As I write this, I am in Las Vegas to participate in a MoneyShow investor conference. Two time zones west of home, I was up at 5:30 a.m., raring to go. As I was reviewing my emails, I came across an interesting fact about the weather that I believe applies to investing.
I live in South Dakota, an agricultural state, and weather forecasts are critical to farmers. In the morning, local television stations provide a weather forecast every seven minutes.
TV weathermen have access to tremendous technology at their fingertips, enabling them to provide the most accurate forecasts. I saw a tool the other day that predicts the size of hailstones. The channel I watch in the morning forecasts the weather for seven days. Today I came across these facts:
- Five-day forecasts are accurate around 90% of the time, while 10-day forecasts are right just half the time.
- With current technology, accurate long-term weather forecasts are essentially impossible.
- Five-day weather forecasts are now as accurate as three-day forecasts were in the 1990s.
Yep, 10-day forecasts are a coin flip.
How does this relate to investing?
If you watch business news channels, you see expert after expert making predictions about the economy, interest rates, and stock markets. These experts are very confident in their predictions, but they often contradict one another.
On the financial networks (CNBC especially), you hear the word “uncertainty” about as often as South Dakota weather forecasters give forecasts. Uncertainty means that investors lack the information necessary to make accurate predictions and informed decisions about investments.
It’s funny, but the future has always been uncertain, and probably nowhere more so (sorry weather) than in the investment markets. The timing of bear and bull markets cannot be predicted—except by the experts who continuously predict bear markets, so they get it right once every few years.
The unpredictability of share prices prompted me to develop dividend income-focused investment strategies. While there will be dividend cuts and dividend increases, a diversified portfolio of high-yield investments will pay a stable and growing income stream.
Many investors are unaware that it is possible to assemble an income-focused portfolio with a yield of around 10%. That’s very close to the long-term average of the S&P 500.
My subscribers and I have learned that focusing on high-yield cash returns provides peace of mind and alleviates concerns that the next bear market will disrupt someone’s financial plans.
For one high-yield investment idea, check out the InfraCap MLP ETF (AMZA). The current yield is 7.7%, and the dividend is growing annually at a high single-digit rate.
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