The POWER of a Proven Stock Investment Plan

When you invest in the stock market for ever-increasing cash dividend income, verses trying to make a buck in the stock market, your mindset will change. There will no longer be a fear of losing money in the stock market.

With the right type of investment plan and investment choices all worries of losing money in the stock market will disappear.

The mind set that will emerge when you adopt a proven income producing investment plan in the stock market will create an air of worry-free concern about the up and down turmoil of a volatile stock market. Whether your investment portfolio is rising or falling won’t make a difference. Your income producing investment plan will prove to continually increase your cash dividend income from all your stock market investments, on a weekly, monthly and yearly basis.

The use of a proven investment plan will allay all fears about investing in the stock market. Why? Because the proven investment plan is based on two very simple and fundamental investment strategies – investing in only those companies that have a historical record of raising their dividend every year, and having the dividends from those companies rolled back into more shares each quarter, until retirement.

By investing in only those companies that raise their dividend every year you will become confident and assured of each stock market investment. And by having the dividends of each company rolled back into more shares each quarter you automatically dollar-cost average into the company’s stock throughout the years.

What happens when you invest with this mind set – investing for ever-increasing cash dividend income through companies that raise their dividend every year, rather than trying to make a buck in the stock market?

You begin investing in only those companies that have a proven record of rewarding their shareholders every year. Every dividend rolled back into the company’s stock every quarter increases the amount of shares owned, and therefore, every dividend from the company will be higher than the previous dividend.

After 10 or 15 years, you’ll find that the cash dividends begin to add up!

The cash dividend income will increase every quarter, no matter what the stock price of the company is at any given time in the market place. As a matter of fact, once you have owned the stock for 10 or 15 years, you’ll be torn as to whether you want the stock to go up or to go down, since a lower stock price will allow your dividend reinvestment to purchase more shares, thereby accelerating your cash dividend income.

The rising dividend every year will also help off-set the risk of inflation. This will be especially helpful when you retire and start having the dividends sent home,rather than having the dividends rolled over into more shares.

During the retirement years, when the dividend is being sent home to help ends-meet, the price of the stock doesn’t matter. Your income increases every year anyway, because every company owned has a program of raising their dividend every year.

After retirement, if your account is worth $250,000 one year and due to a severe drop in the stock market, the net value of your securities drops to $200,000, the net worth of the securities at $200,000 would still generate a higher cash dividend income. The net worth of your holdings means little, if the income produced from your holdings are increasing every year, no matter what the net worth.

That is the partial reasoning behind investing in only those companies that raise their dividend every year. The other reason is to eliminate risk in investing in the stock market. A company that has been raising their dividend every year MUST be doing something right or the money wouldn’t be there to pay their shareholders ever-increasing cash dividends.

The lower the stock price goes, after your initial investment, the higher the dividend yield of the stock. This is extremely powerful and beneficial for you when you are still having the dividends reinvested. Reinvesting those dividends at a lower stock price accelerates your cash dividend income.

And if you are in retirement and no longer investing in the stock, the lower stock price does not affect your dividend income at all. The cash dividend income will still increase every year due to the company’s program of raising their dividend every year.

As time goes on using this type of investment plan/approach you will discover that by reinvesting those ever-increasing cash dividends, coupled with stock appreciation is a very powerful wealth creating formula!

All you will need to know to start a commission-free proven investment strategy (with a plan and a goal) can be found in my book The Stockopoly Plan - Investing for Retirement.

For more excerpts from the book ‘The Stockopoly Plan’ visit: http://www.thestockopolyplan.com

You have permission to this article either electronically or inprint as long as the author bylines are included, with a live link, and the article is not changed in any way (typos, excluded). Please provide a courtesy e-mail to: mailto:charles@thestockopolyplan.com telling where the article was published. (Word count 788)

Charles M. O'Melia is an individual investor with almost 40 years of experience and passion for the stock market. Author of The Stockopoly Plan, published by American Book Publishing.

You buy or trade stocks, bonds and mutual funds. Perhaps you invest in a 401(k) plan. You can us “Options” as part of your short or long term investment objectives.

Did you know you may be using a form of options as a part of your everyday life?

Do you pay a premium every quarter for house, auto, and medical insurance?

You have purchased insurance as a safeguard against a fire in your home, a crash in your car, or large medical bills. Some investors use options on stocks or cash indexes to protect and insure the value of their portfolios.

A major advantage of options is their versatility. They can be as conservative or as speculative as your investing strategy dictates. Options enable you to tailor your position to your own set of circumstances. Consider the following benefits of options:

• You can protect stock holdings from a decline in market price.
• You can increase income against current stock holdings.
• You can prepare to buy stock at a lower price.
• You can position yourself for a big market move even when you don’t know which way prices will move.
• You can benefit from a stock price rise without incurring the cost of buying the stock outright.

What Is An Option?

An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date (listed options are all for 100 shares of the particular underlying asset). An option is a security just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties. Listed options have been available since 1973, when the Chicago Board Options Exchange, still the busiest options exchange in the world, first opened.

Options vs. Stocks

In order for you to better understand the benefits of trading options, you must first understand some of the similarities and differences between options and stocks.

Similarities:

Listed Options are securities, just like stocks.

Options trade like stocks, with buyers making bids and seller making offers.

Options are actively traded in a listed market, just like stocks. They can be bought and sold just like any other security.

Differences:

Options are derivatives, unlike stocks (i.e. options derive their value from something else: the underlying security).

Options have expiration dates, while stocks do not.

There is not a fixed number of options, as there are with stock shares available.

Stock owners have a share of the company, with voting and dividend rights. Options covey no such rights.

There are only two kinds of options: Call Options and Put Options.

Call Option

A Call Option is an option to buy a stock at a specific price on or before a certain date. In this way, Call Options are like security deposits. If for example you wanted to rent a certain property, and left a security deposit for it, the money would be used to insure that you could, in fact, rent that property at the price agreed upon when you returned. If you never returned, you would give up your security deposit, but you would have no other liability. Call Options usually increase in value as the value of the underlying instrument increases.

When you buy a Call Option, the price you pay for, called the option premium, secures your right to buy that certain stock at a specific price, called the strike price. If you decide not to use the option to buy the stock, and you are not obligated to, your only cost is the option premium.

Put Option

Put Options are options to sell a stock at a specific price on or before a certain date. In this way Put Options are like insurance policies.

If you buy a new car, and then buy auto insurance on the car, you pay a premium and are, hence, protected if the asset is damaged in an accident. If this happens, you can use your insurance policy to regain the insured value of the car. In this way, the Put Option gains in value as the value of the underlying instrument decreases. If all goes well and the insurance is not needed, the insurance company keeps your premium in return for taking on the risk.

With a Put Option, you can “insure” a stock by fixing a selling price. If something happens which causes the stock price to fall, and thus “damages” your asset, you can exercise your option and sell it at its “insured” price level.

If the price of your stock goes up and there is no “damage,” then you do not need to use the insurance, and once again, your only cost is the premium. This is the primary function of listed option, to allow investors ways to manage risk.

Hopefully this brief insight into Options gave your enough information for you to be able to decide whether or not Options are something you would like to learn more about.

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