Rational Investing

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2 October 2017

An Alternative to Low Interest Rates


This is no surprise coming from us. We've been writing about it since long before the recent and growing recognition of its value by the minions in the media and on Wall Street: Use high quality companies with long histories of regularly increasing their dividends.

Certificates of Deposit and Bonds will not increase your income regularly. They are in effect loans that you are providing to their issuers. Their current rates, as we have written above, are historically low and incapable of providing a positive rate of return after subtracting inflation and taxes.

The commitment to invest in equities ("I'm afraid of the stock market" or "My [choose one, Dad, Uncle, Friend, Grandfather] lost a lot of money trading stocks.") is perceived as risky by many, especially seniors.

Perhaps that perception can be mitigated by thinking, not in terms of stocks, but in terms of becoming an owner by holding small pieces of successful businesses. Think companies that produce products and services we use every day; companies that have increased their dividends annually; through bull markets and bear markets; through wars; through recessions.

It is a time-honored method for generating income and increasing net worth. For many, if not most, who have not realized this, help is needed. It may be a parent or grandparent that needs to understand and to be comfortable with moving in this direction. You can help them. Even better, we can help them, as we do every day with folks that are unfamiliar with conservative investing. We have no emotional strings attached to helping them do the right thing, and as fiduciaries we are legally required to do what is in the clients' best interest.

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