Recent articles, such as this one from the Wall Street Journal, highlight the explosion in options trading by individual investors. As the article notes: “By one measure, options trading by individual investors has risen roughly fourfold over the past five years, according to Cboe data.”
I believe we live in a culture with a lot of gambling mentality, and those thought processes carry over into how many people “invest.”
When you listen to or read financial news, note how often they use gambling phrases, such as “take a chance” or “place a bet” on a specific stock. Another gambling comment you may hear is, “take some money off the table.” Every day I see hosts and guests on the financial network talk about the stock market and stocks using gambling terms.
One of my favorites is Fox Business host Liz Claman. Whenever she talks with a guest about a stock that is up for the day, she asks whether investors should be buying the stock. If a guest covers a stock falling in value, she always asks if investors should be selling those shares. While she may think (in my opinion about her thinking) that she is helping to jump on and off trends, the attitude strikes me as advice to buy high and sell low.
I believe the gambling mentality that currently prevails from both the financial press and many investors’ actions will be detrimental to investing success. I want my portfolio to grow and provide income for the rest of my life, which logically seems to be a long-term plan. Short-term “hot stock” investing does not correlate with that plan. If you are always looking for the next big investment theme, you are a gambler, not an investor.
If you find yourself constantly looking for a hot investment idea and then end up disappointed with the results, you are guessing what investments will work. If your goal is to build your wealth for long-term security and a great retirement, you need to shift to an investment strategy that matches your goals.
In my investment services, I employ dividend-focused strategies. Investing in high-yield stocks allows your portfolio to earn an attractive income through the ups and downs of the market. If you reinvest dividends until you’re ready for retirement, you will use the power of compounding to grow the income, and the dividends earned will automatically “buy low” when the market goes through the inevitable market corrections.
In my Dividend Hunter service, I help subscribers build and manage a diversified portfolio of high yield investment. I do the research and analysis to help investors build a successful long-term investment plan, including the recommended investments.
If you are looking for a high-yield opportunity with which to get started, check out the Virtus InfraCap U.S. Preferred Stock ETF (PFFA). This fund pays a 7.8% yield, with monthly dividends backed by safe, preferred stocks.