Dividends...Investors' Search for Value

Dividends. They are one of the first figures investors look for when they believe there is not enough value opportunities in the equities market. 

At the moment, we are currently seeing dividend levels that have not been reached in a very long time. The S&P indicated that the quarterly dividend amount in 4Q15 represented the second largest dividend total in at least ten years. 

On the other hand, the dividend growth rate actually fell to its lowest point since 2011.

"Dividends. They are one of the first figures investors look for when they believe there is not enough value opportunities in the equities market. "

When valuations are uncertain and investors find it too risky to bet on a company’s growth alone, dividends are usually sought in order to ensure a safer return. Many companies even continue disbursing dividends, regardless of how the company is doing financially; simply to maintain investors’ faith in the company. For instance, even though commodities took a big hit in 1Q16, only 12 S&P 500 companies cut or suspended their dividends. However, 919 companies in the U.S. equities market increased their dividend in 1Q16, which was actually 8% lower than during 1Q15.

Though dividend growth is not increasing at the same rate it was just a few years ago, they are still very attractive, especially among more conservative investors or investors who would like to hedge away some of the risk from other investments. 

With interest rates remaining at low levels and thought to remain as such for the time being, dividend rates are providing better returns than government bonds. Though this has become somewhat of a norm, it was not so almost a decade ago. Back then only 5% of stocks in the S&P had higher dividend yields than the 10-year Treasury yield. In the last few years this number has jumped to 65%. At the moment, the S&P dividend yield has about a 20% higher return than the 10-year Treasury. And with dividend yields predicted to stay at current levels for the next couple of years, dividend paying stocks should continue to remain popular among investors; so long as interest rates remain near their current lows as well.

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6 Best Practices to Protect Your Confidential Information

Although there is a vast amount of technology available that is designed to safeguard your devices and personal information, that information is still vulnerable to cyber-criminals and identity thieves. In fact, security breaches are not always due to a weakness in technology control. Sometimes, they are the result of the action or inaction of the user—you! Therefore, you are one of the best lines of defense against cyber-crime.

It's always a good time to implement the following information security best practices to do your part in keeping your personal information safe and secure.

"Therefore, you are one of the best lines of defense against cyber-crime."

1) Build strong passwords
It's important to create strong passwords for all of your online accounts. But what exactly does this mean? A strong password:

• Contains both uppercase and lowercase characters, as well as digits and punctuation
• Is at least eight characters long
• Is not a word in any language, slang, dialect, or jargon
• Is not based on personal information, names of family members, and so on

A good rule of thumb is that passwords should be hard to guess but easy to remember.

2) Use multifactor authentication
A user ID and strong password alone are not sufficient protections for securing web accounts. Multifactor authentication—one of the simplest and most effective ways to secure your data—adds an extra layer of protection. With multifactor authentication, users must provide two forms of identification in order to log in to a site.

Here's how it works: After a user enters a user ID and password, the website will send a passcode to the user's mobile device. He or she must then enter this code on the site, ensuring that only that individual can sign into the account.

3) Be suspicious of unsolicited e-mail
Be wary of any e-mails that convey a sense of doom and gloom (e.g., threatening to close an account) or that claim immediate action is required. Grammar mistakes, spelling errors, and generic salutations are also red flags. Perhaps most important, scrutinize those e-mails that contain links and attachments from sources you don't know (and, unfortunately, even from sources you do know). It's quite easy for cyber-criminals to craft a legitimate-looking e-mail in the hopes that you'll be fooled into thinking it came from a company you do business with or from a friend. To protect yourself from this scenario, don't hesitate to verify: Call the source directly to authenticate from whom it was sent it; if it came from a company you know, go to the company website directly to log in.

4) Protect your mobile devices
Outdated software can leave your mobile devices open to security vulnerabilities. By keeping your apps and mobile operating system software up to date, you can mitigate the risk of a cyber-criminal exploiting a hole in your system. Most devices simplify this process for you by offering automatic update options for apps, as well as notification systems that let you know as soon as an operating system update is available. It's your job to take care of these updates immediately!

Another mobile device necessity is to do your homework, making sure the apps you're downloading are from a reputable company (e.g., by checking their ratings and comments). Be sure you know what the app does and what information it's going to access on your mobile device.

5) Engage in safe web browsing
Keeping your browser up to date is critical in preventing malware. Just like apps and your operating system, an out-of-date browser can open up security gaps that cyber-criminals will take advantage of. Be alert to pop-ups and advertisements: Both could be spyware used to plant tracking cookies on your machine, which can steal your information, direct you to bogus phishing sites, and pummel you with pop-ups.

When transmitting personally identifiable or payment information, you can ensure that you are on a secure site by checking for the "https://" before the "www.whateversite.com." When on public Wi-Fi networks, consider connecting through a personal virtual private network (VPN) and disable auto-connect; this way, your device won't automatically connect to found public networks.

6) Stay vigilant
Although advanced technology today is certainly a safeguard and buffer to keep cyber-criminals at bay, it's critical to remember that you are in the first line of defense to keeping your data safe and secure.

For more tips and tricks to stay safe online, visit the National Cyber Security Alliance at www.staysafeonline.org.

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Clicking the Like button on various social media platforms, such as LinkedIn, Facebook, etc. does not constitute a testimonial for or endorsement of Redmount Capital Partners LLC or any Investment Advisor Representative. “Like” is not meant in the traditional sense. Posts must refrain from recommending investment advisory services or providing testimonials for our firm, since they are strictly prohibited. Please understand that we are required to delete such posts, since this is a regulatory requirement.

Rising Rates. Look closer for opportunities.

After more than six years, the Fed is finally poised to end its zero-interest-rate policy and embark on its first rate hiking cycle in nearly a decade.

We believe this is no ordinary rate cycle – and that the Fed is simply “normalizing” rates from their low levels since the financial crisis. The Fed has also signaled that rate increases will be gradual, which should keep interest rates below historic averages for some time. As a result, we expect rates to rise slowly, remaining below historical averages for some time.

Moreover, we believe that rising rates will be along the strengthening, growing economy – and for well-prepared investors, rising rates can signal opportunity.

A thoughtfully allocated, diversified portfolio can help reduce the impact of rising rates as well as capture growth potential.

1st: Seek a better balance of risk and return

Seek a better balance of risk and return by focusing on credit exposure while reducing interest rate exposure. Corporate bonds typically provide additional yield over Treasuries. Shortening the duration of your bond portfolio can help to reduce your interest rate risk. Combining these actions can be an effective way to navigate a rising rate environment.

Barclays U.S. 1-3 Year Credit Bond Index performance (June 2004 – June 2006)

Source: Barclays as of 8/12/15. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.

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Clicking the Like button on various social media platforms, such as LinkedIn, Facebook, etc. does not constitute a testimonial for or endorsement of Redmount Capital Partners LLC or any Investment Advisor Representative. “Like” is not meant in the traditional sense. Posts must refrain from recommending investment advisory services or providing testimonials for our firm, since they are strictly prohibited. Please understand that we are required to delete such posts, since this is a regulatory requirement.

4 Investment Risks Warren Buffett Says You Should Not Take

What does risk mean to you...and Warren Buffett? 

If you ask the average person, they’re likely to say the probability of losing money. If you ask most financial professionals, they’ll probably equate risk with volatility of returns. (While these may sound similar, they’re not exactly the same thing.) For example.

Let’s say investment A loses 3% one year and gains 2% the next and investment B gains 5% one year and 20% the next. Most people would call investment A riskier since it lost money while financial professionals would say investment B is riskier because the returns were more variable.) But if you ask Warren Buffett, the second richest American and widely considered the greatest investor alive today, he would say they're both wrong.

In his 2014 annual letter to shareholders, Buffett wrote:

“Volatility is far from synonymous with risk… If the investor…fears price volatility, erroneously viewing it as a measure of risk, he may, ironically, end up doing some very risky things.”

Instead of volatility, Buffett measures risk as the loss of purchasing power or basically how much you can actually buy with that money, which is the whole point of actually having it.

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What is your risk tolerance?
How much risk is there in your portfolio? 

Start below or Learn more here >>

So what are those “very risky” things investors may do by focusing on volatility? Here are 4 that Buffett mentions and what you should do instead:

1) Keeping long term money in cash.

Many people keep most or even all of the long term money in cash because they're afraid of market volatility. Buffett admits that “owning equities for a day or a week or a year is far riskier (in both nominal and purchasing-power terms) than leaving funds in cash-equivalents,” but he argues that over the long term, “a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.” That’s because in the long run, the erosion of the value of your money due to inflation is much more devastating that the short term fluctuations in the stock market.

Average money-market rates are less than a tenth of a percentage point while the average inflation rate last year was 1.6%. That means, the real value of your cash is decreasing by about 1.5% a year. In the short run, that’s a lot less than what you could lose in stocks but in 10 years, your money will have lost almost a quarter of its purchasing power. Compare that to the S&P 500, a selection of 500 of the largest companies in the US, which more than doubled with dividends reinvested over the last 10 years despite the financial crisis in 2008,

Bottom Line: Match your investments to your time frame.

2) Not being adequately diversified.

Another mistake is people having too much in one stock. Often its their employer's stock or the stock received in exchange of a sold company. Sometimes it’s a majority or even all of their money in one stock. There are lots of different reasons. They may know and trust their employer and don’t understand or trust their other options. This stock may have been performing particularly well. The employer stock may be one option out of several in their retirement plan and by spreading their money around, they may inadvertently put too much in their employer stock. They may have acquired the stock as a gift or inheritance or from options, grants, or an employee stock purchase plan and they don’t know what to do with it.

Regardless of the reason, any individual stock (no matter how good the company) is inherently very risky. Unlike what Buffett calls a “diversified equity portfolio” an individual stock can go to zero and never come back. That’s not volatility. That’s a permanent loss of purchasing power.

Bottom Line: Make sure you own a larger number of individual stocks in a a variety of industries or stick to broad-based mutual funds or ETFs that diversify the money for you.

3) Attempting to “time” the market.

Although not thought often as such, this is one of the most common investor mistakes. How many times have you heard people say that they know the market will decline and are waiting until then to jump in. Yes, it’s true that the market will decline at some point. The problem is that no one knows when. 

As Buffett puts it,

“Anything can happen anytime in markets. And no advisor, economist, or TV commentator – and definitely not Charlie nor I – can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.”

Bottom Line: Instead of trying to time the market (which even Warren Buffett doesn't try to do), make sure you have adequate time IN the market, as that is what matters most. 

4) Active trading.

Instead of trying to time the market, others try to beat it by trading stocks they believe will outperform the market as a whole. This belief can be strengthened if an investor has one or more lucky trades. In many of these situations, the investor mistakes a rising market for his or her investing prowess.

However, many economists believe that the stock market is essentially efficient, which means that it’s extremely difficult if not virtually impossible to beat over the long run. Even if you don’t subscribe to this theory, it’s noteworthy that the vast majority of professional mutual fund managers consistently under-perform the market. Even the few that do outperform over a given time period are actually less likely than average to do so over the next same time period. In other words, any out-performance may be due to luck, exactly what the economists would have predicted.

So if not higher performance, what does all this trading produce? One study found that all this trading costs the average mutual fund about 1.44% per year. That loss comes out of your pocket but is not included in any of the fees reported by mutual funds.

Bottom Line: If professional investment managers, many from top business schools, with access to cutting-edge research and teams of research analysts working for them are unable to consistently beat the market, what makes you think you can? Instead of actively trying to beat the market, limit your trading to making sure your portfolio matches your time frame and risk tolerance, harvest tax losses to offset taxable gains, or switch from higher cost funds to lower cost funds.

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Clicking the Like button on various social media platforms, such as LinkedIn, Facebook, etc. does not constitute a testimonial for or endorsement of Redmount Capital Partners LLC or any Investment Advisor Representative. “Like” is not meant in the traditional sense. Posts must refrain from recommending investment advisory services or providing testimonials for our firm, since they are strictly prohibited. Please understand that we are required to delete such posts, since this is a regulatory requirement.