Saturday 29 October 2011

10 Rules of Financial Safety

Harry Browne was a US personal finance commentator and advisor. He is particularly well-known for his 'permanent portfolio' concept (although this is not a model I agree with totally!). One of his famous observations is: “The best kept secret in the investing world: Almost nothing turns out as expected.”

He came up with  his 16 Rules of Financial Safety, which incorporate a lot of common sense. A couple of these are not directly relevant to a DIY Income Investor, so I'll try to boil these down to just 10 rules [my few additions are in square brackets].

Tuesday 25 October 2011

Portfolio Review: Smiths News (LSE:NWS)

High-yield dividend shares form part of Level 6 of the DIY Income Investor Income Pyramid. As the fortunes of these companies change, so does their eligibility for my portfolio.  So it is worth reviewing the portfolio selection, at least annually.

So how is Smiths News doing?

Sunday 23 October 2011

Funny Money: Earnings vs Net Worth

Money's a funny thing - the more you look at it, the more elusive the concept of 'money' becomes. Sure, you can pull out banknotes and change, and that is 'money'. But most 'money' is not this 'cash in circulation'; it's numbers on computers. And the way money is created is even stranger - when a bank writes a debt (by lending) it creates money out of thin air. (Which is how we all got into this mess...)

However, to get back to our theme, effective money management means thinking about money in the 'right' way. Effectively, if you have any money (in your pocket, or in the bank) it is basically because you haven't spent it yet. So one way of thinking about money is deferred expenditure.

Monday 17 October 2011

Chopped! -13% of UK Dividend Payers Cut Their Dividends

Although at the DIY Income Investor we are keen on investing in high-yield dividend shares - as Level 6 of the Income Pyramid - this type of asset is not without its risks. The key danger is, of course that the company reduces or even stops paying a dividend, as this usually results in both a loss of income and a fall in the price of the share (meaning a capital loss, if you sell).

Well, in the second quarter of 2011 nearly 13% of dividend-payers on the London Stock Exchange did just that!

Friday 14 October 2011

UK Millionaires: How They Earned It and How They Invest It

How did the UK's millionaires earn their millions - and how do they invest? Perhaps the example of these successful people can give us some ideas on getting richer?

Tuesday 11 October 2011

Portfolio Buy: BM Savings 5-year 4.5% Fixed-Rate Bond (Postal)

One of my fixed-rate savings bonds has recently matured.  Investing cash for a fixed period in return for a high return is Level 3 of the DIY Income Investor Income Pyramid. As part of the management of the portfolio, it is necessary to occasionally 'roll over' these savings accounts as they come to the end of their term, as inevitably the bank tries to put the money in a low-interest account and hopes you won't do anything about it!

However, in the UK it's getting harder to find a good (temporary) home for your money...

Saturday 8 October 2011

5 Reasons to Pay Off Your Mortgage

As part of the Level 1 of the DIY Income Investor 'Income Pyramid' I encourage people to pay off their mortgages before embarking on 'serious' investing.

Not everyone agrees, so I thought I should set out the five most convincing reasons I can come up with to justify this position.

Thursday 6 October 2011

Yield Convergence: US Dividend Shares & Treasury Bonds

The yield on dividend-paying US stocks is now at its highest level relative to US government bond interest rates in nearly 50 years. Yields from the two asset classes have now converged.

Is this a sign that the bear market is biting hard? Should this affect our DIY Income Investor strategy?