What is TD Ameritrade?

TD Ameritrade was founded in 1971 and has since evolved into one of the premier online trading platforms during the Internet Boom of the 1990s. Today, the company is an offshoot of Charles Schwab and may be folded into the company sometime in the next several years. TD Ameritrade has more than $1.2 trillion in assets under management.

The Benefits of TD Ameritrade

Most TD Ameritrade reviews focus on the many free tools the company offers to investors — and for good reason! TD Ameritrade is one of the most prolific brokers out there in terms of information accessibility and investor support. Some of the chief benefits of trading through TD Ameritrade include:

• Virtual trading simulator: Access up to $100,000 in “practice money” to simulate real-time trades. It’s a great tool for new investors and those exploring new securities and strategies.
• Resource library: TD Ameritrade has an extensive library of educational materials for investors, including videos, articles, quizzes and much more, on virtually every topic.
• Investor support: With more than 300 branches, there’s always someone available to help you at TD Ameritrade. The company also has a robust chatbot and FAQ section.

In addition to these resources, one of the biggest advantages of using TD Ameritrade is low-to-no cost trading. Some of the best financial reasons to open an account include:

• No account minimums
• No-fee stock trades
• More than 4,100 no-fee mutual funds
• No-fee ETF trades
• No base commission on options ($0.65 per contract)

TD Ameritrade offers a large selection of investments, including cryptocurrencies and IPOs on qualified accounts. With no-commission trades, it aligns well with the move to no-fee services across the industry. The platform also offers a great trading app (iOS only), browser-based trades and even a desktop trading application (thinkorswim).

TD Ameritrade Drawbacks

While some TD Ameritrade reviews mention high fees for broker-assisted trades, this really isn’t a drawback, per say. The company currently charges $45 for broker-assisted trades, which is between $15-20 higher than other brokerages. For many investors, this isn’t a major concern.

While not a drawback, investors considering opening an account with TD Ameritrade need to be aware that this service is likely to change in the next 1-2 years. Charles Schwab officially acquired TD Ameritrade for $26 billion in stock on October 6, 2020. Schwab has maintained that the brokerages will operate separately for the next 18-36 months; however, the company’s intent is to fold TD Ameritrade into Schwab’s brokerage services in the future.

It’s uncertain if TD Ameritrade will remain an independent broker under the Schwab umbrella or if TD Ameritrade accounts will become Schwab accounts as part of the merger. In either case, this isn’t a bad prospect, as Charles Schwab is consistently rated as one of the top brokerages.

Is TD Ameritrade Right for You?

As many TD Ameritrade reviews mention, this is a platform that caters to new investors. Low-to-no fees and a prolific library of educational materials make it easy for new investors to dip their toes into the world of securities and learn the basics of investing as they go.

This isn’t to say experienced investors can’t get value from TD Ameritrade. Who doesn’t love free trades? While the brokerage’s stock screener and research tools are valuable, seasoned investors with advanced needs may choose to look elsewhere for more in-depth analytical tools. Fortunately enough, Charles Schwab offers many of these tools, which may mean more functionality from your TD Ameritrade account in the future.

The bottom line? It’s hard to beat the features and benefits offered by a TD Ameritrade account — especially if you’re a new or casual investor. With the looming prospect of the Charles Schwab merger, the prospects only look better for TD Ameritrade users.

For the latest stock market trends and analysis, sign up for the Trade of the Day e-letter below. This TD Ameritrade review is a great guide to finding the perfect platform for your investment journey. You may just find the next big investment opportunity!

Read Next: TD Ameritrade thinkorswim Review: A Flagship Trading Platform

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What is E*TRADE?

E*TRADE is a subsidiary of Morgan Stanley (acquired in October 2020), a respected brokerage in its own right. While most people know the company because of its humorous “E*TRADE baby” viral advertising in 2008-2014, the company’s platform is one of the most respected. Today, E*TRADE is home to 5.2 million retail brokerage accounts.

The Benefits of E*TRADE

E*TRADE’s long history as an online broker has put it on the cutting edge of many industry trends — namely the decision to eliminate trading commissions. As each E*TRADE review notes, the company is consistently one of the most competitive on pricing and fees, which is great for most investors. Aside from a full cash-out fee of $75, the company’s fee structure shakes out nicely for investors:

• Zero commissions on trades
• No account minimums
• Low robo-advisor fee of 0.30%
• No annual fees
• No base commission on options ($0.65 contracts)
• Commission-free ETFs

In addition to its low-to-no brokerage fee structure, E*TRADE is also widely touted for its many trading resources. As one of the original online brokers, E*TRADE’s digital resources are hard to beat, including three online trade platforms (E*TRADE Web, Power E*TRADE and E*TRADE Pro), as well as iOS- and Android-native apps. Investors will have no trouble brokering trades no matter where they are. Oh yeah, they have an Apple Watch widget, too!

Despite its online-centric business model, E*TRADE’s real-world support is hard to beat, too. The company offers 24/7 phone, email and mobile support across 30 physical locations, with chatbots available and a prolific array of FAQ resources.

Finally, access to extensive resources for research makes E*TRADE a standout brokerage. Many E*TRADE reviews fail to mention that the company has a never-ending selection of technical studies, charts, streaming quotes and news, as well as live webinars open to any account holder.

E*TRADE Drawbacks

The only real drawback of E*TRADE is the complexity of its website and the organization of its resources. While seasoned investors might not have much of an issue navigating the many tools on its web platform, newbies might find themselves lost. It can be difficult to find information. Thankfully, this is easily remedied by the company’s stellar customer service resources.

Not necessarily a drawback but something to be aware of is Morgan Stanley’s recent acquisition of E*TRADE. The deal went through on October 12 for $13 billion, bringing E*TRADE and its services under the Morgan Stanley umbrella. It’s unknown whether current E*TRADE account holders will maintain their accounts. Or, if those will roll into Morgan Stanley accounts after the merger is complete. Regardless, change is unlikely to come anytime soon. And, when it does, E*TRADE account holders might get even more peace of mind since Morgan Stanley is a top-rated broker.

Who Will Get the Most out of This Platform?

This E*TRADE review points to seasoned investors gaining the most from an E*TRADE account. The complexity of the platform and the high-level tools available make it a great option for seasoned traders. Moreover, the low-to-no fee structure make it perfect for frequent traders looking to make complex trades without commissions eating into profits.

New and casual investors will find much more functionality and opportunity from E*TRADE’s mobile apps. They’re much simpler and easier to navigate. The stellar customer service of the company is also a welcome relief for new investors. Especially if you need a little extra help as you get acclimated to the platform.

With the looming presence of the Morgan Stanley acquisition to consider, it’s safe to say that investors using E*TRADE will find themselves satisfied with their investing experience. However, if you’re looking for competitor analysis and stock market trends unlike anywhere else, sign up for the Trade of the Day e-letter below. You’ll gain daily access to more extensive research and insights that compliment this E*TRADE review perfectly.

Read Next: Fidelity Review: A Brokerage Breakdown

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As you look at the top gold stocks out there, remember there are several different types of gold stocks to consider. This includes gold mining companies, brokers, royalty or streaming companies and more. The type of company you hold shares in plays a role in your exposure to commodities. So it’s good to consider each type of company and its operations before investing.

The Best Gold Stocks List for 2020

What are the most popular gold stocks in 2020? We’ve compiled a list of gold stocks that represent all types of companies within the commodities industry. Each have a proven record for success and a bright future ahead of them. Here are the seven best gold companies to invest in this year:

• Franco-Nevada Corp. (NYSE: FNV)
• Wheaton Precious Metals Corp. (NYSE: WPM)
• Kirkland Lake Gold Ltd. (NYSE: KL)
• Barrick Gold (NYSE: GOLD)
• Agnico Eagle Mines (NYSE: AEM)
• Eldorado Gold Corp. (NYSE: EGO)
• Newmont Corp. (NYSE: NEM)

Franco-Nevada Corp.

Franco-Nevada Corp. owns royalties and streams in gold mining and other commodity and natural resources, making it a safe investment for people who want gold exposure in their portfolio. The company has been a paragon of stability over the last five years, sustaining a CAGR of 23% since 2015. With a P/E ratio of 120, it’s one of the more expensive plays in this sector. But, it might be worth the price for the stability alone.

Wheaton Precious Metals Corp.

Wheaton Precious Metals Corp. is more of a silver company than a gold mining stock, but it has a presence in the gold market. The company has done well over the last five years. But 2020 has been especially kind to the stock, with gains of 75% YTD! With a market cap of just over $21B, this company is a large cap player that will shine in any portfolio—especially as a play to diversify into commodities.

Kirkland Lake Gold Ltd.

Kirkland Lake Gold Ltd. is a gold mining company with several profitable mines throughout Canada and Australia. And it stands out as a shining star on this gold stocks list. Despite dipping earlier in 2020, the stock has rebounded and gained in the last six months, showing strong indicators of growth in the future to come. It’s one to watch as more institutional investors throw their weight behind the company.

Barrick Gold

With the ticker symbol “GOLD,” it’s immediately clear that Barrick Gold is a reputable player in this industry. With 16 operating sites in 13 countries, this is about as global of an investment as you could want in your portfolio. The company is up nearly 50% in 2020 alone — an impressive feat for a company with a market cap of nearly $50B. The company’s reputability and strong integration into supply chains makes it one of the best gold stocks worth investing in.

Agnico Eagle Mines

For those who want a little dividend action with their commodities exposure, Agnico Eagle Mines is a welcome investment. The 1% dividend may not seem like much, but it’s a strong sign for this large cap growth stock’s continued success into the future. After lagging with the industry in early 2020, the stock is up 29% YTD. The best part? It still only has a P/E ratio of 38, making it an affordable play.

Eldorado Gold Corp.

Interested in a small cap company to round out your gold investments? Eldorado Gold Corp. has a $2B valuation and a share price hovering around $10. But it might not be long before this gold miner is firmly in large cap range. The company has had some downturn over the last few years, but is trending in the right direction in 2020 with strong revenue of over $600 million and net income above $80 million.

Newmont Corp.

The world’s largest gold mining company, Newmont Corp. is one of the most stable stocks in the commodities sector. Its affordable P/E of 12 and 1.6% dividend make it an attractive buy, as does the growth of 44% it’s seen in 2020 so far. With global exposure and strong supply chain integration, few companies on our gold stocks list are safer than this one to add to your portfolio.

Best Gold Stocks List for You

As commodities continue to heat up in 2020, you may want to consider this gold stocks list for your portfolio. In fact, you can gain immediate access to trending stocks updates through the Investment U e-letter below. Sign up today and take advantage of this FREE newsletter that provides stock market insights from some of Wall Street’s most renowned experts.

Read Next: 5 Gold Stocks to Buy

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It’s also a good alternative to investments like annuities. That’s because you do not need to hold real etstate until a specific time to receive your principle back. This is another one of the benefits of investing in property.

So, the decision to invest in property may be right for you. However,  how do you know the right time for real estate investing? Is there a specific season?

Here are 5 tips you need to know when it comes to investing in property

5 Tips to Help You Invest in Property

1. Understand the Current Real Estate Market

The first thing that you need to think about when investing in property is the current state of the real estate market. You will have trouble getting tenants living in your property or making a profit in a ghost town. It is as simple as that.

People often fear that the house they are investing in has become impossible to sell due to some negative event that happened in that area or town. But, that does not necessarily make a property impossible to sell.

Most likely, there will be some desire for housing in any given real estate market. It may take time and patience. As well as a willingness to negotiate price. But if you stick it out you will likely find tenants. Meanwhile, If you need to sell a house fast, there are plenty of methods to get the best possible price in a short amount of time.

2. Understanding the Finances of Investing in Property

Another thought that makes people fret about investing in property is this question: “Will I actually make a profit from this?” People also wonder how much they will be able to earn from the appreciation in value in addition to any rental income they receive.

Both are great questions to ask. And here’s a hard truth: when it comes to selling a house, you will likely not get full market value. There are a variety of reasons for this: fees, external events and the economy, haggling and negotiations, supply and demand.

But that doesn’t mean your investment won’t be profitable or worth it in the end. You are going to need to sit down and do your research and perform calculations to make sure you can turn a reasonable return on your investment in the end.

3. Consume Media to Understand the Market

A major market event like Brexit in Great Britain or the current coronavirus situation in America can cause real estate prices to tumble.

You need to consume news and read about your real estate market to make wise and educated decisions about how to invest in property in that area. Or if you should at all.

By doing this, you will put yourself in the best possible position to decide whether you are making a smart investment decision. As real estate can be a big investment, you don’t want to make major mistakes that could have been easily avoided with the right information.

4. Seasonality

People often wonder about market timing when it comes to investing in property. They often ask, “is there a specific year or month that people prefer to purchase or rent homes?”

And the answer may surprise you. Some studies have shown that around 80% of people prefer to purchase or rent a home in summer rather than winter.

And other studies show that people often prefer to buy or rent towards the end of the week. There’s even some evidence to support the theory that people prefer to purchase around midday. Right after lunch!

There is sometimes a peculiar psychology to real estate investing or renting. This makes seasonality an important factor to consider when trying to maximize the value of a sale or purchase.

5. Consider Your Resources When Deciding to Invest in Property

Maybe the most important question to ask yourself is, “Can I truly afford to do this?” You need more than just the downpayment of the property. You are going to need enough money to furnish and decorate it, to keep up with maintenance, to pay related bills and expenses before you have tenants.

All of these costs tend to add up. And in he end, some people may find the property in question is simply unaffordable. And if you try to do it anyway, you may end up in some hot water with a terrible investment.

Make sure to run the numbers thoroughly and be honest with yourself. It’s better to walk away from a bad investment than to make the purchase and find out after.

Concluding Thoughts on Investing in Property

Potentially, it can always be the right time to invest in property. And by using the tips in this article, you will hopefully make the best investment decision for yourself.

Of course, when building wealth, real estate and rental income is just one way of generating passive income. And you’ll want to build a diversified portfolio that includes other assets like stocks, bonds cash and even gold or silver.

But in the end, real estate investing can be a rewarding way to go about building wealth. Many have enjoyed the ability to receive this passive income while being able to give tenants a great place to live. And that’s a wonderful feeling if you do decide to invest in property.

The post 5 Tips to Help You Invest in Property appeared first on Investment U.

The company is drawing the eye of many value investors… and the ire of news outlets around the world for its role in spreading the COVID-19 pandemic. It begs the question: is Royal Caribbean stock a buy?

Royal Caribbean Company Background

If you’re considering investing in the travel and hospitality sector, Royal Caribbean has long been a market stalwart. Post-Great Recession until the start of 2020, Royal Caribbean stock price rose over 1200%, handily beating the market.

This growth wasn’t by accident. Royal Caribbean is the world’s second-largest cruise line operator, after Carnival Corporation (NYSE: CCL). The company also holds controlling stakes in three regional cruise lines. 

As the name implies, Royal Caribbean offers extensive cruise options throughout the Caribbean and Bahamas, as well as Mexico. However, the company is a global brand and also offers cruises to destinations to:

• the Mediterranean (Greece, Italy)
• Asia (China, Japan, Thailand)
• South Pacific (Australia, New Zealand)
• and North America (Alaska, Hawaii, Coastal). 

All told, Royal Caribbean visits some 300 world destinations, chartering more than 6.5 million people annually on 24 cruise liners. You can Read more on Royal Caribbean’s background here. 

COVID-19 Has Decimated Travel Stocks

Royal Caribbean stock plummeted over the past 90 days, exclusively on the implication of ferrying individuals carrying COVID-19 around the world. At least 13 ships in the company’s fleet have harbored confirmed cases of COVID-19.

Six of them among the top 15 most severe outbreaks at sea. Currently, the company has suspended all sailings departing on and before June 11th, 2020. 

Despite Royal Caribbean’s proactive forethought and quick compliance with the CDC, WHO and public health authorities around the world, the stock continues to suffer by affiliation.

Carnival Corporation and other cruise operators have experienced freefall in the market, alongside the stagnated stock prices of travel and hospitality companies suffering through travel restrictions.

Expedia Group (NASDAQ: EXPE), United Airlines (NASDAQ: UAL), Booking Holdings Inc. (NASDAQ: BKNG) and other sector leaders are similarly depressed. 

Beyond Royal Caribbean Stock’s Headlines: A Stable Balance Sheet

A Stable Dividend

For investors thinking about opening a position in Royal Caribbean stock, look past the headlines at the company’s financials. What you’ll find is a surprisingly stable balance sheet and a fair history of good fiscal management. 

The first thing that jumps off the balance sheet is the Royal Caribbean stock dividend: 9.06%. It’s a savory draw for dividend investors, though high enough for skeptics.

Based on the recent stock performance, it might also be a cut risk if cruise operators don’t see any government stimulus funding—which they’re not likely to.

More Positive Signs 

Beyond the dividend, there’s a lot to like about Royal Caribbean’s current financials for value investors. The stock’s plunge puts it at a meager 3.85 P/E ratio, which puts it firmly in value territory for those with a positive thesis.

Digging deeper, the company hit or beat its target EPS every quarter in 2019. Unfortunately, due to circumstance, they’re projected negative EPS over the next two quarters.

Royal Caribbean has a stable balance sheet—even at the start of the COVID-19 pandemic. In December 2019, the company had revenue of $2.5B, a profit margin of 10.85% and $234.74M cash on hand.

With $30.32M in total liabilities and stockholder’ equity on the books, investors don’t have to be too worried about financial mismanagement on top of the current market conditions. Free cash flow could be stronger at around $700,000, but it’s nothing to scoff at. 

Two Drawbacks

There are two big drawbacks for Royal Caribbean stock and all cruise lines in general. First, they’re asset-heavy businesses. Every cruise vessel is a depreciating asset on the balance sheet for as long as they’re in service—which is about 30 years. This leads to the second issue. 

According to the company’s most recent 10-k filing, they’re looking at roughly $5.5B in short-term liabilities in 2020. With their chief revenue source (bookings) shut off, it’s going to be difficult for them to avoid default without taking on private equity.

Which isn’t likely to benefit shareholders. 

Buy Royal Caribbean Stock Today, Hold Tomorrow

Is RCL stock a buy? It depends on your comfort with risk. In the short term, Royal Caribbean is going to continue getting beat up. It’s never safe to try and catch a falling knife, and Royal Caribbean has been a textbook definition of one.

Until the stock stabilizes at a bottom, it might be best to avoid. There’s also short-term uncertainties still swirling about COVID-19 and government aid, as well as the state of the dividend and the company’s short-term liabilities.

If you can stomach the immediate risk and afford to sit on it for a time horizon of three to five years, Royal Caribbean could be a gem in your portfolio.

Royal Caribbean’s stock has a history of proven growth after economic downturn, responsible management behind it and a proverbial moat as part of an industry oligopoly. Just prepare to take on water in the short term as a crisis investor. 

The post Is Royal Caribbean Stock a Buy Today? appeared first on Investment U.

Despite the beleaguered share price, crisis investors are starting to take note of a potential long-term play. Is Carnival stock a good buy right now?

To differentiate between a value play and a value trap, investors need to look past carnival stock price and the headlines. Investors should measure the business’s fundamentals as well as macro factors, like the cruise industry and the travel and hospitality sector as a whole.

A Closer Look at Carnival Corporation

Carnival launched in 1972 and, today, employs 150,000 people. It’s firmly entrenched as the world’s largest cruise line operator — by both total number of passengers and ships in fleet. The company has more than 100 ships sailing under 10 subsidiary brands. It ferries more than 13 million passengers to more than 700 ports in 150 countries worldwide. Carnival cruises represent half of the total global cruise market.

Since it went public in the 1980s, Carnival Cruise stock has been a bellwether for the travel and hospitality sector. The company is part of an oligopoly with Royal Caribbean Cruises (NYSE: RCL). It enjoys strong industry partnerships with many of the world’s leading travel networks and chartering companies.

COVID-19 Hits Travel Stocks Hard

Since January 1, 2020, Carnival shares have lost more than 80% of their value in an unprecedented free fall. The catalyst is none other than COVID-19. And it’s not only CCL, RCL and other seafaring stocks that are down — the travel sector as a whole is in a slump. Market leaders Expedia Group (Nasdaq: EXPE) and Booking Holdings (Nasdaq: BKNG) as well as every major U.S. airline — including United Air Lines (Nasdaq: UAL) and American Air Lines (Nasdaq: AAL) — are down 40% to 70% year to date.

Despite total sector depression due to border closings and travel restrictions, Carnival faces even bigger headwinds. Its Diamond Princess luxury cruise ship was one of the catalysts for the North American outbreak of the pandemic, with 712 confirmed cases of COVID-19 aboard. Its Ruby Princess ship produced another 612 cases. All told, Carnival Corporation bears the brunt of three of the top five cruise liner outbreaks of COVID-19 and six of the top 15.

To add insult to injury for the company and its falling share price, new evidence has come to light that company executives continued operations even after acknowledging the virus’s growing presence on its ships.

Looking Beyond the Headlines

Is CCL stock a buy? From the look of its balance sheet, it very well may be. The company reported earnings in February 2020, giving us an updated look at its balance sheet and projections.

According to its recent filings, Carnival brought in $4.79 billion in revenue with a negative net income of $781 million. This is hardly surprising given the situation. Looking back, the company generally sees similar revenue with a positive net income of $400 million outside of peak travel season. It has $1.35 billion in cash on hand, which will shrink rapidly over the course of the year.

For value investors, Carnival’s 4.37 price-to-earnings (P/E) ratio is an attractive draw — as is its massive stock dividend yield of 16.94%. Though the company has announced that it’s suspending the dividend, it nonetheless represents an attractive precedent for long-term holders.

The major downside to this stock is its illiquidity. Bankruptcy is a possibility for CCL if it doesn’t address solvency issues fast. The company’s most recent 10-K filing shows just under $10 billion in debt — of which, half comes due in the next 18 months. The company is issuing $6 billion in new stock and debt to help cover this, but that means dilution for existing shareholders.

To make matters worse, Carnival is incorporated in Panama… which means it’s not likely to see as much help from the government. And, on top of all that, Carnival Corporation has suspended operations, canceling some cruises through the end of the year and delaying others through June 26, 2020. That decision stymies its cash flow, all but cutting off its income.

Don’t Get Caught Holding the Bag

Carnival Corporation may seem like a smart value play in the current economic climate, but it could very easily become a value trap. The combination of a suspended dividend and issuance of new shares puts up a big red flag, even despite the company’s ability to generate cash and fix its solvency issues when operations resume. Unfortunately, there’s too much uncertainty surrounding COVID-19 to recommend CCL as a good buy.

Crisis investors looking for gold in a down market might have better luck with Royal Caribbean Cruises (NYSE: RCL). Carnival’s competitor has yet to suspend its dividend and still maintains a relatively repairable balance sheet. In either case, prepare for an underwater investment for at least three to five years — or longer, depending on the pandemic.

If you’re looking for the latest investment opportunities, Investment U is the place to be. Sign up for our free e-letter below! It’s full of useful tips and research from our experts. Whether you’re a beginner or an experienced investor, there’s something for everyone.

The post Is Carnival Stock a Good Buy Right Now? appeared first on Investment U.

In times of market volatility, stock market rallies aren’t uncommon. In fact, they’re actually part of the reason markets are so volatile! It’s important to pay attention to when the market is poised to rally and how to act when the needle ticks up. If there was a stock market rally today, would you recognize it? Do you have a plan to capitalize on it?

What Is a Stock Market Rally?

What market rallies mean varies, but they generally indicate an upswing in the markets after a period of downturn. Let’s look at a common scenario we’ve seen all too often lately. 

The market opens Monday at a loss, setting the tone for a rough week to come. Stocks trend lower Tuesday and Wednesday on poor economic news, and are flat on Thursday. The market is down 8% heading into Friday. Then, everything goes in reverse. Stocks climb on good earnings reports and positive news; sectors that have performed poorly all week are up. Friday’s gains amount to 6%, leaving the week down only 2%. 

Stock market rallies are sudden upswings that reverse a downtrend, usually over a day or two. Rallies happen in both bull and bear markets. A bull market rally is a rally that continues to lead to growth beyond the duration of the rally itself. Conversely, a bear market rally is part of a long-term downtrend.

Why Does the Market Rally?

The market can rally for many reasons. In bull markets, rallies often come on the heels of good news or expectations. For example, if there are a series of earnings calls in the upcoming week and major companies expect positive earnings, the market might preemptively rise. Likewise, in a bear market, a hint of good news might be exactly what investors need to hear to restore their confidence in the market. 

Rallies can also occur as investors strategically open and close positions. Let’s say you want to invest in Square (NYSE: SQ), but haven’t pulled the trigger because you felt the valuation was too high. Then, a down market took the share price from $80 down to $60 – a much more reasonable valuation in your mind. You decide to invest at this price point and put new money into the market. As millions of other investors do the same, the market rallies!

It’s the same for dollar-cost averaging. If your entry point for Coca-Cola (NYSE: KO) was $55 last year and the share price is at $45 today, you might decide to add to your position as a way to average down. Again, if enough investors take this mindset, the market rallies up.

Why Do They End?

While bull market rallies tend to result in continued growth, a bear market rally is apt to trend down again. This happens for the same reason rallies begin. Instead of buying at a discounted rate, sellers get out of positions that have hemorrhaged value. The small spike from a rally is their opportunity to sell at less of a loss (or even a gain). Unfortunately, as millions of sellers unload their unwanted securities, it pushes the market back down again, ending the rally. 

Will the Market Rally Today? Tomorrow? Next Week?

You can never tell exactly when the market will rally. Usually there’s a catalyst that triggers the rally – either a technical metric, news or the volatility of the market. Rallies are more likely to occur in bear markets than bull markets, and the duration of a rally is usually short-lived. 

The best way to capitalize on a bear market is to keep cash on the sidelines and be smart with your positions. Find value plays and buy into them when the market is depressed, and with any luck, you’ll catch the wave of a stock market rally. Trim your underperforming securities on the upswing – but only if your investment thesis has changed and you no longer see the same value proposition from that company. 

As the current markets rise and fall with relative unpredictability, we’re bound to see a few more rallies over the next few weeks and months. Remember that rallies are short-lived and opportunistic moments – not indicative of long-term trends. Keep a level head and you’ll make smart investment decisions during the next one. 

The post Will the Stock Market Rally Higher This Week? This Quarter? appeared first on Investment U.

High dividend stocks can be a risky bet without a little investigation – but many times, they’re as safe as any other. Let’s take a look at how to evaluate safe high dividend stocks in a market that’s volatile and trending toward depressed.

What Is a High Dividend Stock?

There are about 3,000 different dividend-paying stocks on the market at any given time. The rates of their dividends vary greatly. Right now, the average dividend yield across all dividend-paying companies is about 2.2%. This doesn’t mean everything above a 2.2% yield is high – rather, this number provides a benchmark for the norm. 

High dividend stocks usually yield 6% or more (triple the average). Be wary of dividends of more than 10%, although companies like Magellan Midstream Partners (NYSE: MMP) prove that healthy companies can offer double-digit dividend yields. Anything higher than a 15% yield means you’re getting into risky territory. Generally, REITs are the only type of investment able to sustain their success with such a hefty dividend payout.

How to Evaluate High Dividend Stocks

If you’re going to invest in high dividend stocks, evaluate them thoroughly. The best long-term dividend stocks are those with a track record of dividend growth that have never cut it. 

The obvious place to start looking is among the Dividend Aristocrats – companies that have increased their dividend payouts for 25 consecutive years or more. There are only a handful of these high dividend blue chip stocks and most of them are household names. Think AT&T (NYSE:T), which has a 6.82% yield, or Exxon-Mobile (NYSE: XOM), which offers an 8.51% yield. They’re historically safe investments.

Looking for high dividend stocks you can count on outside of the fabled Dividend Aristocrats? You’ll have to do a bit more research. Use a stock screener to filter for dividend companies and the economic sector you’re interested in. Then, check the  financial fundamentals of the company. If they look good, look at the dividend history and ask yourself the following questions:

• How long have they paid a dividend?
• Has the yield grown and if so, at what rate?
• Based on the company’s cash flow, can it afford to sustain that yield?
• Is there any history of cuts or decreases to the dividend?

Without due diligence, investors risk falling into a dividend trap. They get attracted by high yields that aren’t sustainable and buy into a stock, only to see the dividend slashed shortly after. A good way to avoid this trap is to evaluate a stock as if it didn’t offer the dividend. If it’s a junk investment without the dividend, chances are it’s still a bad play with it.

The Risk of a High Dividend Yield

Typically, a dividend is the sign of a healthy company – especially a growing one. Companies issue dividends as a reward to shareholders and as an incentive to stay invested. But this sword cuts both ways. Once a company starts paying a dividend, it needs to keep paying it. If it chooses to cut it (or needs to cut it to cover expenses), it’s a big red flag about the company’s cash flow and financial health.

The higher the dividend, the larger the financial obligation of the company. A company promising a 6% dividend to its shareholders will pay out more than a company with a 2% dividend. This might not be a problem in a bull market… but we’re no longer in a bull market. Companies might need cash now to pay back debts or fund operations, which means reassessing their dividends. If they can’t afford to pay out a high dividend, some companies will decrease their dividend or even cut it altogether. 

High Dividends Are a Smart Investment

In bear markets and turbulent times, dividend stocks can represent a safer play than growth stocks. High dividends especially are a great way to beat a down market. If you can hold companies like Universal Corp (NYSE: UVV), which has a 6.70% yield, or rely on the 6.17% yield from Bank of Montreal (NYSE: BMO), your portfolio is likely to fare better when the market performs poorly. 

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