INVEST LIKE A DUMBELL

By
Gerri Green

Yes, I’m being facetious. Think of the shape of a dumbbell as an investing tool. Follow me as I give you one way to plan for your financial future.

In case you haven’t noticed, the stock market has been extremely volatile the past 4 years. But out of this volatility has emerged a few interesting trends. Senator Bob Corker, speaking on MSNBC said 88% of the wealth is controlled by the top 10% of the population. On the other end of the spectrum are the growing numbers of people sliding into poverty levels. And fewer and fewer people are classified as middle class. If you analyze these trends and compile them the result is a dumbbell shaped pictograph. A bubble of the rich on one end, the middle class in the middle and another bubble of the poor on the other end.

How can you use this information when it comes to investing your hard earned dollars? Obviously, the wealthy have more discretionary income than they know what to do with. So research stocks like Tiffany’s, Coach, Macy’s, Nordstrom’s, Ralph Lauren and Daimler/Chrysler. All through this downturn, the rich have been patronizing these businesses, thus keeping their stocks from being battered. For example, Ralph Lauren’s Return On Investment is 20.46% year to date.

Now how about all those people who have lost their jobs, their houses, those people who are saddled with mounting debt? Those senior citizens who have to keep on working, if they can. Everyone in this group has to eat, has to live somewhere, and wants to have some form of low cost entertainment. Many companies have taken advantage of this growing market over the past 4 years. Who are some of these companies? First of all, Walmart and McDonald’s should be at the top of your list. Second, Dollar Store, Dollar Tree, Big Lots and Family Dollar. For entertainment I recommend Netflix. They have had financial troubles lately but many analysts feel the company has identified their problems and it is ready for a turn-around. At this point in time I would keep a watch on Groupon as more and people are turning to using coupons in greater numbers. Groupon is also having their share of financial troubles, but if they can remedy their cash flow problems, they will be a good buy. Lastly, I recommend REITS (Real Estate Investment Trusts) that specialize in residential rental properties. This has been a banner year for rental property. People who can no longer afford to buy or maintain their homes are renting apartments in droves. My REIT recommendations are Avalon Bay Communities. They specialize in luxury apartments. Home Properties, Inc. has a 4.55% yield and BRE Properties, Inc. has a 3.19% yield.

Remember, keep an eye on your investments because as the economic environment improves, the yields on these stocks and REITs will no longer give you these same returns. My investing mantra is: “Always have an exit strategy.” What is my exit strategy? I will save that for another article.

Disclosure: I have positions in Walmart and McDonalds.