Five Investment Risks

This week is a short one; I just want to quickly share with you Five Investment Risks to avoid and an allocation of stocks structure.

Here are Five Major Investment Risks to avoid:

1. Being too conservative. This means your net worth doesn't grow fast enough to exceed inflation or meet your investment objectives.

2. Being too aggressive. Extreme optimism is a benefit in the business world but can be your undoing in volatile financial markets.

3. Trying and failing to time the market. Remember that there are only two types of market timers: those who don't know what they're doing and those who don't know they don't know what they're doing.

4. Using expensive fund managers who underperform their benchmarks. As more than 95% of them do over a decade or more. ETFs and Vanguard index funds are effective, low-cost and tax-efficient.

5. Unwise delegation. Bernie Madoff and his ilk can't run off with money they don't manage.

If it is one thing that we have learned over the years at Suburban Trader is not to try to analyze and follow the right predictions, but make sure that we are following the right principles.  As one of the great investors in this present time Alex Green, we always attempt to asset allocate properly, diversify broadly, minimize our taxes and expenses and rebalance annually.  The following is a good asset allocation to look at when purchasing stocks that pay dividends or any stock for that matter.

 The first asset allocation exercise you should do with your dividend portfolio is to look at all the economic sectors which is the foundation of Suburban Trader’s  portfolio:

Basic Materials

Communications

Consumer, Cyclical

Consumer, non-Cyclical

Energy

Financial

Industrial

Technology

Utilities

Ideally, a good dividend asset allocation would include dividend stocks from each sector, which is how we do. Therefore, you are not only picking solid dividend payers but you also invest in different sectors that will react differently to economic cycles. This will allow you to have a smoother investment return over the long run.  Now after looking at the different sectors you might also want to look at different countries.  It easy to trade Canadian stocks here in the US and they are known to pay higher dividends than the US in their Energy sector.  And no matter what sector or country do not forget to always set at least a minimum of a 25% trailing stop.

To your Investing Success

Disclaimer:  Suburban Trader is a publisher of financial news and opinions and NOT a securities broker/dealer or an investment adviser.  You are responsible for your own investment decisions.  All information contained in our newsletters or on our web site(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence.

Suburban Trader