(Sam Swenson, CFA, CPA)
when it comes to being successful long term investmentIt’s a good idea to focus on total return: Combination of price increase and dividend payout. However, there are times when you might think of optimizing cash flow instead. If you have upcoming obligations that can’t be covered by your job income alone—such as an unexpected medical emergency or a larger-than-expected tax bill—you may want to look into investments that help make up for your cash crunch. can help.
Below, we’ll briefly review four strategies for accessing a little more cash.
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Focus on Dividend Payers
Many stocks in the investment world are known for their ability to generate cash, and in many cases even increase their dividends. Here, I mention companies like AT&T, AbbVieAnd baby morgan – among others value stock, but others, usually growth stock In the tech space, pay no dividends and rely on price appreciation alone to provide returns.
While dividend-paying stocks can offer cash flow of 4% to 6% per year, you’ll also need to focus on quality companies if you choose to go this route. A stock that pays a 5% dividend but experiences wild swings in price can leave you with a negative net return overall. That’s why you need to be particularly clear about why you’re optimizing for cash flow and have a strong thesis behind any individual stocks you buy.
use taxable account
One of the taxable brokerage accounts is that, unlike 401(k)s or IRAs, you can easily access the money whenever you want and at any age. If you’re looking to raise cash by selling existing investments, doing so in a taxable account is likely to result in a higher net profit — especially if you’ve held the investment for more than a year (the capital gains will be long-term, at lower rates). tax is levied). If you withdraw money from a 401(k) or a pre-tax IRA, you’ll pay ordinary income tax plus Early withdrawal penalty if you are under 59 1/2 years old.
That’s not to say that you shouldn’t use a 401(k) or IRA; In fact, the exact opposite is true. Both 401(k)s and IRAs can be particularly powerful tools from a tax deferral and compound growth perspective. That said, be sure to have a taxable brokerage account for more easily accessible investments, as well as do your best to maximize both your 401(k) and your IRA each year.
set dividends in cash
If you have stocks that pay dividends, make sure the account setting is turned on that allows dividends to appear as cash in your account. If you don’t, you’ll simply reinvest the dividends in the company (or companies) that paid them, increasing your shareholding but not actually providing you with cash. While this doesn’t increase the amount of dividends you’ll eventually receive, it does provide you with cash on a frequent schedule.
hold on for a moment
before investing more money Share MarketMake sure you have enough cash to meet the upcoming obligations. As we have seen this year, the market can quickly slide and drop for any number of reasons. If you are worried about putting your entire nest egg to work, take a moment and consider how much you are willing to lose in the short term if the markets turn south. just hang on to your money and No Investing can be a viable way to maintain ready access to cash.
Cash is still king
Lastly, you need cash to pay expenses. Investing Your Money in 401(k)s and IRAs Is a Great Strategy retirement Savings, though that money won’t help much with rent or mortgage payments due next month (unless you’re already retired). To get some more cash out of your investments, focus on dividend-paying stocks, set the dividends to cash, and hold off on investing all your money before you have a big cash cushion.
A few small changes to your portfolio can go a long way in reducing worry about day-to-day market movements. Pay attention to your regular obligations and make sure that there is cash flow from all sources to meet them all.
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