|»5 Minute Wrap Up by Equitymaster|
On This Day - 24 MARCH 2012
Is this your master key for full financial freedom?
In this issue:
When millions don't even have food to eat, our government is thinking about bailing out multi-millionaire CEOs!
Is this government really made up of our representatives or is it on the payroll of those corporate giants?
We at Equitymaster feel strongly about this cause, and thus have started an Urgent Poll where you can read all about this and cast your vote to make your voice be heard!
We strongly recommend every Indian, who wants to make a change, to take a look at this.
The conventional wisdom has it wrong we believe. Although stocks carry more risk, not all of them are risky. Besides, even regular stream of income can be assured if the stocks under consideration are bought for their dividend income. Thus, a portfolio of stocks that is not only fundamentally strong but also throws off a lot of dividends can be one of the most effective retirement options out there.
But deciding to build a portfolio of dividend producing stocks in order to achieve full financial freedom is only half the job done we believe. Nothing can be more damaging than ending up with dud stocks and this is where the investor really has to be on its toes. Thankfully though, there are a few pointers that can prove to be of immense help.
A blog by the name of dividend growth investor has argued that only those companies should be considered that have a long history of paying and raising dividends. Not to forget that such stocks have to be bought at attractive valuations. The blog believes that paying a P/E of more than 20 for such stocks can prove to be risky in the long run. Lastly, the prospective portfolio companies should have a sustainable and a well defined moat. This point cannot be emphasised enough. A company with an eroding moat will soon be forced to either fully stop its dividend payouts or lower dividends considerably. Hence, this aspect has to be thoroughly looked into.
We are of the view that a well diversified portfolio of dividend stocks with the above characteristics in mind can prove to be your best bet for financial freedom and it can help you achieve this goal much earlier than imagined.
As per a blog on The Economic Collapse, the Mandarin economy has teamed up with Saudi Arabia to undertake the building of a mammoth oil refinery. This mammoth new refinery is scheduled to be fully operational by 2014. The development is not completely out of the blue. Over the past several years, China has aggressively expanded trade with Saudi Arabia. In fact, China now imports more oil from Saudi Arabia than the United States does.
So why is this important? Well, back in 1973 the United States and Saudi Arabia agreed that all oil sold by Saudi Arabia would be denominated in US dollars. This 'petrodollar system' was later adopted by rest of the world. However, the biggest beneficiary was the US as it immensely strengthened the US dollar. If China were to replace US as the key determinant of oil prices, will the 'petro dollar' last long? Well, we certainly see petro-Yuan on its way.
The point is that the urban poor also deserve their dues. They deserve land and livable housing conditions. But till such time as the government decides to reform its policies this is not going to happen. There is a need for the government to become strict on the allocation of land to lower income groups. Further, the government also needs to encourage private players to participate in providing housing to LIGs. Unless the government takes a stronger hand in the process, the urban poor would continue to see their housing conditions worsen.
The Indian stock markets were down 0.6% during the week. The post-budget trading session was filled with high volatility as markets see-sawed during the week. This was the fifth consecutive weekly loss for the markets as uncertainties still linger as to when the central bank would cut interest rates. Higher borrowing plans for the next fiscal have also worried markets.
Amongst the other world markets, Singapore was down by 0.7% while Japan was down 1.2% during the week. France was the biggest loser registering losses of 3.3% during the week.
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