There are four lessons you should learn before you get involved in dividend investing.

1. There are no guarantees
Many people decided to ignore this lesson in the years before the recession hit. While collecting interest on other investments, such as CDs and bonds, is something you can count on, the same is not true of dividends. The board of directors get to decide whether or not shareholders will be entitled to cash dividends. Most companies recognize that it is in their best interest to maintain or ideally increase payouts. Continuing to pay dividends is a good sign of a company’s financial health. A financially strong company can also attract more investors, enabling them to grow.

2. Do not go after high yields
In the last few years there were many investors that got too greedy and started taking higher and higher risks to find yields that were acceptable. This was possible because interest rates and market yields were very low. However, this turned out to be a bad decision in the long run. To minimize risk, investors should avoid any yield higher than 2.5 times market average. For example, the current market average is two percent, therefore you should stay away from anything five percent or more.

3. Cash flow is king
Do not just look at a company’s earnings this year, but also look carefully at the cash going out and coming in for the last five years, at least. If you focus just on earnings, you will not have a good picture of a dividend’s sustainability. Also try to account for capital expenditures as well. The remaining amount is called the free cash flow and is what the company has available to either pay dividends or buy back shares. Also check how much the company pays out in dividends every year. The free cash flow needs to be greater than the dividends paid so the company can maintain dividend payouts.

4. Don’t put your eggs in one basket – diversify
No matter what the current financial situation may be, diversifying your portfolio will help you weather even the toughest situations. Diversification is the basic rule in your building your portfolio and this is a lesson that should learnt in your stock market basics class. The financial industry was hurt worse than others over the last few years, and even those who diversified were hurt. However, they were also less affected than people who put all their money into high yield financial stocks. Diversifying is still important even if the yields are lower.

These four tips will ensure that you have a much easier time building your portfolio. You will be able to find companies that have a sustainable dividend payout with a higher than average yield.

Welcome to this edition of The Investing Carnival! We have  so many informative links to share so let’s get started!

During uncertain or volatile stock markets, it’s not always clear where to invest now.  Investors want to be diversified, but also limit risk by choosing profitable investment vehicles depending on current trends.   It’s a good idea to explore investments that may be new to you, such as currencies, futures, ETFs, and other investments.

If you were told that you could get free money in the form of real estate grants that you would never have to pay back, what would you say? Nothing is free these days but if you are looking for a down payment on your mortgage, help towards the closing costs for your home purchase, or money to refurbish your home and then you could qualify for a real estate grant.

Roth IRAs are one of the most missed opportunities in the personal investment world today. So many people miss the great benefits of Roth IRAs because they are not informed about how they work. A Roth IRA differs greatly in the way you pay taxes on the increases, and over time, that makes a huge difference.

Investment property is gaining a lot of support, especially as investors fear their money is no longer safe in the stock market. It’s also good to farm homes or condos in a certain area, focusing your efforts on one location. Orlando investment property is a wise choice due to the location. With tons of recreations and amusement parks in Central Florida, there will always be jobs and a service industry supporting the local businesses. Having locations to rent out to the support staff there means you’ll never be short of potential tenants.

Have you ever been interested in investing in finance companies, but aren’t sure where to start? Perhaps you should consider a financial exchange-traded fund. An exchange traded fund is a type of mutual fund that can be traded on a stock exchange. A financial ETF can make investing simpler for beginning investors who want to dive into the finance marketplace. At the same time, financial ETFs can still be a great investment for more advanced investors who want to balance their portfolio.

Forex investments can be risky, but also very lucrative. Critical skills are needed to profit in this highly competitive investment landscape, but these skills can be acquired through education, training and practice trading utilizing virtual (demo) accounts from the right broker. There is money on the table for those who can follow a system, control their emotions and practice good money management methods.

In the aftermath of the financial crisis a growing number of North Americans are reconsidering their investment and lifestyle choices. Many are looking beyond US borders at countries in Central America, where real estate is cheaper and the cost of living more affordable. Real estate in Nicaragua stands out as having the lowest prices in the region according to data from Reveal Real Estate.

So You Want to Be a Real Estate Investor? Have you been thinking about buying investment property for a long time? Have you read all the books and watched all the infomercials, but just didn’t know where to start? Here are some quick steps to get you started toward your investment property dreams.

Do you find yourself in deep financial trouble, but can’t quite figure out how to get back on the right track? If, so perhaps you should consider declaring yourself bankrupt. Speaking to a financial professional is a great way to evaluate your options while learning a great deal about bankruptcy and other financial repair options.

Forex investing has gotten a bad rap over the years, but the truth is that investing in the forex markets is a legitimate way to strengthen your portfolio. Knowing that there are inherent risks involved with any type of investment is the key to realizing that due diligence should be executed when researching any potential opportunity.

First, one must understand the basics and the foundation of stocks. Stocks are nothing more than parts of ownership in a company. Basically, a company offers stocks to the public to finance their company. Buying stock makes you a shareholder, and in essence, you own part of the company even if you are buying penny stocks.

There are different types of stock that one could buy. First is common stock. Common stock is exactly as it is stated, common, and holds no preferences. When the company offers a dividend, you are entitled to it. The next step up is preferred stock, which means you get a higher priority when it comes to dividends, meaning you get paid first.

Voting / participating stock is also available, where you can vote on issues of the corporation. Stocks of large publicly traded companies are traded on the open market, at such places such as the New York Stock Exchange, NASDAQ, etc. At the New York Stock Exchange, deals are done face to face in person. Prices are determined by an auction format in essence, meaning whoever pays the most, gets the stock. While this is going on, people can sell stocks at that price, and you are actually “trading” stocks. You may never meet the person you are trading with, but in essence that is what happens in two separate transactions.

Stocks can change constantly, due to many different things. It works on supply and demand, meaning if more people want a stock, the stock prices go up, and conversely, less interest equals a lower price. The most common way to purchase a stock are through brokers.

There are in person brokerage companies, such as Merrill Lynch, or you can go online and trade online yourself or through a broker. Online sites such as Scottrade, Etrade, etc let you trade stocks on a real time basis, and only cost a few dollars per trade. Many people may be enticed to buy penny stocks, but those are almost a sure bet to make you lose money.

Overall, there are some basics that were outlined that are important to trading stocks, but to really be successful, there is a bunch more to learn.

There are many things to look for when researching stocks and understanding the stock market. First off, is the company large or small, and what industry are they in? Pharmaceuticals are usually great buys since all it takes is one drug to take off and you have a winner. Other things to look at are the companies financials which give you key rations to know. Cash flow per share is important because it tells you how the company is spending their cash. If they are spending a lot of cash, they may not be a safe investment, but of course they could be investing the cash wisely, making them a good buy. Financial grade health is also important, if a company has no money, it isn’t wise to invest.

Companies with the highest grades are the most solid financially, and are normally better options. Growth grade refers to sales and if they are rising or decreasing. Again, the higher the grade, the better the investment. Many big companies and institutions buy stocks in many different things to hold value and make them money over time. If a stock you want to buy doesn’t have any of that, why would you want to buy that if those large companies don’t think they will make money over time?

Another big thing to look at is the accounts receivables of a company. Accounts receivables is how much money that is owed by customers for their purchases. If a company has a lot of accounts receivables, this means that there is less cash and more risk that they will get paid. The less accounts receivable the better. And of course the last piece of research are listening to stock analysts and your broker.

They can give you personal insight and advice on what they might do if they were in your decision. Research can be tough, but all it takes is asking a few people and looking at a companies financial history, and then you can determine if it is a good investment or not.

Several different types of charts are available for use to evaluate your stock portfolio or to evaluate stocks that you have an interest in and are wanting to research. A common chart to use to keep track of your current portfolio is the basic pie chart. The chart is circular and the sections of the pie represent the stocks you own in the quantitative proportion that they represent in your whole portfolio.

The chart can have labels that will give the stocks ticker symbol and commonly show the amount they have went up or down on that particular day. The chart can be color coded as well, to give you an idea of how your stocks are doing in a glance. Red would mean a down day, and green would be an up day. Keep in mind that your pie chart can show some stocks as green and some as red at the same time. They don’t all move the same direction at once!

The next chart you will need to learn to use is the line chart. This chart is easy to use and can be adjusted to give the information you need. You can track stocks that you own or stocks that you would like to find out more about before purchasing. These charts can be used to track price and/or to track volume (the amount of shares traded in a day). Variations of this chart would be the dot chart and the candle chart. The basic line chart is valuable because you can see patterns over hours, days, weeks, months or years.

You can read a daily line chart for a volatile stock that you are wanting to purchase for a short time period or you can use the line chart that covers a period of years to determine the stability of the stock for a long term buy and hold. The charts mentioned are the most common in usage. They can be printed out to study or you can watch your computer screen for live updates and chart progress while the market is open.

If watching the market move is of interest, there are trading platforms and steaming tools that will let you watch the market trade by trade, especially if you want to buy stocks online. You can get a lot of information from charts, but the important thing is to actually find the information that will apply to your needs and help you make the right investment decisions.

It’s the same way with these websites that seem to be popping up on what seems to be a daily basis. With the overall market being down so much from it’s high in 2007, there are many traders out there that are trying to make their money back by starting these subscription base websites. In doing so they not only make money on the website’s traffic, but also in the stock that they are pumping at any given moment.

I’m not saying that every site out there is doing this type of shady practice, but I know that there are quite a few out there. You as an investor/trader need to take responsibility of your portfolio and your actions instead of expecting someone else’s decisions to make your stock purchases. Yes, it’s a lot more work for you to research stocks and to do your due diligence on a daily/weekly basis, but at least you know where your money is and who it’s invested with.

No matter who you may open an account with for your online stock trading, you need to use the tools and other resources that the site provides to really know who you should and shouldn’t be investing in. You should also use other sites to affirm your research. Don’t ever rely on one site to do all your research on. Some sites will list things different than others and in some cases, you’ll find information on one site that you couldn’t find on the others. Remember, knowledge is power and someone else’s knowledge will only take you so far.

If you read the other posts that have been put up on this site, you should have a pretty good idea on how to buy and sell stocks and how to decide which stocks you want to put your money in.

How to make your nest egg even bigger is by staying on top of the news that is released on each of the companies that you’re in. Just because the company is doing good at the time that you purchased the shares doesn’t mean that it will stay that way.

Throughout the day, week, and month, every stock will rise and fall in value. Depending on what is going on in the stock markets themselves will effect your stock in one way or another. This is where your research will come in. If you see that your stock has lost 10% of it’s value in a day or so, your research will have told you if it’s because of the company or just a healthy pull-back. If it was a pull-back because of profit-takers or that the major indices brought it down, then you should go ahead and buy more shares at the lower price to take advantage of the situation.

If the price fell because the company came out with a bad earnings report or lowered it guidance for the future, well then you will have to decide to either sell or just hold o to the shares you have until there’s some sort of rally before getting out.

Like I said, stock trading is easy if you just do the research and stay on top of the news to keep yourself in the loop of things.

What is a online discount broker? You see their advertisements all the time, it just a matter if you’re aying attention to the commercials. TD Ameritrade, Scottrade, Zecco are just a few for now and it’s a good place to start.

Not only will they brokers assist you in opening an account, but they will help you in what you need to know if you want to succeed. All of them offer many tools to help you do your research and find the right companies to invest in.

In an earlier post I said that it’s very important to stay on top of your investments and by that I don’t mean just looking at the balance of the account. You need to know the latest news that is being released. Just because the company is doing good for the last three months doesn’t mean that it will be doing good for the next three months. From one quarter to the next things can change and quite often does, especially during slow downs in the economy.

I’ve used one of these types of brokers for years and have learned a lot from the representatives that are available. If you’re lucky, you’ll click with one that you can build a relationship with and get a few perks along the way.

These online discount brokers are the way to go no matter how much money you have to invest. Who ants to pay high fees and commissions to some of these brokerage houses? I know I don’t and never will. Look around and find one that’s right for your trading needs.

What is a penny stock? A penny stock is just like any other stock that you would buy in a company. The difference is the value of the shares in the company. Basically it’s a stock that is valued less than $1 per share (some would say less than $5).

When you look into penny stocks online, you mostly see these site that tell you that they made a 300% gain on a stock trade and typically that can happen when you deal with stock shares that are less than $1. If the price per share was $0.25 and it gained $0.15 in one day (which could happen a does), you would be up 60%. Quite often stocks that are valued in this price range will have those types of moves, but what often happens is that in just a few days of gaining anywhere from 60% to 150% it will drop back down to it’s original price before it made those gains.

Penny stocks are usually companies that are relatively new and are trying to raise capital to increase the size of their business. Since they are new it can fail in it’s attempts and close their doors forever. How do you know which companies to invest in when you want to but into these types of stocks?

Research is the key. Most times it’s hard to find any information out on these companies because they are new. Most of them don’t trade on the big boards (DOW, NASDAQ), so they don’t really file their financial reports on a regular basis. In some cases you will find that these companies don’t even operate in the United States, so they don’t follow the rules of the SEC (Security Exchange Commission).

What you can do at times (which is something that I do), is to call the company and talk to the highest executive that you can to get a feel for the condition of them. You will be amazed to see how much you can learn from the person with just a few phone calls. I do have to say that if you call, you must let then believe that you are a shareholder or they’ll think twice about really talking.

Be careful when dealing with penny stocks, you can get burned more times than hitting it big. Remember, it’s estimated that nine out of ten business’ fail.

I’ve lost money over the years and in the beginning in bothered me quite a bit. Whenever that happened, I’d look at what I did and looked to see where I went wrong. Sometimes it was my research wasn’t thorough enough, other times it might have been the way I bought into the company. There were also those times that I didn’t do anything wrong, but because of the condition of the stock market as a whole, I would be on the losing end. Either way, I learned something for the next trade. Education is the key to wise money investments especially when you’re a beginner.

In this post I want to talk to you about “core position”. A core position is the stocks that you originally buy at a particular price. I’ve mentioned before about buying your shares incrementally and not all at once. So the first batch that you purchased would be considered your core.

In this example I’ll talk about company “XYZ”, which has a a price per share at $50. For this example I will also state that the cash in my portfolio is valued $50,000.

I never put more than 15% of my portfolio in any one stock. With that in mind, it would mean that I won’t invest more than $7,500 in “XYZ”. That tells me that I can only purchase 150 shares of “XYZ”. My first purchase will be 50 share at the price of $2,500, while keeping the rest for later buy-ins. The stock drops $5 per share in the nest week. I will go ahead and buy another 25 shares of “XYZ”, which will cost me $1,125. Another week goes by and the stock has been going up and down between $45-$50. I will simply sit on the sidelines and wait before doing anything. If the stock takes a dive because the markets have dragged it down I’ll buy my next buy at $40, costing me another $1000.

I now own 100 shares of “XYZ” with my average cost basis being $46.25. I’ve only invested so far $4,625 into the “XYZ company. If I had bought all of the shares at once, it would have cost me $5,000 (saving me $375).

When the stock goes back up to $50, I’ll only sell 50 shares of the stock (the ones the I bought at $45 and below). I will make a profit of $375 for those shares that I sold. While at the same time I continue to hold on to the original 50 shares.

When the price drops back down to the $45 range I will again pick up another 25 shares and start the process all over.

It the price had gone up after buying the first 50 shares that would have been fine also. I would pick up another 25 shares at $55. Once it rose above the price I would either waited for the price to drop back at the $50 level or if it kept going, I would just ride out the gains as it went up in value.