This Special Investment Offers Growth AND Reliable Income
“What’s better… a stock with slow reliable growth, or a risky stock with huge potential?”
If you’re trying to grow your retirement fund in the stock market, you may have run into this dilemma before.
Stocks that offer steady growth usually aren’t going to offer huge gains overnight.
And stocks that do have huge growth potential rarely offer regular payments in the form of dividends.
So, which do you choose?
You’ll get a different answer depending on who you ask.
But here’s an answer you may not have heard before…
A stock that offers both.
Today, I’m showing you a special investment that combines the safety of guaranteed income and the potential for high-growth.
Let’s take a look…
There are plenty of stocks that pay good dividends. We’ve talked about many of them here in The Daily Edge
But companies with reliable dividends usually aren’t the kind of stocks that can double or triple in value in a short time.
That’s why I want to share an investment that doesn’t make you choose between the two!
A little-known class of investments — called convertible preferred stocks — gives investors a way to lock in reliable income, while still having a shot at big investment gains.
This type of investment got its start from regular preferred stocks, which companies have historically issued to help raise capital needed for managing and growing their business.
Preferred stocks are typically sold for $25 per share, and they have a quarterly yield attached to them. So just like dividend stocks, these shares pay investors income along the way.
But unlike dividends, which can be raised or lowered depending on how the company is doing, preferred stocks have a set payment that is agreed upon for the life of that stock. And at a certain point in time, most companies have the option to buy these preferred stocks back from investors (typically for $25 per share).
Since preferred stocks have a set payment and a set value that companies pay to “retire” these shares, preferred stocks are very much like bonds. They’re reliable investments for generating income, but they’re not too exciting.
That is, until you add in the “convertible” part!
As the name implies, investors have an option to convert these shares into something else.
Specifically, these shares can be converted into regular stock shares of the company. Each convertible preferred stock has a specific ratio that tells you how many shares of stock each convertible preferred share represents.
Here’s why convertible preferred shares can be so exciting for retirees…
When you own a convertible preferred stock, you’ll get paid reliable income from that position. As long as the company continues to operate profitably, your shares should continue to generate income for you.
And if the company does well and the stock shares start to trade higher, your convertible preferred stock will also rise. That’s because other investors know that it’s worth more, since the convertible preferred stock can be exchanged for high-priced shares of the company’s normal stock.
These securities truly do give you the “best of both worlds” and are perfect for environments like today with a good bit of uncertainty.
A good place to get started with convertible preferred shares is to check out some funds that invest specifically in this category. Here are a handful that I’ve looked at recently:
- iShares Preferred and Income Securities (PFF)
- Invesco Preferred ETF (PGX)
- First Trust Preferred Securities & Income ETF (FPE)
You could consider investing in these funds directly. But I would prefer (no pun intended) for you to look up the top holdings in the portfolios of each of these funds. You can find these holdings online by searching the name of the fund.
From there, you can pick the convertible preferred securities that these funds have vetted and choose the ones that make the most sense for your individual portfolio.
Enjoy the income and watch for your gains to accumulate!
Now Let’s Get to the “Must Knows” for Monday, October 21st
New High Alert — Regardless of the negativity you’ll likely hear from the mainstream media, remember that the S&P 500 is just 1% below its all-time high. And this week, a huge number of companies are scheduled to report earnings, which could boost the index to levels never before seen. So stay invested!
Earnings on Deck — All eyes will be on earnings reports this week. On Monday, TD Ameritrade, Halliburton, SAP, Logitech and Del Taco report earnings.
On Tuesday, McDonald’s, Snap Inc., Chipotle, P&G, Lockheed Martin, UPS, United Technologies, Discover Financial Services, Texas Instruments, JetBlue and Biogen report earnings.
On Wednesday, Boeing, Microsoft, Tesla, Cleveland Cliffs, PayPal, Ford, Waste Management, Caterpillar, Xilinx, The Blackstone Group, EBay and Las Vegas Sands Corp. report earnings.
On Thursday, Amazon, Twitter, Visa, Intel, Nokia, 3M, Gilead, Raytheon, Alaska Air Group, Northrop Grumman, Southwest, Comcast, Capital One, Valero and Dow report earnings.
And wrapping up the week on Friday, Verizon, ABInBev, Goodyear Tire, VF Corporation, Charter Communications and Phillips 66 report earnings.
Here’s What to Watch — With so many earnings reports on deck this week, there are bound to be countless insights into not only these individual companies, but their industries and the economy as a whole. Here’s what I’ll be watching:
Boeing’s reputation is now at stake after reports of warnings over 737 MAX safety surfaced from both pilots and regulators before the two fatal crashes took place. Let’s pay close attention to what management has to say about these allegations, and what they’ll be changing going forward.
Many airlines report this week. Let’s tune in to see if consumers are still taking vacations and if this undervalued sector is worth buying.
And finally, many companies that are leading the 5G revolution report earnings this week. Let’s watch closely for any updated timelines on release dates, and for any big news surrounding the technology.
The State of the Consumer — As we hinted at above, the consumer is the most important factor in keeping today’s economy churning. That’s because consumers like us account for nearly 70% of economic activity in this country.
So while you’ll likely hear bad news surrounding recent business spending statistics, know that consumer spending statistics are way more important. This week, we’ll get a closer look at the consumer as reports on mortgage applications, new and existing home sales, and consumer sentiment are released.
That’s all for me today. Enjoy your week!
Here’s to growing and protecting your wealth!