Author: Smart Investing

Passive Income

Bigger Pockets: Dave Ramsey Is Wrong – Doing This Won’t Make You Wealthy, But There Is Another Way

Posted on by Smart Investing

There are many roads to wealth. And many ways for those to get started on the road. Some strategies for building wealth are based on keeping expenses minimal. That can include avoiding such small expenses as dining out or buying a cup of coffee.

While avoiding excessive expenses can save money, it doesn’t lead to a pleasant life. There are better places to reduce expenses and enjoy a more abundant life.

It’s more likely that making small cuts will simply mean reducing your current quality of life. Instead, the focus should be on first removing destructive expenses. That includes credit card debt, which carries a high interest rate balance.

And instead of avoiding debt entirely, investors can use it safely. Buying real estate will usually entail a large amount of debt. But such debt tends to carry a low interest rate. And it can be used to buy an appreciating asset, such as a home.

Even better, real estate can provide cash flow. That means even after making the debt payments, it puts money into your pockets each month. That’s passive income.

Ensuring that your expenses are productive for building assets and increasing cash flow make for a more satisfying strategy than cutting back. That’s why having an abundance mindset, rather than a restrictive one, matters.

 

To read the full list of ways to build wealth, click here.

Stock market

Joseph Carlson: Google’s Dominance Is Over

Posted on by Smart Investing

Earnings season is winding down. Big tech companies saved the market from potentially selling off after their multi-month rally. Chipmakers have been leading the way, with many players reporting double-digit wins the day after reporting earnings.

However, some tech companies aren’t hitting it out of the park right now. Investors need to get more selective in their tech plays, especially as the AI rollout will lead to clear winners and losers.

For instance, Alphabet (GOOG), the parent of Google, is a big-cap tech play that’s out of favor with the market. Despite having the dominant internet search engine, the company has been behind other tech players for the AI space.

Google’s attempt at AI, named Bard, failed to take off with the market. The Bard demo was an embarrassment, as the AI couldn’t even provide factually accurate answers.

Next, the company’s AI Gemini was also not quite ready for launch. It later came out the best demo video for the AI was faked.

With other big-cap tech companies pulling ahead in the AI race, Google may start to lose its dominance.

While Google will likely still lead the search engine space, losing the AI space may mean lower total returns going forward.

Plus, with a slowdown in the cloud space, other companies in the space, such as Microsoft (MSFT) may pull ahead.

 

To watch the full video, click here.

Stock market strategies

The D&O Diary: Thinking About Warren Buffett’s Latest Letter to Berkshire Shareholders

Posted on by Smart Investing

Consistently outperforming the stock market is challenging. Many professional investors fail over time. A few good years are quickly forgotten amid years of underperformance.

There have been a few exceptions in the world of money management. The best-known is Warren Buffett. He has managed to roughly double the performance of the stock market over the past 50 years. The result? The creation of one of the largest companies in the world today.

Buffett released his annual Berkshire Hathaway (BRK-A) shareholder letter last week. In it, he went into detail regarding several factors behind his long-term success.

One of the most important factors is Buffett’s long-term view. While markets may drop from time to time, betting against American companies over the long term is not a successful strategy.

And when markets are overly bullish, as may be the case now, some caution is warranted.

Currently, Buffett is sitting on $167 billion in cash. That can be deployed during a crisis to buy great companies at reasonable prices.

That strategy served Buffett well during the late 1970s. And again following the 2008 financial meltdown.

The large cash position allowed for big investments yielding big returns. That even included 10 percent yielding bank bonds.

At a time when AI and other tech names are driving the market higher, Buffett’s outperformance continues to stand out.

 

To read the full analysis, click here.

Personal finance

BiggerPockets: Generational Wealth 101 and Getting Started in a Tough Market

Posted on by Smart Investing

Investing is putting wealth to work to create more wealth over time. For some investors, saving to buy a home or take a vacation is the goal. Others may have longer-term goals, like creating and keeping generational wealth.

Real estate is an asset that can be held for generations. It offers price appreciation and cash flow. But investing for generational wealth is different than looking to make a quick profit.

For generational wealth, it may mean just investing in markets that can continue growing for decades. Plus, a rising population and increased demand will likely lead to substantially higher prices.

Getting started may be tough right now. However, it may be the best time.

That’s because mortgage rates are high. But home prices haven’t sold off that much. Should mortgage rates drop materially lower, home prices may start soaring higher again.

Fortunately, starting investors in real estate can take advantage of first-time homebuyer programs. That can substantially reduce the down payment requirements. Also, today’s high-rate mortgage can be refinanced after the rates have dropped.

Homebuyers can also buy multi-unit properties and live in one of the units. Or even rent out individual rooms in a home. Either way, there are many ways to get started, so that the compounding power can start to take place over time.

 

To listen to the best ways to think generationally with real estate now, click here.

Income investing

Dividend Growth Investor: Eighteen Companies Rewarding Shareholders With a Raise

Posted on by Smart Investing

Whether the market moves up or down, stocks are just fractions of a business. Some of those businesses decide to use their excess cash flows to reward the owners of that business by paying a dividend.

Over time, they have more cash coming in to go out to shareholders. These dividend growth stocks are a fraction of the overall market. But they offer safe, consistent returns for patient investors. That makes for a simple strategy to beat the market over time.

Recently 18 companies have announced dividend increases .The increases have been as small as a 1.6 percent increase in the dividend to an 18 percent rise.

The largest rise came from Sherwin-Williams (SHW). The painting retailer is increasing its payout from $0.61 to $0.72 per share. It’s also the 45th year the company has paid an increased dividend to its owners.

With a current yield of 0.9 percent, the yield isn’t large. But long-term holders will make a great return thanks to the dividend growth over time.

Another company increasing its payout now is the Coca-Cola Company (KO). The beverage manufacturer pays a 3.3 percent dividend, and just increased its payout by 5.4 percent.

Coca-Cola has also raised its dividend for the past 62 years. Today’s buyers will likely see more decades of dividend growth ahead.

 

To view the full list of companies raising their dividends now, click here.

Economy

George Gammon: Interview: Hedge Fund Manager Reveals Secrets You’ll Never Hear on CNBC

Posted on by Smart Investing

While the mainstream view is that the economy is faring well, as evidenced by the stock market near all-time highs, there are other views.

One view is that the world is getting into a war footing. That view looks at the money being spent around the world, particularly in the Russia/Ukraine conflict. Under that view, growth may not be as strong, as resources are going to the war effort rather than on private-sector spending.

Another view is that we are in a stagflation environment. That’s a world where wages and the economy grow slowly, but inflation remains stubbornly high. The past three months of sticky inflation data would support the idea of at least some stagflation.

That’s also not a growth environment, or one conducive to stock market returns. The last stagflation of the 1970s saw massive inflation and a bear market combine. The result was the worst real performance for stocks since the 1930s.

For now, the market may not be pricing in further supply shocks. Global commodities could be cut off from global conflicts. That could lead to skyrocketing costs. When commodities can no longer be moved quickly or cheaply, other changes such as monetary policy is irrelevant.

Investors may want to consider commodity-related investments as a hedge against the dangers of both stagflation and global conflict.

 

To watch the full interview, click here.

Stock market strategies

The Lead-Lag Report: Dissecting the AI Revolution’s Economic Ripple Effects

Posted on by Smart Investing

AI has been the market’s hot trend for over a year now. It’s allowed many big-tech companies playing to the trend to reach new all-time highs. Companies have reported how they’re investing in AI tools to improve their returns.

On the surface, there’s much that looks similar to the rollout of the internet. For society, that could mean fantastic improvements in productivity in the coming years. It could even rival the productivity boom of the 1990s.

And, much like the 1990s, investors may first overcommit capital to AI investments. A great AI technology may not necessarily make a good investment.

The internet era saw the rise of plenty of companies that sounded attractive on paper. But they failed to earn a profit from the idea, and failed.

Likewise, the capital moving into AI projects will likely see some of it wasted. That means investors should be cautious on where they invest.

AI industry leaders such as Nvidia (NVDA) also trade at a high valuation. If they were to lose market share for some reason, that valuation could drop substantially.

Even if Nvidia continues its lead, it could see slowing returns over time. That could be comparable to how companies like Microsoft (MSFT) slowed down after it saturated the computer market, and before they started looking into other lines of business.

 

 To listen to the full interview, click here.

Stock market

Elliott Wave Options: S&P Worries Inflation Too Hot! … Correction Coming?

Posted on by Smart Investing

Last week’s economic data showed that both consumer and producer inflation is staying higher than expected. That’s a concern for the market, as declining inflation is key for interest rates to come down later in the year.

Meanwhile, markets have fared well in the first few weeks of 2024, with the S&P 500 breaking to a new all-time high over 5,000. That move may not last, as the latest data could mean a pullback is ahead.

If such a pullback does play out in the next few weeks, it will be in line with market seasonality. The back half of February, and most of March, is often a poorly-performing time for stocks, as earnings season winds down.

The headline inflation data can give the market an explanation for this seasonal decline. From a technical perspective, stocks have been trending higher in overbought territory for weeks.

Both of those signal that a small pullback could be a good thing for investors. Those who have missed out on the market’s recent run should get the chance to make additional buys in the coming weeks.

A market correction this time of year is typically in the 5-10 percent range. That should be enough for more volatile positions to see an even steeper drop before they start to turn around and head higher.

 

To view the full analysis, click here.

Cryptocurrencies

Swan Bitcoin: Bitcoin Hits $50K – FOMO Rally to All Time Highs Next?

Posted on by Smart Investing

2024 could be a breakout year for bitcoin. The cryptocurrency more than doubled in 2023 from its 2022 lows. But the approval and trading of 11 bitcoin ETFs have given the crypto a surge in demand.

Already, these ETFs have attracted nearly $30 billion in investor interest. And money will continue to trickle in, now that these ETFs can be used to passively acquire bitcoin in a retirement account. That suggests that there could be more upside ahead.

Even better, bitcoin is on track for its next halving in April. That’s the event that causes new bitcoin supply to get cut in half.

Since its inception, bitcoin has already gone through three halvings. Each halving cycle has led to a massive jump higher in price in the subsequent months.

It’s possible that bitcoin moves to $100,000 by the end of the year. If so, that would mark a new all-time high compared to 2021’s all-time high just shy of $70,000.

The combination of rising demand and reduced future supply bode well for prices.

Investors may not see the massive price jumps of prior bitcoin moves. But they can likely see market-beating returns with bitcoin this year. One bitcoin starts to make new highs, so too will other cryptos as traders look to catch-up.

 

To get the full data on why bitcoin is poised to surge higher, click here.

 

Income investing

The Average Joe Investor: I Back-Tested a Covered Call Strategy with Real Option Data

Posted on by Smart Investing

Investors have several ways to increase their income. That can include investing in dividend growth stocks. Or investing high-yield stocks such as real estate investment trusts or pipeline companies.

Investors looking for more have other tools as well, provided they’re willing to go to the options market. Call options can be used to generate extra income. This strategy of selling call options on stocks an investor owns is known as covered call writing.

There are a few caveats. As an option contract is standardized for 100 shares, an investor must first own 100 shares of a stock.

Using a dividend stock like Coca-Cola (KO), for instance, buy-and-hold investors can earn a 3.1 percent dividend. That’s based on $0.46 in quarterly income per share.

While a single option contract may go for just a few cents, multiplying that out by 100 shares can mean monthly returns and extra $40-60 per month.

That can greatly increase the annual total income, adding another 4-5 percent to total returns.

However, there are risks to any strategy. If shares soar higher, investors risk being called away. That may mean having to get back in at a higher price later.

Or finding a new stock to invest in with the capital. Such events frequently occur when selling covered calls.

 

To look at the full strategy and how it works, click here.