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Here’s How You Pick The Right Preferred Stock

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This is part of a series of a selection of articles written by Benjamin Graham between 1919 and 1922 for the Magazine of Wall Street.

In this article, Benjamin Graham is combing the market for attractive preferred stocks.

Benjamin Graham: Combing The Market For Attractive Preferred Stocks

Graham started his article by outlining the tax benefits of owning preferred issues, with attractive dividend yields in comparison to bonds.

He notes that at the time, due to the additional tax burden placed on bond income, “an income of $1,000 from dividends was found to be equivalent to over $1,130 in corporation bond interest.”

In this situation, preferred stocks offered a much better investment alternative for the “moderately well-to-do.”

With the case for attractive preferred stocks over bonds laid out, Graham then goes on to outline the key fundamentals any investors should consider in preferred issues before jumping in.

He notes that the “value of any investment depends primarily upon its assets value and earning power,” before going on to note that, unlike bonds, preferred stock holders cannot lay claim to a company’s assets in the event of a default.

Therefore, ” the leading consideration must… be the sufficiency of earnings to meet dividend requirements.”

This article originally appeared on ValueWalk. Follow ValueWalk on TwitterInstagram and Facebook.

Personal Finance

INTERVIEW: Ex-NY Giants Star Shares His Business Philosophy

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Athletes going broke is a popular phenomenon, despite their hefty paycheck. But not all do. In this video, Victor Cruz, former NY Giants star breaks down his philosophy on business and financial planning — and how not to go #broke.

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Personal Finance

Productivity Hacks Infographic: Top 20 Apps That Can Maximize Your Time

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In today’s competitive and demand-driven world, there’s a constant need to stay on top of things. Between incessant emails and back-to-back meetings, phone calls and dozens of things to cross off your checklist, it’s no surprise we’re struggling to reach our productivity’s peak.

Here are 20 apps that helps you do just that.

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Personal Finance

DIY: Your 5-Step Financial Planning Guide

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If you’re starting out to plan your financial future, it can get overwhelming. While many opt for a financial advisor to take care of the entire process, you can always handle your financial planning all by yourself (it’s simple, really) if you’ve got the right tools.

For starters, here’s what you need:

1. Set Goals!

Chalk out your goals—it can be short term, like paying off your card payment bills or long term, to meet expenses like retirement and your kids’ education.

Take a step back and do a reality check. Where do you stand now? How are your cash flows? How soon can you meet your expenses? Create a timeline to achieve these targets (and ensure you meet them!)

2. Do The Math

Calculate your total assets, after deducting the debts—and budget smart. Ditch your debt to stay away from piling on more to your list of financial risks. If you’ve got way too many debts to clear and it’s becoming increasingly difficult to keep track of them, here’s a great tool that comes in handy.

3. Build An Emergency Fund

Uncertainties can be hard, more so if they have a significant financial impact—be it an illness, job loss, or even global downturns.

To evade being stranded, ensure that you’ve built an emergency fund (a good start would be to keep aside six months’ worth of expenses), along with solid insurance coverage to back you up.

4. Hire The Right Agents

Apart from the general power of attorney, also ensure you lay out a directive in case a medical emergency comes up (if you’re incapacitated—we know, it’s not the best of thoughts to ponder over). To ensure you plan right, avail the services of an accountant, a real estate planning authority, and a medical power of attorney.

5. Earn Money On Your Money

The final step is to make sure you earn returns off your money. How’d you go about this? To start with, educate yourself. Read, read and read some more—research about what stocks, bonds, mutual funds, ETFs and other financial instruments do. Understand their risks, costs and how you can work on diversifying your investment.

It’s important to invest in something you understand.

Post this, set up your accounts to meet each of your goals—through monthly contribution plans, 401(k)s, low-cost index funds, IRAs or other savings plans. If all these details get you dizzy (or overwhelmingly hard), you’re better off with a financial planner who can do the research and investment planning for you.

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