Investment Opportunities

Dividends: income and stability for your portfolio
Equities have a history of providing positive returns over the long term, but in the short term, it’s nice to have investments in your portfolio that can generate steady income — even if the market is not rising. Bonds are often relied upon for tried-and-true income generation, but dividend-paying stocks offer compelling advantages of their own.

For one thing, they allow you to participate in the growth of the market with less risk than other equities. Whereas non-dividend-paying stocks need earnings growth and investor optimism to support their price, the prices of dividend-paying stocks are usually supported by their own quarterly dividends.
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Don’t give in to emotion
Every investor dreams of buying low and selling high. Yet through the different market cycles, many investors do just the opposite: They tend to buy when the market is near its peak and sell when the markets are struggling.

This kind of emotion-based investing can be harmful to your long-term goals, since it ignores fundamental valuation in favour of following market momentum. Stocks tend to be overvalued when the markets make new highs, and undervalued when they reach their lows.

Here are some sound investment principles to keep in mind in today’s fast-changing markets.
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Income strategies for an uncertain market
Every investor can benefit from having income-generating investments in his or her portfolio. Especially in today’s challenging environment, these holdings can add stability, as well as a source of regular payouts while you wait for the markets to improve.

But it is not enough to simply add more income investments to your portfolio. In fact, making significant changes to your asset mix without integrating them into a strategic investment plan can result in imbalances and affect long-term returns.

It’s key to have a plan for the income portion of your portfolio that takes into account your investment objectives, timelines, and risk tolerance, while balancing immediate needs for income with your longer-term need for growth. The good news is that today’s market offers a number of ways to structure your portfolio with investments that offer both high-yielding income opportunities and good longer-term growth prospects.
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Preferred Shares: An income investment you may have overlooked
Investors seeking income often limit their selection to bonds and give little or no consideration to preferred shares. They usually ignore preferreds simply because they don’t know much about them.

Perhaps the easiest way to think of preferred shares is that they are shares which behave like a bond. A preferred share represents an ownership interest in a corporation, just as common stock does. But it also produces a reliable stream of income — in the form of a pre-set dividend — very much like the interest paid on a bond. The price of a preferred moves with interest rates, like a bond’s price. When interest rates rise, the price of the preferred falls, and when rates fall, the price rises.
Continue reading Preferred Shares: An income investment you may have overlooked (pdf)