There is no such thing as 100 percent safe investing. However, those investors who follow three important rules will outperform those who don't practice safe investing.
The first rule is to find someone who has actually become financially independent solely from safe investing. How do you know for sure?
You need to ask the prospective financial adviser how much their annual dividend income is and also their age. Someone 75 years old with only $15,000 of annual dividend income is not better than someone who has $85,000 dollars of dividend income and is 45 years old. Dividends are the first sign of safe investing
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The second rule in safe investing is to find companies that are either consumer goods or big pharma companies. From 1957 – 2003, 18 of the top 20 companies in the S&P 500 were either big pharma or consumer goods companies when reinvested dividends were taken into consideration.
Tech, financials, and large capital intensive businesses may sound great and may do great, but they are generally not appropriate investments for those who want to practice safe investing.
The third rule in safe investing is to find large cap U.S stocks that have a market cap of at least $30 billion or more. The fact is that the big fish eat the small fish. A wise and safe investor tries to buy a big fish-type stock at a small fish price.
Safe investing however is an illusion. There is an inherent risk in everything — even U.S. Treasury bills because of inflation, the long-term future of the U.S government, and its reckless spending.
No one can predict the future 100 percent of the time. Investing is 50 percent art (instinct) and 50 percent science (numbers). But the key to safe investing is to combine safety growth and income with getting the right entry price which is an inexact science.
Keeping the three traits mentioned above in mind will improve your odds of practicing safe investing.
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