Many investors know what happened in October 1929, even if they don’t realize it. That was when stocks crashed and triggered the Great Depression. On October 28, 1929, the Dow Jones Industrial Average fell 12.8%. It lost another 11.7% the next day. At the close on October 29, the Dow was more than 40% below its September 3 high. Investors were shocked. But The New York Times warned of a crash on September 6. A statistician named Roger Babson said that “sooner or later a crash is coming…” He expected a decline of at least 16%. Of course, many disagreed with Babson. Among them was Irving Fisher, a noted Harvard economist and stock market expert. Fisher argued that stock prices were justifiably high because corporate earnings were rising, and investors were diversifying because of innovations in the market like unit trusts (similar to mutual funds). Babson was right. He continued offering sound advice into the 1960s, when he was beyond 80 years old. In 1935, he recommended an income investment. He was talking about a specific one many don’t know about today… ![Turn Your Images On](https://banyanhill.s3.us-east-1.amazonaws.com/Spads/2023/SFT/sft_endless_income_2023_spad5.png) | Find out how to: - Make 12 times more interest from your savings account.
- Become a “lazy landlord” and collect rent without owning any real estate…
- TRIPLE your dividend income with a nearly forgotten group of “high-class” stocks.
- And much more…
The wealthy have used simple, surprising, money-boosting secrets like these for years. Now you could use them too. Click here to see how. | A Hybrid of Stocks and Bonds Babson wrote: “It is sometimes said that preferred stocks provide more liberal yields than bonds and a greater certainty of income than common stocks.” Now almost 90 years later, Babson’s words are still true. Preferred stocks are a hybrid investment. They have some of the characteristics of stocks. Most importantly, they trade like stocks. They also share some characteristics with bonds. Most importantly, they pay a steady income. Many banks issue preferred stocks. The specific reasons are technical, but they generally do this to meet regulatory requirements related to capital ratios. Preferreds pay a quarterly dividend that is fixed when the shares are issued. Some preferreds can be converted to common stock. This offers some of the upside of common stocks. But the dividend is almost guaranteed unless the issuer goes bankrupt. If the issuer skips a payment, they often have to pay all arrears before they can pay dividends on their common stock. In the long run, preferreds should deliver returns that are between stocks and bonds. Despite their benefits, many investors don’t hold preferred stock in their portfolios. One reason is because a lot of information about preferreds isn’t readily available. There isn’t a benchmark index. Information about the securities can be difficult to find. But with some effort, this information can be obtained. Income investors can get better returns from preferreds than common stocks in banks of all sizes. Here’s how preferred yields play out for some of the most recognizable names. Preferred Yield vs. Dividend Yield of Bank Stocks | Preferred yield | Dividend yield | JPMorgan (JPM) | 5.6% | 2.7% | Bank of America (BAC) | 6.0% | 3.4% | Wells Fargo (WFC) | 6.5% | 3.4% | Morgan Stanley (MS) | 6.5% | 4.1% | But if the research is too daunting, there is an exchange-traded fund (ETF) that offers exposure to preferred stocks. It’s called iShares Preferred and Income Securities ETF (Nasdaq: PFF) and offers a 6.8% yield. Now is an ideal time to look at preferreds. Like bonds, they decline in value when interest rates rise. This means PFF is more than 20% below the price it was at when the Federal Reserve began raising rates. Rate hikes may be ending, and future cuts will lead to higher prices in preferreds. Preferred stocks are a source of Endless Income. While most have heard of 401(k)s, IRAs and Roth IRAs, there are dozens of other tools, tactics and income investments that most Main Street retirees don’t even know exist. Secrets that the wealthy have been using to boost their money for years. You can learn more about these unexpected investments in a brand-new book, Endless Income: 50 Secrets for a Happier, Richer Life. Click here to find out how to obtain a copy today. Until next time, ![Michael Carr signature](https://moneyandmarkets.s3.us-east-1.amazonaws.com/sigs/web-png/Mike_Carr.png) Michael Carr Senior Technical Analyst, Money & Markets Check Out More From Stock Power Daily: Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or whitelist within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: https://moneyandmarkets.com/contact-us/ Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2023 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Money & Markets. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 800-684-8471) Remove your email from this list: Click here to Unsubscribe | | | | | | |
Post a Comment
Post a Comment