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For the past 30 years, my grandfather has been living the retirement dream, thanks to a few strategic stock plays.
Here's the interesting part: My grandfather never knew a thing about stocks. He didn't know how to value them, or when to buy and sell.
But he did know the power of income.
You see, as a child of the Great Depression he saw stocks differently than we do today.
His generation didn't buy stocks for the possible capital appreciation.
Instead, they bought stocks based on the dividend yield - and the consistency of that dividend.
They had lived through uncertain times, so they only trusted investments that offered fairly certain income.
That's why now, as we find ourselves back in uncertain markets, you want to make sure your portfolio includes interest-bearing and dividend-yielding assets.
Passive dividend income arrives no matter what's happening in Greece, or how long U.S. Federal Reserve Chairman Ben Bernanke decides to hold rates at record lows. It comes as long as the company remains strong.
Which means my grandfather's strategy is worth copying.
How to Live Comfortably During Uncomfortable Times
My grandfather started with certificate of deposits (CDs) in the late 1970s and early 1980s. These were the high-interest days, so these CDs paid 16% to18% interest. He got that nice, passive "certain" income for as long as that party lasted.
Then once interest rates dropped and all his CDs matured, he looked for the next round of certain income. He had just retired from the telecom industry and believed AT&T Inc. (NYSE: T) was a good long-term play.
Best of all, AT&T paid a 6% dividend yield. So he wisely invested his CD income into AT&T stock and then sat back and waited.
His dividend checks kept arriving through the dot- com and tech bust of the late 1990s and early 2000s. His checks have kept coming through the real estate bust and credit crunch through 2008 and 2009.
He never had to worry if stock prices were bobbing up and down.
In fact, in 2001 and 2002, he saw his AT&T stock gyrate all over the place. It dropped from more than $50 a share to $18 a share before it was all said and done. Over the years, he also watched his favorite stock double in price from $20 to $40.
Did he care? Not in the least. You see, he earned all his money back on AT&T stock many years ago just by patiently collecting dividend checks.
My grandfather has lived comfortably off this "certain" passive income for more than three decades.
Now, you can do the same.
Two Ways to Add Income To Your Portfolio
As a currency investor, there are several ways you can add income to your overall portfolio.
First of all, look for high-yielding foreign dividend stocks.
As a currency investor, you can invest in foreign stocks that offer higher dividends than their U.S. counterparts. Plus, you get the currency exposure, assuming the local currency rises against the dollar while you're holding shares of that foreign company.
Second, you can invest in foreign currency CDs. They don't pay the 16% to 18% that my grandfather received back in the "party days" for income - but the right currency CD can hand you a yield of more than 4%. Not bad.
These CDs also give you exposure outside the U.S. dollar.
Bottom line: There are several ways to earn income with foreign currencies. But whichever strategy you decide, I highly recommend you start thinking of investing in these terms.
[Bio Note: With the outlook for the dollar and the euro growing increasingly bleak, many readers have asked us about currency trading. So we decided to respond by bringing on a new currency expert - Sean Hyman. Hyman is a veteran currency trader with more than 20 years of experience. He also currently serves as Investment Director for World Currency Watch, editor of Currency Capitalist, and editor of Currency Cross Trader. Watch for his columns on currency trading in Money Morning.]
News and Related Story Links:
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- Money Morning:
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- Money Morning:
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