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Investing: ‘What ifs’ and ‘maybes’ lose out to long-term planning

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Back in August 2011, I posted Don’t Panic. plan

I took a look at investor psychology in the face of negative sentiment on the markets. In It was the best of times (for dividend investors), I outlined how well dividend-payers did over the last few years. The markets have done very well for the dividend-centric.

So what’s an investor to do, now?

Interesting U.S. market stats

Bob Pisani, of CNBC, points out some interesting information regrading U.S. markets:

Most notable among the trends was a near-record pace of fund flows last week into equity funds.

Stock mutuals saw $19 billion come in, the highest since 2008 and the fourth-biggest in the 12-year history of tracking the data, according to Bank of America Merrill Lynch.

The latest American Association of Individual Investors survey registered a 46.4 percent bullish reading during the same period, well above historical averages, while those expecting the market to be lower in six months fell to 26.9 percent.

Finally, the CBOE Volatility Index, or VIX, a popular measure of market fear, is at a subdued sub-14. A declining VIX usually means rising stock prices.

(Read More: Why VIX’s Recent Plunge May Be Bad for Stocks)

About the only areas showing caution were safe-haven money market funds, which saw assets grow to $2.72 trillion on an influx from institutions, and commodities, which had outflows of $570 million.

The most popular reason among traders for all the optimism is basic relief that the U.S. made it through the “fiscal cliff” scare relatively unscathed.

If that’s the case, the looming debt-ceiling battle and a likely lackluster earnings period could offer perilous counterweights.

So, what’s an investor to do?

The reality is, if you know who you are as an investor, and more importantly, where you want to be, none of this should rattle you. But it should make you think. Trading the media is something some do, and some do it very successfully, but most don’t. And that’s why investors must plan.

When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people.

— Chinese proverb

Warren Buffett plans. Why not you? After all, planning is a form of self-reflection and self-education.

The metric of the past and planning for the future

It may be wise for investors to reassess their investing plans, to decide if their plan is capable of meeting their goals and then have the courage to sail on the course they’ve charted. If past is prologue, then the last couple of years have rewarded the longer-term planners for wading through the ‘what ifs’ and ‘maybes’ and sticking to the fundamentals.

The market hasn’t had a 10 per cent correction in a while in the U.S. While we all watch, we have to wonder at the market’s resilience while remembering why we hold assets that act as ‘insurance’ against revaluations. Any correction should be incorporated into your plan and taken advantage of. But a 2 or 3 per cent drop from an all-time high is hardly a correction. Having some cash on hand when markets have hit recent highs is rarely a bad idea.

The market hasn’t seen a traditional correction in almost three years. Majority sentiment would have seemed against this phenomenon three years ago. We will have a correction at some point. No one can be sure of the degree of the next correction. But does this alter your planning?

Planning empowers you in the face of ‘peril’

It’s best if you incorporate the possibility of a correction into your plan. Because, at some point, the stock markets will correct.

In a world gone into overdrive, where the short-term seems like the long-term to some, authentic long-term planning may be the most valuable commodity.

The markets are like anything else with respect to planning. And the markets are one of the best barometers of human psychology. ‘Perilous counterweights’ need to be part of your planning.

We’ve all heard that in the long-term risk gets reduced by time-in-the-market. In the meantime, knowing your tolerance for risk is crucial. What we can learn from the period from August 2011 to now is that risk happens in so-called ‘safe’ investments, too.

The broad markets have outperformed cash. At some point, markets will correct. Maybe that process has started. Markets correct. This is part of what makes a bull market healthy. And corrections are the reason why we should use proper asset allocation in our portfolios.

One thing is sure. It was better to be in-the-market than it was to be in cash in the time period we looked at above.

No one owns the patent on the future. No one ever knows the exact nature of the next correction. It’ll be interesting to see what the next six months holds …

A plan we can live with is part of what keeps people happy as investors over the long-term. So that we can sleep and dream of sheep.

Want to contact me? Go here.

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It was the best of times for dividend investors

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dividend In my last post, I discussed the complicated world of dividend payments.

(It may help to refer to my last post on dividend-payers and its predecessor before reading this new one.)

Continuing from the previous, when it comes to dividend payments, what we have to remember is:

Since the dividend payments have already been paid and taxed (if held outside a registered account), then your adjusted cost base (ACB) for accounting purposes, and, more importantly, for paying taxes on your investments, already takes the dividend into consideration.

What the charts and ACB don’t tell you

When you look at charts, since they don’t add the dividend amounts on to the listed return, it looks like you made less than you did. You have to take the return on the investment plus the dividend it paid to get a real picture of your investment.

In a great year, like this last year, it doesn’t matter as much, but in years where the stock only appreciates a little, say 1 or 2 per cent, a 4 per cent dividend looks great.

If you bought 100 shares, originally, and reinvested your dividend payment each time it was made, those payments will become part of your ACB. Let’s use a very simple example to review how this works.

Okay, one more time, from the top

If you held 100 shares and received four dividend payments that equalled 1 share each, you’d now hold more shares:

100 + 1 + 1 + 1 +1 = 104 shares

If the share / unit price were $62, your investment would be: 104 shares x $62 = $6,448. The dividends paid in 2013 will be taxable. In the example above, three of the dividend payments will be taxable on your 2013 tax statement while one of them would have been paid the year before since it was paid in 2012. (Again, this is only true if the investment is held in a non-registered account.)

In Paid for faith and paid to wait: Have you thought about this regarding your dividend paying investments?, I discussed what happens with dividend-paying stocks. Key is the way dividends are accounted for (in a non-registered account, e.g., outside of an RRSP or TFSA).

When a dividend is paid (refer back to the example above), it becomes part of your cost when reinvested because you have bought new shares or units. So, in the above example, where you hold 104 shares, all of those shares are you’re ACB.

$6,448 becomes your ACB. Not the $6,200 of your original investment. The $248 of dividend payments are added to your cost.

This works in your favour at tax time:

If held outside of a registered account, the dividend payment is tax preferred and you’ll pay a lower rate of tax than if it were normal income. For example, you’ll pay a higher tax rate on your salary, on GICs and other deposit investments which pay out normal income.

Let’s take a quick look at history … Way back in December 2011, I posted about the favourable climate for dividend-payers – especially U.S. dividend stocks. You’d be a happy investor right now if you’d made investments in quality dividend stocks back then — U.S. or Canadian.

It was the best of times (for dividend investor returns): the irrefutable metric of the past

As always, the future is unwritten, but the past is fact because we can measure it. I began this series of posts a while ago. If we update it to the time of writing, we find:

One of the most conservative of indices, the Dow Jones Industrial Average (DJIA) returned approximately 33 per cent since that time. The broader S&P 500 returned about 47 per cent (although the index does have a lower dividend payout and is somewhat ‘growthier’). Still, it was indeed one of the best of times for dividend-payers.

Royal Bank? About 62 per cent.

Even more impressive? Those returns quoted above don’t include dividend payments. Your return including those payments would’ve been even higher.

ry inx djia

Here’s a chart showing dividend activity for Royal Bank over the same period of time:

ry div

For Canadian investors, it might be interesting to consider that the Canadian dollar dropped in value over this time as well. If you held U.S. investments, the strength in the U.S. dollar added to your return on those investments. Since its recent peak in July 2011, the Canadian dollar has dropped from $1.05 U.S. to about 90 cents U.S. (a drop of approximately 16.7 per cent if you want your 90 cents to grow back to 1.05).

The change in currency added about 6 per cent to the DJIA’s return for Canadian investors and about 8.6 per cent to the S&P 500.

Not bad.

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February 24, 2014 at 12:22 pm

The unifying theory of communications: Sustain us

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unifying theoryWhen less is simply less 

Look at Earth, hanging in space, alone in darkness. After you’re done admiring the beauty of what you see, you can’t help but think, on some level:

Will we be able to sustain such a hurtling jewel?

What if we looked at communications in that context?

Sometimes communications are used in less-than-best practice.

Infographics are great. They convey information quickly. They’re on everybody’s lips.

But infographics can mislead. When infographics are over-tasked with carrying the thrust of a message alone, they fail.

Communications is about integration: a unification of channels. It’s about sustaining brilliance, about sustaining best practice.

Shaping a story

Some creatives can do graphics with great impact and shape a great story. It depends on the strategy behind the message. Infographics are brilliant tools, but success is in how infographics are used.

Words have built empires. There is no escaping our need for information. As we move into any subject, we want deeper information.

We live in a world where our communications race forward into space. Connectivity. Speed. Data blasting forward. It’s all tough to process.

Infographics are everywhere. They provide snapshots of almost anything you can imagine. Done well, they are useful, but …

How deep are some really?

The shallow end: Don’t use audiences when using data

Go out and search. You will doubtless find an infographic on what you’re looking for. Now, look for the source.

Where did the information come from?

Some infographics don’t reference where the research for the data comes from. They tell a story, but if the story’s fiction, consider its value.

Organizations have objectives. If data and infographics are used to mislead, you risk credibility.

In our race to process information, to relay information, to demonstrate concepts to people more easily, more accessibly, without demanding too much of the beleaguered audience or public, we sometimes forget to look into where the research for the data comes from.

Who did the research? If we don’t know … Are we setting up our audience, and so, ourselves for disappointment?

In these days of content curation, we still have to be conscious of where data comes from, and its interpretation. That can be difficult. Speed is of the essence.

Even the research process itself has come under repeated analysis. There have been a number of papers criticizing peer review. Often, the conclusion is, peer review may be imperfect, but it’s still the best thing we’ve got.

Questions, questions: Ask some questions

At the very least, we should ask questions about what research seems to demonstrate. We live in a time of rapid change.

Since Einstein, and beyond, we’ve learned that things are relative. We may like slow cooking, but we still have priorities related to “getting things done”. In a historical context, Einstein did pretty well without all the technology we have at our disposal today.

Take research on phones. As one of the largest manufacturers of phones used to advise us: Think different. A recent study suggested a few things about different phone manufacturers. One idea was that the wealthy / intelligent buy a certain model of phone.

What’s being suggested here? That the phone makes you wealthy or intelligent?

Let’s ask some questions: What types of phones are we talking about? Does one brand sell a greater variety of phones across a broader spectrum within a broader price range? (For example, if wealth determines intelligence, then obviously Warren Buffett and Bill Gates are smarter than Steve Jobs was.)

Which company focuses on the high-end? If a product costs more, it doesn’t take Einstein to figure out that the wealthy might buy that product.

Sheep or deep?

Questions can start to reveal bias or data manipulation. There’s a difference between interpretation and distortion of data. Insights have to be as deep as the data.

None of us are perfect, but If we use data with less-than-best-practice, doesn’t it reflect our opinion of our target audience? Our publics?

Is there an element of danger in such a strategy? How do people feel when there’s a massive pullback in a company’s stock? When IPOs and exchanges are held up as parlayers of bad practice?

Researching media reports after such errors in judgement – more often labelled as “debacles” in the media – provide clear evidence. No management team wants to see its name lit up in a reputational example of bad practice.

Need more evidence? Take a look at questions asked about the U.S. government’s reputation following the Merkel phone-tapping.

The complications involved in communicating, and various organizational debacles, are bound to affect brand and reputation. Do consumers want to know we’re burying poor references to our brands in cyberspace, or, that:

  • We’re addressing issues from stakeholders
  • Opening a channel of dialogue
  • Working hard to improve our organizations

and,

  • Willing to listen to feedback that provides insight?

Daniel Libeskind and David Chipperfield discuss why architecture is collaborative and is a form of communication. Any new building is bound to cause controversy like any great new idea. The discussion is the thing.

Flip the agenda on its head

Some believe that in a world where our communications burn across media at a faster and faster pace, the potential for backlash is vastly accelerated. But isn’t it important to consider that people are also getting more discerning? Aren’t people looking for something to believe in?

Aren’t we building a form of architecture when we reach out to talk to publics and audiences? Aren’t we better off building a foundation that lasts?

Isn’t there opportunity here? And if you’re not involved in the discussion, not seated at the table, digitally, with your publics, then, who is?

If you’re not dealing with stakeholders’ trust issues, then who is?

Won’t integrity stand out?

Peter Lynch and Warren Buffett have been cited for discussing how a company’s focus on how to spend its money (read: not spending outlandish amounts on offices, furniture, etc.) shows a competitive edge in these companies, especially for the shareholder. Does this frugality on the part of management mean that the managements of these companies aren’t intelligent?

Warren Buffett still lives in a modest house. Is he less intelligent for doing this?

Meanwhile, some companies spend a great deal on their employees including training and R&D to help stimulate creativity, engagement and innovation.

Is there more than one way to get to an outcome? In fact, is the construction of outcomes liquid? In constant flux?

A river flows out to the sea, but the way the water gets to the sea is epic. It’s a story of flow, of perpetual change. It’s the story of nature’s architecture.

A discerning audience is able to deconstruct what it sees. New York has taken steps to protect consumers from fake reviews. Is it really sound to imagine that there are no customers that have ever considered that these kinds of bad practices are going on?

Smart competitors will create smart campaigns centred around companies’ branding. Clever advertising is full of examples of a brand’s position being reframed – even if you’re reframing the idea that consumers of that brand are “creative”.

If an infographic misleads, does it take your audience where you want to go ultimately?

Information in infographics absent best practice, can mislead. What can it do to a brand?

Data can be used in a self-perpetuating, self-aggrandizing way to rationalize, what? That a product makes us look smarter? Makes us superior to others because we spend more on it?

Publics are going to change as fast as the media that bombard them. Appealing to customers will be an act of ultimate creativity. Some will do it brilliantly. Others are going to be remembered for compromising their ethics.

Customers, more than ever, want organizations that walk the talk.

Even if an organization mounts a comeback related to a major stumble, followed by negative media coverage, wouldn’t it have been better to follow a sustainable path of best practice in the first place? Wouldn’t it have been better not to suffer the reputational damage – to have more consistent growth?

Isn’t this why business schools hold ethics classes? Why reputation and trust factor large in polls? Why the Warren Buffetts of the world focus on the long-term rather than the short-term?

Are we telling stakeholders that all of this is mere lip service? Do we want to build our communications architecture like a house of cards?

Consider smartphone advertising, public relations and marketing. Just this sector is full of (depending on your opinion and metrics) winners, winners who became losers, organizational wrestling with public perception of privacy issues, the rapid pace of technological change, intense competition, shrinking margins, hype, hubris and successes that are hard to maintain.

Looking for a bullet-proof suit? It exists in best practice. The structure that sustains is the structure than can be built on.

Privacy, hacktivists and change giving birth to change

What of privacy? How much are people willing to give away? With social media, many of us are more visible, willingly, but there’s still constant debate about what amount of social media exposure is healthy. We do that regarding television, and electronics generally, too.

Hacktivists seem to be playing a major role in our public perception of networks, our personal, societal and corporate treatment of information.

Doubtless, security plays in the minds of our publics even as they increasingly give more of their information away. Security issues could impact dramatically on collaboration and information exchange, but innovation depends on such exchange.

Multiple security issues can change perception about services. New perceptions create new realities.

Many in the media and related professions and organizations are trying to appeal to their audiences. We could go on and on asking questions: The pace of change is making us move from what we are, are becoming and will be. It’s a never-ending cycle of change.

Change begets change.

Audiences and publics are undergoing ferocious transformation, and they will undergo all manner of metamorphoses as they absorb their new universes.

The portals are everywhere

In our hands. In our pockets. On our desks.

Portals. Everywhere.

Our world has become worlds. Some of us are spending as much time in virtual worlds as in real ones. Since the advent of screens and all their permutations, we’ve gained new devices offering  portable portals.

Some won’t care. Others will constantly jump on the “new”, but the reality is, sustainability of anything, idea, product, service, depends on growth. But what kind of growth?

Integration and ethics: The song that remains, sustains

Infographics work best in an integrated communications plan. They are a great tool when used wisely. Today, the way you reach out has to have a long-term focus. There may be short-term tactics, but they have to rationalize with a long-term vision. Content is everywhere, so, creators of content need to work together to move mountains.

Eventually, you have to bring people somewhere where they access deep, meaningful research or information. While short pieces are the rage for grabbing views, leading audiences to deep information increases credibility. That, in itself, is the message.

Fluff eventually blows away. Substance is permanent. A well-built foundation upholds a structure.

Unethical manipulation of public trust, of audiences, can only end badly. Look at the U.S. and world stock markets as an example. It’s only this year that retail investors have come back.  If people hold great and enduring mistrust against the stock markets, what will the impact be on innovation, societal development and wealth creation?

The great thing about asking questions is it can help you formulate long-term strategy. In a world where you want to be aware of weaknesses and threats against your organization, your society on a small and large scale, you have to focus on ways to create opportunity that resonate for the long-term. (This should be in our DNA. It’s the double helix of a virtual spiral.)

We’ve all heard pop songs that are one-hit wonders, but there are some songs that sustain us, and in turn, we sustain them.  Quality endures. We make sure of it.

In a world of change, where there are so many one-hit wonders, songs that remain sustain.

Image source: Flickr/Ted Kendell

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N.B.: When it comes to integrated communications, here are three excellent key messages:

canada digital in sync

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Paid for faith and paid to wait: Have you thought about this regarding your dividend-paying investments?

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In Help! I can’t understand if I’ve made money with my dividend-paying investments! I blogged about the difficulty some investors have with dividend payments. What are dividends? How do they function?

Using the dividend data from my previous post …

If I made money, why doesn’t it show?

It does. You have to understand what’s happening when you get paid that dividend.

(You might want to review the previous post above.)

Here’s what it looks like:

dividendEach time your dividend of .63 cents per share is made (.63 cents x 100 shares = $63), your $63 dividend payment is subtracted from the share or unit price of the investment. If the share price was $62 when the dividend was issued, and the dividend was issued at .63 cents then the share or unit price is now:

Share price – dividend issued

New share price:

$62 – .63 cents = $61.37

The new share per unit price is $61.37 ex-dividend (after the dividend payment is made).

Paid for faith = Paid to wait

Some people have trouble understanding this change in the stock or unit price of the investment. The point is, the company has paid you for your faith in investing in it. (In our time of give-it-to-me-right-this-second, faith in the long-term future is a sadly diminished concept.)

The company has also paid (most probably) millions of other shareholders, so the share or unit price must go down by the amount paid out as a dividend. This affects your Adjusted Cost Base (ACB).

The dividend has been paid to you. You’ve already received it. It’s your choice whether you reinvest it into that same investment (over the long-term a good strategy) or take it in the form of cash and buy another investment with it — or spend it. However, spending this cash goes against one of the mantras of investing, which is, reinvesting your capital for the long-term.

What are your goals?

Cost is relative

Because you were paid the dividend amount, and if that amount is held outside of a registered account, e.g., an RRSP, the dividend payment becomes part of your cost:

$62 + a dividend payment of .63 cents as above makes your ACB: 62 + .63 = $62.63.

If you received four dividend payments of .63 cents that would be 4 x .63 = $2.52. Now your ACB would be $62 + $2.52 =  $64.52.

Time in

This is where people get confused. Because the ACB includes the dividend payouts, the payouts that are recent skew your cost base. The new dividend investment hasn’t had time to make much money, and so, it reduces the “look” of the performance of your shares.

Sometimes, especially if it’s a new investment, it looks like you’ve made less than you have.

Remember:

  • That dividend payment may add to your ACB, but it is money you “made”, money you didn’t have before

When you have a newer investment or in a declining market, this effect is amplified. But if you have a quality investment, this is short-term thinking. Resist short-term thought.

Declining market? New investment?

  • Your dividends are being paid out, and you’re buying at cheaper prices if you’re repurchasing stock / getting new units of a fund during a correction (the difficulty is trying to understand when the correction will end)
  • With a new investment, you haven’t had much time to profit, so the dividend payments are going to add to the ACB and make it look like you’ve made less than you have unless you remember you received that dividend payment every month, quarter or year
  • If you project out over three, five or ten years, you get a lot better idea of how those extra shares you reinvested in through your dividends increased over time (assuming an increasing market)
  • Even if you received your dividend as cash, you still got something you didn’t have before

Think like a business owner when it comes to your investments.

Life, business, investing – it all moves in cycles. Have the patience to wait, and the wisdom to filter out hype and noise.

Like the recurring circle of kids on their way back to school in fall, there are certain near-immutable laws and cycles that investors must consider.

Whatever the stock does, the dividend payment’s in your pocket

When investors sit down to look at their statements, even if their accounts are registered, the ACB appears to make it look like they haven’t made money in the short-term. But often, they have.

Remember, if the investment paid out a dividend this year of, say, 4 per cent, you made that 4 per cent. The investment would have to drop 4 per cent (of course, there are management fees to mutual funds and ETFs, and you have to subtract those*) for you to break even.

To sum up:

  • Remember, the share price will be reduced every time a dividend payment was made by the amount of the dividend payment (but you still received that payment in cash or through the purchase of more shares)
  • You now own more shares because of the dividend payments
  • Because you own more shares, if the price of the investment continues to go up, those additional shares will increase in value

It’s important to note that during real dividend payments (rather than our example), there may be more variation because of the numbers involved, but this example will give you an idea of how dividend payments operate and what a stock or unit price looks like ex-dividend (after the dividend has been paid).

In a year like this last, the returns have been excellent (the Dow Jones Industrial Average and S&P 500 are up over:

  • 26 and 30 per cent respectively since the low of June, 2012, and that’s without including dividend payments**).

You can expect to have made money even on some of the new money invested through the new dividend payments into new shares or units.

In my next post in this dividend series, get an example of what this looks like, including a chart.

Want to contact me? Go here.

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* Mutual funds subtract these fees before flowing gains to investors
** At the time of writing, and, in U.S. dollars

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September 19, 2013 at 4:05 pm

Help! I can’t understand if I’ve made any money with my dividend-paying investments!

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dividend

Having difficulty understanding if you’ve made money with a dividend-paying investment?

So many investors look at their statement when it arrives and think:

I haven’t made any money! (Cue gnashing of teeth.)

But is it true?

Let’s say you hold investments that are of a dividend-paying nature. How do they operate?

Well, whether you’re investment is a mutual fund, an ETF or a stock, if it pays dividends, and you don’t really understand how dividends work, you’ll be confused.

Paid to wait

First, it’s important to separate your original investment from your dividend payments (distributions).

Dividend payments might be:

  • Monthly
  • Quarterly

or,

  • Yearly

Most dividends come in quarterly payments.

In this example, I’m going to use Royal Bank, a widely-held Canadian bank stock. It doesn’t matter what dividend-payer you use. It’s also the same with an ETF, a stock or a mutual fund. It’s only the terminology that changes (e.g. shareholder or unitholder).

Royal Bank pays a dividend of .63 cents quarterly. If you hold 100 shares of Royal Bank, you’ll receive a payment of approximately .63 cents four times per year per share.

Why “approximately”? Because depending on the health of the company, it may raise or lower the dividend. For example, Royal Bank raised it’s dividend payments this year. It’s first two dividend payments were .60 cents, and the last two were .63 cents.

To make things easy, let’s assume Royal Bank had made four dividend payments of .63 cents:

4 x .63 = 2.52

In my example, the dividend payment would be $2.52 per year. If the stock were valued at $62.00, that yearly dividend payment would be equal to 4.06 per cent (or one year’s dividend payments). Our example is very close to Royal Bank’s dividend yield (currently 3.94 per cent).

Let’s imagine the Royal Bank illustration above was a mutual fund. If the fund paid a dividend of $2.52, the dividend payment amount would be subtracted from the unit price each quarter.

Each time the dividend was paid (.63 cents), the unit price of the fund would be subtracted by the dividend payment.

Why?

But wait! Wasn’t there a dividend payment?

Because your Adjusted Cost Base (ACB) changes when dividends are paid out.  If the unit price of the fund did nothing, for example, ended the year at the same price it began it, your investment would look like it hadn’t made any money. Superficially, at least.

But it would have, because, when you receive the dividend, you get more shares / units. Your 100 original shares will increase in number.

Didn’t that fund pay $2.52 for the year? And wasn’t that payment supposed to be 4.06 per cent? And so, didn’t you, as an investor, make over 4 per cent on your investment?

Yes.

And every time the dividend was paid out, didn’t you get additional shares in your investment?

Yes.

But the four dividend payments, when made, count as dividend income if they’re held outside of a registered account. The dividend is reinvested into the fund. So, when your payment of .63 cents per share is made, for accounting purposes, it’s considered new money and a new investment.

In a future post, I’ll give you an example of what this looks like, and a key error less-experienced investors make in understanding their investments.

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Written by johnrondina

August 27, 2013 at 5:35 pm

How to achieve transcendence in business: Believe in others

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What motivates people at work?

TransHow to boost the bottom line

In a post-recession environment where employee engagement plays a major role in organizational success — up to a 250 per cent boost to the bottom line — attention to motivation and engagement demonstrate greater loyalty from employees. A focus on innovation sets organizations apart. (See below infographic.)

What does innovation look like with respect to employees?

Feel valued. Feel engaged.

From the employees point of view:

  • Believe in me
  • Believe in others

Recent data from a Dale Carnegie engagement study, which focused in part on “belief in senior leadership”, found:

Organizations that believe people are intelligent, self-motivated individuals that do good work outperform. Collaborative work, like many things, thrives when management prioritizes it. Minimizing employees’ knowledge and efforts is counterintuitive.

Brilliant work comes from treating people like they’re brilliant. But how do you get those diamonds to shine?

Creating a culture where employees are underappreciated, creates an environment where employees:

  • Give less
  • Find another way to feel appreciated
  • Move on

Invest in relationships

Business is about relationships. Relationships need investment just like anything else you want to grow. That’s as important internally as it is externally.

Every company is trying to get the best out of its employees. Because every company faces the costs inherent in employee turnover.

Disengaging from employees is disengaging from operating margin

Towers Watson studied 50 global companies and  found:

  • Companies with low engagement scores had an average operating margin just under 10 per cent
  • High traditional engagement had a higher margin of 14 per cent
  • Companies with what Towers defines as the highest “sustainable engagement” scores had an average one-year operating margin of 27 per cent

The Carnegie study found companies lose $350 billion a year because of employee disengagement. One-third of a trillion dollars lost to employee disengagement.

What do companies want to achieve? Three things they don’t want is less productivity, increasing turnover or gifting employees to competitors.

Engage to innovate, innovate to engage

Employees of companies that outperform when it comes to innovation said in a Hay Group survey (see infographic below):

  • A majority of executives intend to create employee incentives to encourage collaboration across functions (79 per cent)
  • My company evaluates or rewards leaders based on their ability to build excellent relationships with peers (95 per cent)
  • 91 per cent of best-in-class companies regularly reach out to employees for ideas on creating efficiencies

Watching a former employee later excel with a competitor is painful. Long-term strategy regarding employee engagement and innovation should embrace the strengths of employees.

Forgetting to invest in meaningful work for employees comes with its own negatives. How do we know?

Because according to 95 per cent of employees at top companies, leaders work hard to connect people with projects that are personally meaningful to their employees.

Believe in your employees. Transcend the mean and shine. dia

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Written by johnrondina

June 17, 2013 at 1:35 pm

The new portals are online, social, and big enterprise is buying in, again

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Is activity in online marketing slowing down? Not for Salesforce.com.

Salesforce decided to put their foot to the pedal with the $2.5 blahobillion acquisition of ExactTarget Inc. ExactTarget is the latest, but high-profile deals have been happening for awhile.

Big marketing

Big enterprise software companies are jumping into online marketing.

ExactTarget provides email marketing services to clients. Eloqua was swallowed by Oracle last summer. Eloqua’s involved in managing and measuring the effectiveness of organizations’ marketing efforts.

Salesforce, Oracle, Microsoft and IBM are managing change becoming more  social and more collaborative.

This deal does put the other large software vendors in the hunt for marketing assets …   When the proxy on this deal comes out, I think we’ll see they were all in the bidding …

— analyst Pat Walravens of JMP Securities

The competition for assets amongst the big software vendors is alive and well. At a 52 per cent premium, and the largest for Salesforce, will the acquisition pan out as profitable?

Salesforce is paying 5.5 times forecast 2014 revenue, less than the 6.1 times forward revenue Eloqua cost Oracle, according to Walravens.

Change is disruption is change

Online shopping is driving change. Change is leading  marketers to look at data in a big way. Consumers are empowered. The buying process and shopping, affected by the winds of technological change, is forcing change on business.

Data has fuelled providers like Radian6 and Buddy Media. With shoppers going social, companies want to listen. Providing for the needs of consumers is also about providing for the wants. The empowerment of the consumer has reinforced listening as a profound tool for marketing.

Reputation and perception factor into the equation. Consumer perception of reputation and brand have burst into the organizational atmosphere like an asteroid.

Power are the people

Consumers have opinions. Their opinions spread digitally. Listening provides valuable insights gained from focusing on customers.

If 80 per cent of online content is user generated (infographic below), then shrinking away from listening to consumers is the kind of arrogance that leads to crushing falls in stock valuations, mistakes in product development and customer service debacles.

Stories focus on how marketing and IT will work more closely together. Trends are toward collaboration and trust.

The hidden vampire

Silos can form even within marketing departments as analytics and more traditional roles butt heads. The problem is the effect on the bottom line. Silos are vampires and suck the life blood away from the overall health of a business or organization.

Companies need to sustain their organizational lifeblood by moving from a  conquest-based departmental viewpoint to a collaborative one. The players that play for the team rather than for the individual stars become an irresistible force.

How will marketers work with new technology? The technology’s built, but are we letting the operators come? Are we investing in training people? If we aren’t, what does that say about our future efforts to get talent?

While there has been significant criticism of companies like Apple hoarding cash, Salesforce Chief Executive Marc Benioff said:

We can’t just keep making these small acquisitions … That strategy was just taking honestly too long. We needed to do something of consequence and we needed to do something strategic and we needed to do something now.

Now. Sounds like a call-to-action.

Judging by the media attention Salesforce has generated, not every company has been blind to the reputational effects of putting cash to work.

Companies continue to share or invest cash by finding investments that fulfill their vision of new data-driven and social tools. As tools continue to open up portals in space, companies will look to how they can build their businesses in a way that allows them to go through those portals, find new worlds and make their businesses thrive.

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2013-04-03-The_Future_of_Marketing_Infographic_March_20131

Written by johnrondina

June 6, 2013 at 7:00 pm

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