With the changes in the local financial institution landscape, local residents must now think about these changes (and their impact) on their portfolios. For many who inherited securities from parents and grandparents, this may be the first time in their lives that they have the wonderful opportunity to learn about international investments. Some may feel that income-producing alternatives are the only ones they can consider. Some think they should simply pick another stock with a dividend. While, others thinking of their family longevity history and financial goals, are realising that they will need to appropriately diversify their portfolio with assets that will appreciate as well as with those that produce income. Placing a large amount of money into one individual stock position may leave you open to concentration risk and market volatility. Are you prepared to watch day-to-day, week-to-week fluctuations, as the 52-week moving average chart of General Electric enclosed demonstrates? Just suppose you have to liquidate the very week it hits a 52-week low? Do you even know if GE is a good investment? See next question.Be prepared to: 1) do a good deal of research to understand what you are buying; 2) Be prepared to learn as much as you can about the principles of asset allocation and diversification in order to risk-protect your portfolio against precipitous downslides. A diversified stock portfolio generally will contain a minimum of 30 stocks, but probably more like 80-100 different stock positions. For instance, I automatically know today that when an investors says that ?they took a real hit? during the bear market of 2000-2003, their portfolio was non-diversified and concentrated in only large cap growth stocks. Yes, if your purchase is a US stock (or an ADR) the tax on the dividend will be deducted at taxing source; that is you will receive a net dividend payment. The same type of situation will be true for UK stocks, and other tax regime countries. Let?s say the dividend tax is 30 percent. You multiply the gross dividend declared per share by 70 percent (e.g. $1.50 X .70 = $1.05 net dividend).This is actually a simple equation, the higher the cost of the stock, the lower the real yield.

If your shares pay a 1.00 dividend a year, and the stock costs $20 per share, your dividend yield is 5 percent; but, if you buy an expensive stock, e.g. paying $40 dollars per share, your yield is only 2.5 percent.

A dear price for a dividend payment, and just supposing that when you intend to sell the stock is sitting at a low? You will loss far more in market value than you will gain in chasing a high priced high dividend paying stock.This question seems to trip everyone up, probably because the trend in the industry is that most investment advisors provide full disclosure on the mutual funds they are selling. Generally, the first thing you will see on a mutual fund fact sheet is the performance. This rate of return can be stated two ways:

Gross return ? This is the performance calculated without deducting any expenses for the fund company managing the fund, the custody charges, the marketing and so on. It is very misleading, particularly, when you have to manually calculate the net return.

Or while trying to compare it to a mutual fund that reports on a net of expense basis. Note that the cost of purchasing the mutual fund ? the sales commission paid up front is not included in this calculation. To know the real cost of buying a mutual fund, you need only type that into Google and use a website that will impute it for you.

NAV (Net Asset Value) ? most mutual funds, but not all, report performance on a net asset value basis. Sometimes it will state, ?performance on an NAV to NAV basis?This means that all costs the manage the fund have been deducted. The performance number, the total return is the actual appreciation (depreciation) of the fund. The last year has been a good year for performance for most of the excellent mutual funds and the rate of return year to year has been very positive. My friends, the media and so on are all saying they are not a good investment, but I need income.What happens if the dollar bounces back from its low against other currencies?Those not comfortable with investment markets often state that ?their money will go into real estate.?

It is always your choice, but as with any investment, have all of the costs of acquisition, leasing, maintenance, and financing been considered? Do you know what your bottom line return on equity has to be? (See more on the subject for next week?s article)

Upon your income need.

Upon your liquidity requirements for your current and future goals.

Upon your age (and longevity).

Upon the other types of investments that you own, so that these choices will help diversify your portfolio further.

Upon your knowledge, interest, and time in managing your investments.

Upon your comfort with market volatility (personal risk tolerance).

No financial decision, including an investment decision, for any individual should be made in isolation, without considering the individual?s current complete personal financial profile. Consulting with a qualified licensed investment or financial planning professional for an objective opinion is always an appropriate choice.

@EDITRULE:

The Royal Gazette