If there’s one golden thing you learn as an investor, it is this: You learn to price risk.
This starts to spill over to other areas of your life.
‘If I take this action — what will the cost of it be? Is the risk worth it?’
Practiced investors become masters at assessing risk. And the very best investments, at least in the stock market, come from achieving strong profits when the risk taken was well-covered.
So I was impressed, while sitting at the annual meeting of one NZX-listed company, when the chief executive announced a new approach to risk.
In particular, new IT systems that would allow the price of a customer’s risk to be calculated. And charged for accordingly.
A key consideration for many of our investors is to generate income. You see, the biggest risk to your financial future is having little or no income.
You could get made redundant. And find it difficult to get another job. Your payroll income dries up.
Your business could slow or fall on hard times. Your self-employment income dries up.
Term deposit rates at the bank have hit such lows, it is hard to get any income from them at all.
Commercial and residential rental properties can face times of vacancy, with no rental income while costs mount.
In my experience, secure, dividend-paying stocks can help de-risk your income. And provide genuine passive income.
Of course, dividends do rise, fall, and sometimes get cut altogether. But across a diversified portfolio, dividend streams can really work your capital. And we do see clients with income streams of $60,000+ from dividends alone.
Now, the particular company I just mentioned — impressing me at their AGM — has suggested that this financial year, they will return to paying a dividend.
Not only could this provide years of steady income at a good yield — but a sustained rise in the share price.
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