Posted By Pete Hill
If you're depending on your investments for spending cash in retirement and you don't want your spending power to fall behind inflation, then you want your portfolio to have the potential for capital growth over the long term.
Getting enough growth to maintain your purchasing power throughout a lengthy retirement is difficult if you invest only in cash equivalents like money-market funds and CDs. Although there are no guarantees, investing a diversified portfolio of stocks and bonds gives you a much better shot at getting the long-term gains you need.
Yield stocks always make sense. And even in tough times you can find companies with solid payouts. This is shaping up as the worst year for dividend cuts in three generations. Striving to conserve cash amid the most severe slump since the Depression, companies are reducing or eliminating their payouts to shareholders.
But dividends are not dead. Some companies maintained or raised them in the past year, indicating that their payouts can survive even the worst markets. And dividend investing remains a sound course amid market turmoil.
Even though stocks are still well below their 2007 peak, they can no longer be considered cheap, with the price/earnings ratio for companies in the Standard & Poor's 500 now nearly 20% higher than its long-term average.
The good news is that those profits will probably materialize. Analysts look for operating earnings for S&P 500 companies to rise 27% from recession-battered levels, fueled primarily by improving economic growth overseas and a further weakening of the U.S. dollar which would increase exports.
Sources:
http://money.cnn.com/2009/11/05/pf/expert/retirement_stocks.moneymag/index.htm
http://money.cnn.com/2009/11/06/pf/dividends.fortune/index.htm
Getting enough growth to maintain your purchasing power throughout a lengthy retirement is difficult if you invest only in cash equivalents like money-market funds and CDs. Although there are no guarantees, investing a diversified portfolio of stocks and bonds gives you a much better shot at getting the long-term gains you need.
Yield stocks always make sense. And even in tough times you can find companies with solid payouts. This is shaping up as the worst year for dividend cuts in three generations. Striving to conserve cash amid the most severe slump since the Depression, companies are reducing or eliminating their payouts to shareholders.
But dividends are not dead. Some companies maintained or raised them in the past year, indicating that their payouts can survive even the worst markets. And dividend investing remains a sound course amid market turmoil.
Even though stocks are still well below their 2007 peak, they can no longer be considered cheap, with the price/earnings ratio for companies in the Standard & Poor's 500 now nearly 20% higher than its long-term average.
The good news is that those profits will probably materialize. Analysts look for operating earnings for S&P 500 companies to rise 27% from recession-battered levels, fueled primarily by improving economic growth overseas and a further weakening of the U.S. dollar which would increase exports.
Sources:
http://money.cnn.com/2009/11/05/pf/expert/retirement_stocks.moneymag/index.htm
http://money.cnn.com/2009/11/06/pf/dividends.fortune/index.htm
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