isn't going to amount to much of a retirement.
(P&G) stock price didn't budge all that much,---That's cute.In March of 2000, PG dropped from about 90 to about 60 in one day based on one earnings warning. Biggest drop of a blue chip stock I've ever personally absorbed. It recovered, but it took years.Ten years later, last May, a "flash crash" caused a downward spike in PG's price, which triggered a lot of panic sells, or stop loss orders. The price very quickly recovered, but the automatic sells clobbered a lot of investors.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar. Earnings Estimates, Analyst Rat