The “Safe Dividend Stock” Illusion…

It is very common today to get a client or prospect asking about high dividend paying stocks.  It is perhaps even more common for many advisors today to include dividend stocks as a part of their lead pitch.  “We focus on high quality dividend paying stocks,” they might say.  This will undoubtedly lead to affirming head nods from the prospective clients.  And therein lies the problem.  This idea that high quality dividend paying stocks are a guaranteed smart investment with great upside and limited downside potential has become an axiom of sorts in the eyes of the general public.  No further data is needed; the safety of dividend stocks is self-evident.

Market Peak

The stock market recently surpassed two very meaningful price points.  The Dow Jones surpassed 14,000 and the S&P 500 reached 1,500 for the first time since 2007.  Many people are now starting to wonder whether we are “due for a correction” or are we at a market peak.  As I write this article the market indeed has pulled back from these highs.  But what, if any, influence should these index levels have to do with investing long term?

I think there are at least a few important questions to consider when this type of thinking creeps into our heads.

Predictably Unpredictable

By Eric Burkholder, Portfolio Manager

A 2012 review of market outcomes and the “experts” who failed to predict them.

“Prediction is very difficult, especially if it's about the future.” - Niels Bohr, Danish physicist

The world of investment advice and market forecasting is very profitable.  Let me rephrase that.  The world of investment advice and market forecasting is very profitable for those selling the advice.  The outcome for those who invest on said advice is not quite as rosy.  So each year I make a point to track all the “expert” predictions and highlight some of the more pronounced failures.  2012, as expected, did not disappoint.

Market Returns: A Presidential Prediction

With only a short time left until we select the 45th President of the United States of America many investors are in a state of panic.  Many believe the market is waiting for the outcome and if the "correct" candidate is selected the stock market will immediately surge on the news.  Or, if the "wrong" candidate is selected the market will tank the next day. Fortunately, history provides a guide on this matter and it suggests that, when it comes to U.S. Presidents, the market is a true Independent.

2013 IRS Inflation Adjustments

The IRS just announced inflation adjustments for 2013.  These rules affect many things such as your retirement plan contributions, gift tax exclusion, and the "kiddie" tax.  Make sure to bookmark this link as a handy reference.

 http://blogs.wsj.com/totalreturn/2012/10/18/irs-announces-2013-inflation-adjustments/