Why dividends are not good for investors?

Other drawbacks of dividend investing are potential extra tax burdens , especially for investors who live off the income. 3 Once a company starts paying a dividend, investors become accustomed to it and expect it to grow. If that doesn't happen or it is cut, the share price will likely fall.

What is the biggest mistake an investor can make?

Common investing mistakes include not doing enough research , reacting emotionally, not diversifying your portfolio, not having investment goals, not understanding your risk tolerance, only looking at short-term returns, and not paying attention to fees.

What is the number one rule of investing?

Rule 1: Never Lose Money This might seem like a no-brainer because what investor sets out with the intention of losing their hard-earned cash? But, in fact, events can transpire that can cause an investor to forget this rule. Buffett thereby swears by Rule 2.

Do 90% of investors lose money?

Assistant professor, LJ University. sizable poron, approximately 90%, of stock market traders incur losses . decision-making, and raising overall trading success.

What is the number one mistake traders make?

Trading without a Plan Successful, experienced traders have a well-defined strategy, and they know when they should enter and exit trades. They also have plans about how much they're willing to risk. Trading without a plan is one of the biggest mistakes made by new traders.

What is the riskiest thing to invest in?

The riskiest investments are often speculative in nature. While there are investment opportunities in each asset class that could result in you losing some or all of your money, cryptocurrency is often considered to be among the riskiest types of investments.

What is considered to be one of the riskiest of all investments?

Investment Products All have higher risks and potentially higher returns than savings products. Over many decades, the investment that has provided the highest average rate of return has been stocks. But there are no guarantees of profits when you buy stock, which makes stock one of the most risky investments.

What is the 5 rule of investing?

This sort of five percent rule is a yardstick to help investors with diversification and risk management. Using this strategy, no more than 1/20th of an investor's portfolio would be tied to any single security . This protects against material losses should that single company perform poorly or become insolvent.

Is there a downside to dividend investing?

Another potential downside of investing primarily for dividends is the chance for a disconnect between the business growth of a company and the amount of dividends the company pays . Common stocks are not required to pay dividends. A company can cut its dividend at any time.

Why do some investors prefer not to receive dividends?

In fact, there can be significant positives to investing in stocks without dividends. Companies that don't pay dividends on stocks are typically reinvesting the money that might otherwise go to dividend payments into the expansion and overall growth of the company .

What are the negative effects of dividends?

An observed negative and significant effect of dividend yield on firm value in the full study sample suggests that, on average, an increase in dividend yield ratio is associated with a decrease in firm value .

What are the disadvantages of paying dividends?

Disadvantages: 1. Limited Financial Flexibility : Paying dividends can limit a company's financial flexibility. When a company pays dividends, it is committing to using a portion of its profits to reward shareholders, which can leave less money for other purposes such as research and development or expansion.

Investing Mistakes: (7) Investment Mistakes You Should Never Make

Investing mistakes: Examining my worst investments/trades to avoid making the same mistakes and to see what lessons can be learned.

Even the best investors make investing mistakes.

Ideally, whether you’re a long-term investor or trader, seven out of ten investments will outperform. The other three may lag behind the market or underperform.

Fortunately, I’ve done quite well with many of my individual equity selections. But I’ve also made many investing mistakes over the last 10 years.

In this post, I will examine my worst investing mistakes ever so you don’t have to make the same mistakes I did.

Let’s get started.

Investing Mistakes: (7) Common Investment Mistakes to Avoid

Investing Mistakes: (7) Investment Mistakes You Should Never Make - Dividend Income Investor (1)

1. Understand the Business: I sold Corning (Ticker: $GLW) too soon

Corning Incorporated is engaged in manufacturing glass and ceramics. More specifically, it produces display technologies for electronics.

I originally purchased approximately $2,000 worth of GLW shares in 2011 at $13.80 per share.

The thesis for the purchase was based on the premise that the company would profit off their cellphone display segment.

In addition, I made the purchase based 100% on the rules recommended by Ben Graham in The Intelligent Investor. I thought the company was grossly undervalued. In fact, I found it through a stock screener while searching for undervalued equities.

With that said, I ended up selling the stock at a loss (between $11 to $12 per share) in early 2012. I panic sold it because I didn’t know enough about the business.

Nowadays, Corning Incorporated (GLW) is trading at $35 per share (SMH). My evaluation was completely right, and the company has doubled its value while paying dividends along the way (SMH). 🤦‍♂️

Lesson: Make Sure You Understand The Business

2. Don’t Trade (Gamble): I Traded Before the Crude Oil Inventory Report

For the readers that don’t know, I took a mini-retirement to focus on trading and blogging in 2016.

During my time as a day-trader from March 2016 to July 2016, I had a few impressive trades and was profitable on over 60% of my trades.

But I also made some major investing mistakes. Fortunately, none of them were life-altering, because I used stop limits and proportionate amounts of money to trade with.

Even still, the mistakes were painful.

My worst trading mistake ever occurred on Wednesday April 27, 2016. As I wrote in my post covering it

“On Wednesday, I got smoked out of the market with my worst trade to date.”
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You can read the entire post with more trade details here:.

Anyways, I successfully made a similar trade the prior Wednesday. My plan was to attempt to predict the direction of crude oil before the inventory report was released.

But I shouldn’t have assumed it would work out the same again. I never should have speculated.

Here’s how the trade went down:

I bought 200 shares of UWTI at $29.98 for $6,006.03 in anticipation that the inventory report would push oil higher for the day.

Unfortunately, I was wrong, as the price of oil dropped sharply. In fact, it dropped right through my stop limit so fast it didn’t sell. Based on my strategy at the time, I got out immediately at the best available price. I sold 200 shares of UWTI at $28.06 giving me a final amount of $5,612.02. I lost $394.01 in a matter of minutes (SMH). 🤦‍♂️

Lesson: Don’t Trade (Gamble)

3. Never Sell A Great Business: I Sold Apple (AAPL) Shares Two Splits ago

I’m going to be honest with you – this one stings.

I originally purchased Apple shares in 2011 around $375 per share, two splits ago.

The stock continued to rise up to $700 before coming back down for a while. I sold some shares at around $680 for an 80% return.

Before the first split, the shares bounced around from approximately $418 to $460 for a while. I bought a couple more times at $420 and $428—I later sold the shares at around $456 and $460 for decent profits again.

Soon after I sold my Apple position, the shares jumped to nearly $800 before the company announced a dividend payment and 7 for 1 stock split. After the first stock split, the shares were prices around $90 to $100 per share. From there, shares of AAPL climbed back to $500 before splitting again in 2020.

Altogether, the $2,500 I invested would have been worth approximately $17,500 excluding dividends. Instead of a 7-bagger, I ended up with a measly eighty percent return.

Nevertheless, I learned to never trade a fantastic business. I will never sell an AAPL share again (SMH). 🤦‍♂️

Lesson: Never sell high quality stocks, hold them forever.

4. Take Advantage of Stock-Sharing Plans and Company Matches (free money)

I worked for two Canadian banks prior to my current job.

Regrettably, I waited nearly two years before I participated in RBC Royal Bank’s stock-sharing plan. I missed out on thousands of dollars.

By not participating, I missed out on free money (SMH). The company matched 50% of your contribution up to 6% of your salary. Based on my salary at the time, I missed out on over $4,600 over a 4 year period.

In short, not enrolling into employer share plans can cause you to miss out on thousands of dollars (SMH) 🤦‍♂️.

Lesson: If your employer offers a match, take it

5. Be Patient: I sold Shoppers Drug Mart before Loblaws Purchased

After completing a detailed analysis of Shoppers Drug Mart, I invested $2,500 at $41 per share (not exact numbers). After becoming worried that larger competitors, such as Walmart and Amazon, would eat into their business, I sold around the middle of 2013.

Though I sold for roughly $44 per share, which earned me a small profit, an announcement was made within a short period of time stating:Lobalws was acquiring Shoppers Drug Mart for 12.4 billion (SMH!).

The following is a quote from the above linked article:

“Shoppers shareholders will be able to choose either $61.54 in cash or 1.29417 Loblaw shares, plus one cent in cash for each Shoppers Drug Mart share held, on a pro rationed basis.”

$61.54 per share!—(SMH!) 🤦‍♂️

Lesson: Be patient and trust your research

6. Don’t Chase High Yield: Sir Royalty Income Fund Cut its Dividend

As a dividend income investor, I buy stocks that pay dividends to build a cash flow machine.

However, I’ve learned that chasing the highest yield available is not the best option. Based on my experience, it’s better to focus on quality dividend growth stocks as opposed to chasing the highest yields.

Unfortunately, I learned this lesson more recently with Sir Royalty Income Fund (SRV.UN), a real estate investment trust I formerly owned.

Because of the shutdown, the company was forced to cut its dividend. The stock has plunged since.

I should have known, though. Even prior to the shutdown, the company’s dividend payout ratio was too high. The proof is that they slashed their dividend even before the pandemic started.

I mean, the 8% dividend yield that was paid monthly was nice for a while. But chasing this high yield ended up burning my portfolio later.

Simply put, they were paying out too much of their earnings.

Lesson: Don’t Chase High Dividend Yields

7. Manage Risk and Speculate with 10% or Less of Your Portfolio’s Value: I Bought Cannabis Stocks At High Valuations

To put it bluntly, I got caught up in the hype of cannabis stocks in the early days of Canadian legalization.

I purchased three cannabis stocks that I still own in 2020.

Unfortunately, though, the hype had already been priced into cannabis stocks by the time I purchased.

They were all grossly overvalued based on analysts overestimating Canadian demand.

As a result, the cannabis sector collapsed and share prices have never really recovered. We’re all still waiting for the European growth, or for the United States to legalize it.

Anyways, Aurora Cannabis (ACB) is now one of my worst investments of all time. My initial investment is basically non-existent now.

Fortunately, I created my own set of rules for investing in the cannabis industry. Mainly, I used less than 10% of my portfolio’s value to speculate with. In fact, I used less than 2% for this position.

Although the value of my Aurora Cannabis shares collapsed, I didn’t lose a lot of money because I didn’t invest a lot of money.

Lesson: Manage risk and speculate with 10% or less.

Investing Mistakes: (7) Investment Mistakes You Should Never Make - Dividend Income Investor (2)

Investing Mistakes – Concluding Thoughts (Errors of Omission)

In addition to the 7 investing mistakes mentioned in this post, the only other mistakes are errors of omission.

There are stocks I should’ve bought, and stocks I should’ve trusted my analysis on. But for whatever reason, I either purchased another equity or missed the opportunity altogether.

But in the end, all we can really do is learn from our mistakes and learn from the mistakes of others.

In conclusion, investing mistakes help you become a better investor in the long run. It’s important to reflect, examine and assess your own performance.

To recap the lessons I’ve learned from my own investing mistakes:

Understand the business.
Don’t Trade (it’s gambling).
Hold great stocks forever.
Take advantage of company stock-sharing plans.
Be patient and trust your research.
Don’t chase high dividend yields.
Manage risk and speculate with 10% or less of your portfolio’s value.

Apple (AAPL) – The Next Great Dividend Growth Stock Story – Is AAPL a Buy?

Dividend Payout Ratio – Dividend Investors Should Seek Healthy Ratios Over High Ratios

Investing in the Cannabis Industry – Four Tips to Protect Wealth

Oil Prices Leads to Disaster – The Day I Paid Trader Tuition

I am not a licensed investment or tax adviser.All opinions are my own.This post may contain advertisem*nts by Monumetric.This post may also contain internal links, affiliate links to BizBudding, Amazon, Bluehost, and Questrade, links to trusted external sites, and links to RTC social media accounts.