Can You Retire on Dividends?

I think you can retire on dividends and I plan to have dividends provide the majority of my income in retirement. Others have very different views on the possibility of retiring on dividends. At Early Retirement Extreme, Jacob proposes the idea of retiring on $85,000 of dividend stocks. At My Money Blog, Jonathan looks at a hypothetical $100,000 investment for creating retirement income only from dividends. He tests how the investment would have fared in a couple of funds and concludes they wouldn’t provide nearly enough retirement income.

Which one of them is right? I think they are both right, they are just using extremely different variables to come to their conclusions. ERE supposes you can live on $6000 a year and receive a 7% dividend yield. With those variables you only need a sum of $85,000 to fund your retirement. Most people will consider the living expenses and dividend yield unachievable but they are possible. Jacob lives on $6000 a year and you can find plenty of others who live on a similar amount at the ERE or MMM forums. It is probably more difficult to consistently earn a 7% yield. I’m not sure if Jacob has done that. I’d like to hear from anyone that has.

Jonathan looks at investing in the Vanguard 500 Index Fund and the Vanguard Wellesley Income Fund. The index fund isn’t designed to provide income so it is not surprising that it doesn’t produce much income. The more interesting information is looking at the income fund results. The income fund actually produced less income over time. This was because the fund is heavily invested in bonds which have much lower interest rates now then they did twenty years ago. The conclusion is that you can’t just buy an income fund and collect the dividends.

I do believe it is possible to retire on dividend income from a portfolio of dividend stocks. In my next post I’ll share some of the stocks I own.

Free Trades in June with Motif Investing

Motif Investing is offering free trades in June. Motif Investing is a registered online brokerage firm offering an intuitive platform that empowers individuals to invest in real-world ideas through motifs. A motif is a carefully researched and balanced portfolio of up to 30 stocks reflecting a specific idea or trend. Examples include Renter Nation, Lots of Likes (most liked brands on Facebook) and All American (companies selling only in the US). Motifs are fully customizable—you can add and delete stocks, and change their weightings. You’ll pay just one low commission – and no management fees. And, you’ll get important diversification both within a motif and across motifs. Motif Investing offers brokerage accounts as well as no-fee retirement accounts, including Roth IRAs, Traditional IRAs, and Rollover IRAs.

*** The promotion is now over and regular pricing applies.*** From now through June 30, 2012, you can enjoy a $0 commission when you buy and sell any motifs or individual stocks in the motifs you own. Regular pricing: $9.95 per motif and $4.95 per stock. Other fees may apply. For details on fees and commissions, please visit their website.

Motif Investing – Buy 30 Stocks in 1 Motif: $9.95. Fully Customizable. Learn More.

The idea of motifs is interesting but I’m not sure about the cost and how well they will work. What do you think?

Mortgage Advice

With energy bills and the price of food constantly on the rise, it’s more important than ever for homeowners to ensure that their mortgage rates are as low as they could be.

Now is the perfect time to change to a mortgage lender that offers a better deal. Mortgage holders that are not currently in a fixed term are free to move their mortgage to another bank or building society.

Switching to a lender that offers a more favourable rate, such as Leeds Building Society, can save a homeowner a lot of money every month. During the process of remortgaging, a homeowner can choose to raise extra money by increasing their mortgage. They may wish to do this for a number of reasons – from paying for a wedding to doing up the kitchen or bathroom.

Remortgaging in this way could also raise funds that can go towards the cost of building an extension. This could be a cheaper and less stressful option than moving house to a larger home.

Alternatively, a customer may choose to remortgage and increase their mortgage to move to a bigger home. If their family has outgrown their current house, then it may be time to upsize to somewhere new and if their mortgage payments are going to go up, it is important to obtain the best rate available to keep costs as low as possible.

With so much choice of mortgage products on offer, it can be difficult for a homeowner to decide which mortgage is the right one for them. Anyone thinking about remortgaging should take a look at the products that are available and investigate which one suits their situation the best. Whether it is choosing the security of a five-year, fixed-rate mortgage or the freedom of a mortgage with lower repayment charges, there are many factors to consider.

It can be wise to seek professional advice. Customers can speak to an independent mortgage broker or seek guidance from an advisor at their chosen building society or bank.

Once a customer who wishes to remortgage has selected the correct product for them, they can begin the application process. The building society or bank will investigate the applicants’ financial affairs and come to a decision swiftly and efficiently. If the remortgage application is successful, then very soon the homeowner will be able to benefit from the new mortgage rates.

My Bankruptcy Story

A little over fifteen years ago I declared bankruptcy. This was mainly due to compulsive gambling that I financed with credit card advances. My total debt was only about $20,000. When I think about that amount now I know I could have paid it off eventually but at the time it seemed like an insurmountable total. One of the main reasons that it seemed insurmountable is the my credit card companies kept hitting me with late fees,over the limit fees and punitive interest rates so even though I was making monthly payments my debt just kept getting larger. Getting into debt was one hundred percent my fault but I feel the credit card companies should have at least tried to work with me. With the credit card companies offering no flexibility on the repayment terms the situation seemed hopeless. I gave up and declared bankruptcy.

The bankruptcy law has changed since I declared bankruptcy, someone filing today would have a different experience. The lawyer fees and court fees together were about $500. I’m sure it would cost more now but it was a lot to me at the time and it was a struggle to come up with the amount. The bankruptcy hearing itself was pretty simple. None of my creditors showed up. The judge asked me if I had any assets. I replied that I did not and that was pretty much the extent of it.

The aftermath wasn’t too bad either. I’m sure my credit was very poor after that but I wasn’t applying for any loans so it didn’t really matter. I was able to rent an apartment while the bankruptcy was pending. The apartment management didn’t really care about the bankruptcy. I was told as long as my rental history was fine then there wouldn’t be a problem. My rental history was perfect because I always considered my rent payments more important than credit card payments. Since the bankruptcy was quite a while ago it no longer has any effect on my credit and I have above average credit.

All in all my bankruptcy experience wasn’t that bad. It was probably too easy but since the law has changed I don’t think that is true now. I wouldn’t do it again in the same circumstances though.

Investing On A Shoestring – Paper Ephemera

The last time I mentioned investing on a shoestring, I wrote about buying, collecting and reselling books. There are other forms of paper with profit potential: paper ephemera. That’s a fancy name for items like photographs, trade cards, postcards, prints and advertisements.

These have several things going for them. First and foremost, they’re easy to find. It doesn’t take much to unearth an old magazine with intriguing graphics from the pile at your local antiques store — or damaged bound volumes (6 months to a year of issues) on Ebay. (Breaking up a perfectly good volume of mags may not be illegal, but it sure is criminal!) These may go for as little as a quarter, though they’re usually in the $5 range for single issues, and up to $50 for bound volumes. (Damaged volumes are more inexpensive — and you’re going to pick and choose from it, anyways.)

I look for magazines like Harper’s Bazaar (good historical graphics, and often Thomas Nast engravings), Godey’s Lady’s Book and Peterson’s (wonderful ladies with amazing outfits, crafts and even cute children/animal combos), Punch (excellent for political and patriotic themes), or periodicals with mostly pictures, like The Graphic. Some of these have a special center page with a larger engraving — perfect for framing.

Many famous novels, like Wilkie Collins’ Woman in Black or nearly all of Charles Dickens’ novels, started as installments in magazines. (Dickens also edited several magazines, including Bentley’s Miscellany, Household Words and All the Year Round.)  Collectors who value these will want these magazines — and they’d enjoy an engraved ‘photo’ of their favorite author, too.

Twentieth century magazines like Woman’s Home Companion and Priscilla — yes, McCall’s, too! — are excellent for strong, graphic advertisements that promote everything from automobiles to cigarettes. Look for bright colors and good contrasts, as well as articles with a special cultural and political bent. Years like 1932 (Washington’s birth bicentennial) and 1976 (America’s bicentennial) are especially good for historical themes.

Second, these items are often modestly priced. While you’re at it, check the bins or the postings for unusual postcards or photos. Collectors are looking for anything unusual, certainly, but there’s also a market for graphics and photos of animals; famous people; historical and cultural references; occupations, like farming, storekeeping, etc.; the military; and everyday hobbies, like sewing, knitting and such. (Don’t set aside the state postcards, either; people often collect state and famous place postcards if they have a personal connection.)

One unsettling subject is ‘post mortems’ …”dead baby photos.” There are more of these than you would think — in a good year, approx. 25% of America’s births in the 19th century died before the age of 2! Often parents would have nothing left of their beloved child but a few clothes, a lock of hair, and the photo taken of their bodies. (Dead adults were photographed, too.) Post-mortems are heavily collected today, and can go for astonishing prices — I’ve seen good examples sell consistently for more than $25, and as high as $200!

Trade cards are another good buy. These handheld cardboard advertisements (like the sewing one shown below) were given as freebies for special products or events. They range widely on subject. Look for cards connected with events like the the World’s Fair; larger ones (Arbuckle coffee was famous for these) are excellent for framing. Tractors, polar exploration, flowers, holidays — there’s a collector somewhere who will value these. Don’t ignore calling cards, reward and stock certificates, either — find them at the right price, and you’ll make a good profit reselling them.

So what is the right price? Like collecting maps and books, you’re best off doing your homework. Studying the current listings on auctions and online stores will tell you what people are interested in, as well as the prices they’re willing to pay. (Ruby Lane is one good source.) If the anniversary of a special event is coming up in a year or so, collectibles connected with it often increase in value. (Olympics memorabilia often does this, for example.)

Websites are available for more information, like this one. Or look for books — there are many on the subject, including Picture Postcards by C.W. Hill.

Once you get a better idea on pricing, use that as a gauge for how much you’re willing to spend. Most dealers figure to double their money, at the very least — many price their items at triple or more. Even you find a $1 postcard that goes for only $3-5, those profits can start to add up. (Don’t forget to factor in any selling fees or percentages you might have to pay.)

The rewards for reselling these items can be modest — or very rewarding. The photo below, of a performer showing off a scandalous bit of ankle, plus a crazy-quilted costume, went for $86 and change on Ebay a few years ago. Its original penciled-in price, no doubt picked up from an antiques store: $4.

This is another installment of a series on shoestring investment options. (See the first post here — on silver. Other subjects include maps and books.) You can be involved on a large scale, but small, regular investments are even more easily accomplished. Please note: I am a certified personal property appraiser — but not a professional investment counselor. These are my takes on the subject, albeit backed up with resesarch and expert opinions. Invest at your own risk.

This post is by staff writer Cindy Brick. You can visit her at CindyBrick.com or visit her personal blog.

Investing in Housing

During the organized chaos that’s characterized the stock market in recent years, one division took an especially hard hit: housing stocks. Real estate bankruptcies and short sales cluttered the market, making it difficult for construction companies to sell their current offerings…let alone build new ones. As a result, housing stocks took a huge dive.

Now that the economy is cautiously rebounding, construction and housing-related stocks are starting to come up, too. As early as January 2011, KB Home (KBH) announced a fourth-quarter profit larger than analysts had been expecting. As the companies stabilize, their assets go up — and so does their stock.

One housing stock that has been doing well recently is (PHM) Pulte Homes. (Disclosure: I’ve owned this stock for years off and on. No, I’m not getting compensated for mentioning it or other stocks here.). This megabuilder not only sells and constructs homes, but also provides mortgage financing and develops adult communities. After a rough ride, including watching its stock slide from the $60s level to as low as $3 and change, it finally began to rise. In the past week, it traded at a new 52-week high of $9.59, and as of this writing, may well be beyond that. It’s also periodically offered dividends — a bonus for the steady investor.

Pulte may be one of my personal favorites, but it’s not the leader in the market. According to Financial News Network Online (FNNO), that honor goes to Meritage Homes (MTH), with a gain of nearly 6%; Ryland Group (RYL) ranks second, with a gain of 4.68%, and Pulte comes in shortly after with 4.53%. Lennar [LEN] and MDC Holdings [MDC] round out the top five with similar increases.
Are the hard times over? Probably not. But as far as housing stocks go, they do seem to be improving. If you haven’t added any to your portfolio, now’s the time to consider doing so.

There’s another way to invest in housing: upgrading your own domicile. New double-paned windows not only cut down on drafts and cold spots, but reduce your energy bills — ours, installed in January, have cut our utility bills in half. That money not only pays back the initial bill; it’s also increases your home’s overall value.

This post is by staff writer Cindy Brick. You can visit her at CindyBrick.com or visit her personal blog.

Real Estate Vs Stock Market: The Best Investment Revealed

Author Bio: YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances. Join YFS’s mailing list for straight forward financial advice by clicking here

For decades, the battle between which is the better investment has been waged between real estate and the stock market. Opinions from a wide range of entrepreneurs have led to differing views, and until today many people are still confused as to which one really gives the best return on your investment.

Why People Would Think It’s Real Estate

If you ask any average Joe, which is the better investment stocks or real estate, most of the time the answer would surely lean towards the latter.

Some reasons for this inclination exist. First of all, real estate is a tangible investment. It’s something that you can see and feel, sell when you like, rent out if you like, and even pass it on to your children.

On the other hand, the stock market feels a little too out of your control. Plus, it has that reputation of being volatile, wiping out your hard earned money in a flash. While real estate conveniently gives you money every month, without you having to work every day for it.
Despite the obvious advantages of real property, is it really the better investment?

The Facts

If we look at the facts for the short term, it would certainly look like real estate is taking the lead what with a 56% increase in sales prices beginning from 1999 to 2004 as recorded by the US Department of Housing and Urban Development. During the same time, the S&P 500, which is an index for the stock market didn’t experience any growth at all, in fact, it even took a dip of about 6%.

However, if we look at the whole picture for the long term, say 25 years, the outcome is radically different.

Gathering data from 1980 all the way to 2004, it appears that the S&P has actually crushed the real estate figures. During this time, prices of home sales have increased to a whopping 247%, but this figure doesn’t even cover half of what the S&P gained – a stellar 1,000%. As eye popping as those results you will not achieve them if you do not have a proper asset allocation.

The data for real estate was based on the OFHEO which records mortgage information from both Fannie Mae and Freddie Mac.

Why The Stock Market Is Actually Better

Getting into practical reasons, real estate can provide a roof above your head. Meaning, there are many investors who can use the property as a temporary home. This obviously means that your return on investment would be impaired because you’re utilizing your investment for personal use.

Stocks on the other hand, won’t be able to give the same benefit, but they also don’t need any repairs or cost money in association dues. One clear benefit of stocks is that these are normally very liquid. The moment you decide to sell is the moment you get your profit – as long as the market is open of course.

With real estate, selling isn’t always so easy. Some investors have to wait months, even years to finally cash out on their biggest investment. Not to mention having to continually slash their prices just to entice a buyer into entering into a quick sale.

But then again, real estate will always have its advantages. For one thing, the largest decline in real estate price has been recorded to be only at a mere 5%, while a decrease in stock price could go as low as 20%.

Clearly the data comparison using the S&P and the OFHEO in the span of 25 years shows just how much the stock market can outperform the real estate market. But then again, most investors are still wary about the volatility of stocks, which encourages them to seek for a more stable and tangible investment – real estate.

Knowing how the stock market can outperform real estate, which investment would you rather bet your money on? Which type of investment do you currently prefer??

Emerging Markets – Thailand

Author bio: Steve is the owner of the site Money Infant and a recent expatriate living in Thailand in semi-retirement. He writes on a variety of finance and investment related subjects as well as focusing on life in Thailand and Thailand investment opportunities. Once you are done here head over there and say hi. Tell him InvestorzBlog sent you!

Investing wisely is all about diversification to protect your assets. You know it isn’t possible to time any market, so you need a way to ensure that when one market tanks another is rising to help offset any losses. One popular way to diversify outside your home country is through the stocks in emerging markets. These are the underdeveloped countries where growth can still be explosive and returns on stocks can be equally heady.

One of my recent favorite emerging markets plays is Thailand. As a hub of business activity in Asia it has attracted the attention of manufacturers from Japan, Korea and China as well as investment dollars from around the world. Despite the ongoing political problems the country has it continues to grow at a rapid pace and it’s stock market, the Stock Exchange of Thailand (SET) continues to rise as well. In addition, Thailand companies focus heavily on dividend payments and it isn’t unusual to find dividend rates here between 5% and 10%.

While investing in individual Thai stocks can deliver outstanding returns, doing so is not easy. You need both a bank account and brokerage account in Thailand and of course analyzing these foreign stocks can often be a headache. An easier approach to gaining exposure to the Thai markets is through an ETF or Exchange Traded Fund. These are baskets of stocks that seek to mirror the returns of a particular index and with their instant diversification across industries or countries, low fees and ease of exposure they can be the perfect choice to diversify your portfolio globally.

In the case of Thailand the only country specific ETF I was able to locate is the iShares MSCI Thailand Investable Market Index Fund (Symbol: THD). Although it is the only fund I was able to locate, it is a pretty good one for all that. It boasts fees that are lower than the average for emerging markets ETF’s (0.% vs 0.65%), a broad exposure to the largest capitalization companies in Thailand and a broad diversification across many market sectors.

The fund has only been in existance since 2008 so historical data is slim, but the fund has an average annual return of 40.13% and -4.23% over the past 3 year and 1 year periods respectively. The loss in 2011 can be attributed to the extreme flooding across much of Thailand from September through November. Considering it is the worst flooding the country has seen in 60 years it isn’t likely to be repeate anytime soon. Current YTD returns for 2012 as of the end of February have reversed the downtrend and are 20.47%.

As a resident expatriate in Thailand I can tell you that conditions here have never been better. Asia hasn’t suffered from the banking and housing crisis in the West and growth in Thailand is a stunning at 7.81% in 2010 and was on pace to grow at over 5% in 2011 prior to the severe flooding which caused a 10.8% contraction in the 4th quarter of 2011. Conversely, growth has heated back up not only on the export side, but also domestically as the country rebuilds from the flooding.

Compared to other emerging economies in SE Asia (Vietnam, Indonesia, Cambodia, etc) Thailand benefits from a good infrastructure, a free-enterprise economy, and generally pro-investment policies. In addition, they have a good relationship with both ASEAN and Western countries which benefits this export driven economy. All these combine to make Thailand one of the more stable emerging economy growth plays and will help contribute to their continuing growth going forward.

Investing on a Shoestring – Books

This is another installment of a series on shoestring investment options. (See the first post here on silver, the second on maps.) You can be involved on a large scale, but small, regular investments are even more easily accomplished. Please note: I am a certified personal property appraiser — but not a professional investment counselor. These are my assessments, albeit backed up with resesarch and expert opinions. Invest at your own risk.

In high school, I commandeered a treehouse my brother built overlooking the yard. I spent many happy hours up there, a copy of Twenty Thousand Leagues Under the Sea (read slowly, to make it last), a mason jar of iced tea and Snickers bar handy nearby.

The same books that give you pleasure can also help fund your retirement, if you choose them carefully. And it’s not just old books, either. According to the Stephen King collector site, a 1974 first edition of Stephen King’s first major book, Carrie, sells for $30,000! (A first edition of his 1989 less-famous collection, Four Past Midnight, values at $1500.)

Rare books go for the highest prices, of course, like Mark Twain’s Huckleberry Finn, with a hand-written dedication to his wife. (Sold for $99,000 in 1991, well above the $80,000 pre-sale estimate.) And if you’re lucky enough to snag a small pamphlet called Tamerlane And Other Poems, authored by ‘a Bostonian,’ like the man who paid $15 for one buried under a pile of agricultural tracts in a New Hampshire antiques barn in recent years, brace yourself. You may have to settle for just the reserve at Sotheby’s, like his did: a mere $198,000. (The Bostonian of this “black orchid” of American literature was Edgar Allan Poe.)

Some tips to help, if you’d like to invest in a literary way:

*Study. Not all first editions are treasured ones. Sites like Abe Books are good for checking — even Amazon will give you a better idea what’s hot right now.

*Make sure you have a true first edition. Bookseller World is an excellent starting point for dates and identifying marks.

*Buy the best you can afford — and include the dust jacket. It can really jumpstart the value.

*Take care of your purchases, and hold onto them. Protect them from too much light or heat, and store the most precious books in ‘clamshells,’ protective cases. Time is not always a guarantee, but it’s certainly been kind to many old books. Even waiting a few years can increase the value of the really unusual titles.

*Keep an eye out for the new stuff. One collector studies Publisher’s Weekly regularly, then buys new titles as they become available. (Gets the authors to autograph them, too.)

*If money’s tight, haunt the secondhand places: thrift shops, garage sales, used bookstores. (Hint: Stretch your money even further by helping out at your local thrift shop. You’ll be giving time and effort where it’s needed…and if your shop is typical, you’ll get a healthy discount. Our local thrift charges volunteers 10 cents apiece for books!)

*Every little bit adds up. Do your research, then choose carefully — you can make a profit by reselling not only books, but videos and music. I picked up a DVD of Henry Gates Jr’s African American Lives for $1 at our local library’s sale room — and sold it on Amazon for $10.95. A thick gardening book, purchased for $2, went for nearly $16. Do this several times, and you’ve got a pocketful of cash for speculating — or more substantial purchases.

*Buy what you love…or at least admire. Even if you decide not to sell, or it takes some time, you can enjoy your investments the best way — by reading and absorbing them.

Some booklovers choose only certain authors — others will collect anything rare. Nicholas A. Basbanes’ A Gentle Madness: Bibliophiles, Bibliomanes, and the Eternal Passion for Books is a lengthy romp into the world of book collecting –and an excellent self-education in the process.

This post is by staff writer Cindy Brick. Cindy has several published books and many published articles on a variety of subjects. You can visit her business website at CindyBrick.com or visit her personal blog.

Money Pros Index Fund Challenge Update

I am participating in the Money Pros Index Fund Challenge which is a stock picking contest where each contestant gets to invest $1000 in three different stocks and whoever has the highest return for the year is the winner. Currently I’m in the bottom half of the challengers with a return of 3.23%. That is well below the leading contestant’s return of 31.12% and even below the S&P 500 return of 8.49%. I knew when I entered the contest I wouldn’t likely be a leader since I was picking relatively stable dividend-paying stocks but I did think I could beat the S&P 500.

Part of the reason I haven’t done as well as I hoped is that despite the contest saying dividends will be reinvested in more shares that isn’t happening. Without the dividends being considered it is no surprise that my stocks aren’t showing a good return. Doing my own calculations including the dividends in my return I come up with a return of 4.8% which is better but still quite a bit less than the S&P 500 return. I think my return will eventually come closer to the return of the S&P but I’m not too concerned about it since I invest more for yield than total return.

Are any of you competing in this contest or another stock contest? How are you doing?