Friday, January 6, 2017


As a long time investor, I have to admit to having a couple of total loss investments.  My old shares of Kmart which I purchased during their bankruptcy went to $0.  I had 1,000 shares of Atlantic Energy Solutions which also ended up worthless.  There was also a high flying REIT back in the 90's that dropped to $0.  As scary and disappointing as this may seem, I've found an easy way to avoid this as soon as I switched to dividend investing.

What's the secret?  Take some money off the table.  When you own a stock paying dividends, it's quite easy to take some money off the table by simply collecting your dividends in cash instead of reinvesting.  While I'm a die hard advocate for reinvesting your dividends, there are times when this would be contraindicated.  If you own some high yield, high risk stocks like I do, it never hurts to take some of the risk out by collecting some cash dividends.  If you collect cash, that money is yours and even if the share price drops to zero, you still have the cash.  Thus you avoid having a total loss on your investment.  

I employ this strategy regularly and it helps me sleep much better at night knowing I'll never lose my entire investment in any one stock.  You don't have to collect all the dividends in cash.  To continue growing monthly income, I'll have the dividends reinvested for 3 months and collect cash for the next 3 months.  That way I'm covered if the stock does well and I'm covered if it doesn't.  Maybe I miss out on a little growth, or maybe I avoid excessive loss and have a nice tidy bundle of cash to take advantage of other investment opportunities as they present themselves.

Just a simple way to any avoid total loss.  

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