I know I don’t have to tell you that risk management is one of the keys to successful long-term investing.

But here’s the strange thing: most responsible, risk-conscious investors underperform the market—and not by a little.

Why?

Because the reality of risk management is not the conventional wisdom frequently peddled by financial advisors. They warn that taking on too much risk will threaten your life savings, so you need to choose an extremely conservative fund and invest for the long term.

That’s close enough to the truth to sound convincing—but unfortunately it’s wrong. (I’ll show you two funds that upend the “conventional” wisdom—and deliver consistent market-beating gains—in just a moment.)… Read more

Dividend stocks are different animals. If you practiced “buy and hope” in your previous investing life, there are some habits you should leave behind.

Using a “stop loss” is one of them. In theory, stop losses limit downside while letting winners run higher. If a stock closes below a certain price, or drops a certain percentage, the “stop” will make you sell before things get worse. Instead of holding a stock all the way to zero, you’re forced to book gains (or at least cut losses) early.

It sounds like a no brainer. Why wouldn’t we want downside protection on all of our positions?… Read more

One question I field all the time is, “Should I own preferred stocks?” and my answer is always the same: “Yes, yes and yes.”

But after that, things get tricky.

When most investors think of investing in preferred stocks, they think about popular funds like the iShares U.S. Preferred Stock ETF (PFF) or the PowerShares Preferred Portfolio (PGX). But despite yields near 6%, these mainstream preferred stock funds are the wrong way to go. Instead, I suggest you take my lead and look at outside-the-box preferred-stock options like the three high-yield picks I have in store for you today.… Read more

Most investors still don’t understand dividend stocks.

Why?

Because they spend way too much time obsessing over one figure—the dividend yield—and ignore stocks with payouts below some arbitrary number, say 2%, which is about what the SPDR S&P 500 ETF (SPY) pays.

Consider Visa (V), a stock that gets zero love from the dividend crowd, no thanks to its 0.69% trailing-twelve-month yield, which has gone nowhere for five years:

Visa’s Dividend Downer

But if you’ve ignored Visa because of its low yield, you’ve missed out big time—this “boring” chart is actually a sign of powerful growth.

Because what it’s really showing us is that investors have been bidding up V’s share price in lockstep with its payout hikes (because you calculate yield by dividing the annual dividend by the current share price).… Read more

Utilities are a particularly enjoyable sector for income investors because they offer sustainable and growing dividends—if you choose the right companies.

This boring and predictable model means utilities tend to attract risk-averse investors who jump out during times of extreme caution—even when there’s really nothing to be cautious about. That’s why the Utilities Select Sector SPDR ETF (XLU) erased much of its 2016 gains in the second half of the year, when the months leading up to the presidential election led to market panic.

Surprising Volatility

What’s even more interesting is that utilities continued to fall even after Donald Trump won and the so-called “Trump rally” began.… Read more

Healthcare real estate investment trusts (REITs) are at the crossroads of some very powerful investing themes that make them a one-two punch of potential growth and extremely generous yield. Today, I want to show you a trio of these double-threat dynamos that pay secure dividends up to 7.6%.

I love healthcare because it’s broadly unbeatable as a recession-proof investment. Plus the aging of the baby boomers is driving spending through the roof. Consider this: 10,000 baby boomers are reaching full retirement age every single day. No wonder, then, that the Centers for Medicare and Medicaid Services projecting that annual healthcare spend will grow 5.8% every year through 2025!… Read more

Let’s face it: people make a lot of stupid mistakes.

You see it every day: they turn on to the freeway without signaling. They fall for obvious scams. They throw money away on useless things.

But here’s the good news: It’s possible—even easy—for savvy investors to profit from humanity’s lousy judgment.

How? By being a contrarian.

Contrarian investing means heading away from the crowds: buying heavily when everyone is fleeing in fear and selling when everyone says the asset is a sure thing. (I’ll show you 2 unloved funds ready to pop—plus 2 overbought names ready for a fall—in just a moment.)… Read more

There are, literally, a billion reasons to avoid the energy sector right now.

Hedge funds now own a billion barrels worth of bets that crude oil prices are heading higher. Problem is, these guys are usually wrong – especially when they wager with such conviction!

In April 2014, I warned that then-$103 crude oil was due for a drop. U.S. crude oil inventories were at 5-year highs, yet money managers were “net long” 336,000 contracts on crude oil future. They were doubling down on the goo at the worst possible time.

When oil prices began to roll over, hedgies were forced to liquidate their bad bets in unison.… Read more

Things are tough for contrarian investors these days.

Back in August, for example, I recommended buying financial stocks. It was an easy call to make.

At the time, the Financial Select Sector SPDR Fund (XLF) was down 4% from a year earlier, and the worst performers had fallen much further. I specifically saw value in Wells Fargo (WFC), KeyCorp (KEY) and PNC Financial Services (PNC), which had fallen 14.5%, 17.6% and 12.0%, respectively.

I bought heavily into these three stocks at the time, expecting financials to recover over the short term, especially if Trump won the election.

Here’s how they’ve done since then:

Financials Rebound With Gusto

The strong recovery since August has convinced me to back off on financials, since the market has finally seen in these firms what I saw in them last summer.… Read more

With the Trump bump squeezing stocks higher, retirees (and near-retirees) are asking me two questions a lot these days:

Is it still a good time to buy? And if so, what the heck should I buy?

The answer to the first is, undoubtedly, yes.

And it’s no secret what’s behind the second: according to FactSet, this market is trading at a forward price-to-earnings (P/E) ratio that hasn’t been seen in 13 years.

Investors Double Down

Source: FactSet

No wonder folks are struggling with what to buy!

One thing I recommend avoiding now is an index fund like the SPDR S&P 500 ETF (SPY).… Read more