In other words, they execute trades on your behalf. A full-service broker charges more but may offer some valuable insight and advice. A discount broker merely processes your order. If you’re a do-it-yourselfer, this route is the way to go.
✓ Investment advisor: A registered investment advisor is a step above a broker. An advisor can help you build and manage a portfolio to meet your financial goals, recommend stocks and other investments to consider, and meet with you regularly to make adjustments.
Reviewing your portfolio regularly
In the best of all possible worlds, you can build your portfolio and let it set sail without a care in the world. In the real world, you must continue to invest at least some time and effort reviewing your portfolio and making adjustments. Monitoring dividend stocks consists of reevaluating them regularly, using the same criteria you used to select them in the first place: dividend, yield, price-to-earnings ratio, payout ratio, and so on. When you notice the performance of one of the stocks in your portfolio slipping or have reason to believe it will start slipping, you may need to replace it with a better prospect. In addition, you probably want to make adjustments to your portfolio as your goals change. At the very least, you should check your portfolio twice a year to make sure your asset allocations match your strategy.
Staying on top of possible tax code changes
Tax legislation can make investing in dividend stocks more or less attractive. For many years, dividends were taxed as ordinary income – at a rate as high as 39.6 percent. In other words, for every dollar in dividends, investors had to fork over about 40 cents to Uncle Sam. In 1981, when the rate on long-term capital gains was reduced to a maximum of 20 percent, many investors shifted from dividend to growth stocks to give themselves a tax cut.
The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) changed all that. It dropped the tax rate on long-term capital gains and dividends to a maximum of 15 percent, leveling the playing field.
Investment vehicle is a fancy term used to describe an investment product other than basic stocks or bonds. Sometimes it refers to a product, such as a fund, which holds many different stocks or bonds. Other times, it refers to a way to purchase stocks or bonds other than a straightforward purchase. Some examples are
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