{"id":61988,"date":"2013-06-13T10:01:25","date_gmt":"2013-06-13T00:01:25","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2013\/06\/13\/everything-you-believe-is-wrong\/"},"modified":"2013-06-13T10:01:25","modified_gmt":"2013-06-13T00:01:25","slug":"everything-you-believe-is-wrong","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2013\/06\/13\/everything-you-believe-is-wrong\/","title":{"rendered":"Everything You Believe Is Wrong"},"content":{"rendered":"

\n\tBy Marc Lichtenfeld<\/span>, Investment U Senior Analyst<\/p>\n

\n\tI’m reading a fascinating book called the Emperor of All Maladies by Siddhartha Mukherjee<\/span>. It details the history of cancer and cancer treatments.<\/p>\n

\n\tWhat I find most interesting is not the chemistry or biology in how new medicines were discovered (the book is not heavy on the science, so don’t be scared off). Instead, what makes the book so thought provoking is how sure doctors were of their philosophies toward cancer… and yet were completely wrong.<\/p>\n

\n\tThe absolute trust that patients put in their doctors’ opinions often led to agonizing deaths rather than recovery.<\/p>\n

\n\tIt was not that long ago that doctors believed the best way to treat breast cancer was to perform radical mastectomies that removed not only the entire breast, but often ribs, collarbones and all surrounding tissue.<\/p>\n

\n\tIn fact, most cancers were treated with incredibly invasive surgeries.<\/p>\n

\n\tA few decades later, after tobacco became popular in the United States and Europe and instances of lung cancer started to soar, a few rogue doctors asked whether tobacco smoke could be responsible for the surge in new cancers.<\/p>\n

\n\tThe medical establishment thought it was sheer lunacy. Even the Surgeon General mocked the idea by stating that smoking cigarettes will be shown to have the same correlation to lung cancer as drinking milk.<\/p>\n

\n\tThey were wrong.<\/p>\n

\n\tIn Data We Trust<\/strong><\/p>\n

\n\tIn my own life, I have seen the fallibility of doctors. I was furious at our pediatrician who, after two visits, insisted my son had a simple stomach bug that would go away. Turned out he had appendicitis.<\/p>\n

\n\tMy son’s appendix was so inflamed the surgeon took a photo of it because it was the largest one he’d ever seen.<\/p>\n

\n\tAfter years of writing about healthcare and now after reading Emperor of All Maladies, one thing is clear to me – I don’t trust advice unless it’s backed up by data.<\/p>\n

\n\tAnd it’s not just medical practices that I question. I’ve been skeptical of many investing so-called “truths” for years.<\/p>\n

\n\tFor example, many people believe that Treasurys are the safest investment in the world. I argue they are not all that safe. You will lose money, even when holding them to maturity.<\/p>\n

\n\tIf a 10-year Treasury pays 2.1% and inflation rises above that level, your buying power decreases.<\/p>\n

\n\tHistorically, the average rate of inflation in the United States is 3.4%. If you buy $1,000 worth of 10-year bonds today at 2.16%, you’ll have $1,216 in 10 years.<\/p>\n

\n\tBut if inflation averages 3% over the next 10 years (still lower than the historical average), you’ll need $1,343 to buy $1,000 worth of today’s goods and services. You’ll be $127 short. So while your bond was “safe” because your principal was returned, you lost buying power.<\/p>\n

\n\tGrowth versus value is another argument in which both sides will claim that their strategy is the only way to make money.<\/p>\n

\n\tInvestors in growth stocks warn of value traps and point to successes like Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG). Meanwhile value investors believe you’re simply the greater fool for buying a stock that boasts a “high” P\/E ratio or some other value indicator.<\/p>\n

\n\tThe truth is both strategies work and tend to go in cycles. Sometimes value is in favor. Other times growth is the best choice.<\/p>\n

\n\tNo Debate<\/strong><\/p>\n

\n\tWhen I researched the performance of dividend stocks and discovered the effectiveness of a strategy that focused on dividends, I felt like I’d been slapped in the face.<\/p>\n

\n\tAfter digging deeper, I was compelled to write a book. I wanted to get the message out to a wider audience.<\/p>\n

\n\tI named the book Get Rich with Dividends and now have started a radio show with the same name. The message is this: Investing in Perpetual Dividend Raisers is a time-tested and proven way of making money in the stock market over the long term.<\/p>\n

\n\tFor example, over 10-year periods, the stock market has a 91% winning rate, and the only losing periods were attached to the Great Depression and Great Recession (though not all 10-year periods in those two eras were losers).<\/p>\n

\n\tSince the S&P Dividend Aristocrat Index was created in 1990, it has never had a losing 10-year period… and that includes the Great Recession.<\/p>\n

\n\tIn fact, in the incredible period that ended in 2008, you still would have made 40% on your money. Keep in mind that means buying near the top of the dot-com bubble in 1999, and selling in 2008, near the bottom of the financial collapse.<\/p>\n

\n\tThis isn’t just theory.<\/p>\n

\n\tIf you invested $10,000 in Alliant Energy (NYSE: LNT) 10 years ago, you’d have $31,591 today. And you’d have over $37,000 if you had reinvested the dividend.<\/p>\n

\n\tKimberly-Clark (NYSE: KMB) – the boring maker of tissues, toilet paper and diapers – generated a 131% return for investors over 10 years.<\/p>\n

\n\tAnd oil company Chevron (NYSE: CVX) turned $10,000 of shareholders’ money into $41,385 in just 10 years. Reinvesting the dividends – shareholders wound up with $47,630, a 376% return.<\/p>\n

\n\tFeel free to question this investing “truth” I just laid out for you. Do your own research and see if you come up with the same conclusion.<\/p>\n

\n\tBut as someone who was formally trained as a contrarian and has questioned establishment investing ideas his whole career, I am more than satisfied with the data that supports investing in Perpetual Dividend Raisers over the long term.<\/p>\n

\n\tThe facts prove the strategy.<\/p>\n

\n\tGood investing,<\/p>\n

\n\tMarc<\/p>\n

\n\t
\n\tReprinted with permission of the publisher. The above story can be read on the website www.investmentU.com. The direct link is: <\/em>http:\/\/www.investmentu.com\/2013\/June\/everything-you-believe-is-wrong.html<\/p>\n

\n\tNothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.<\/em><\/p>\n

\n\tViews expressed are not FNArena's (see our disclaimer).<\/p>\n

\n\tFind out why FNArena subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Investing in stocks that steadily lift dividends is a time-tested and proven way of making money in the stock market over the long term.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61988"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=61988"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61988\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=61988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=61988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=61988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}