The Fiscal Cliff: Calculate Your Losses Now!

In today’s Daily Profit I’m including what should be one of the most useful tools to combat the ongoing fiscal cliff debacle …

A fiscal cliff calculator.

Once you know how much you stand to lose, you can begin to search for alternative ways to bring in income. To that end, I’ve provided a few simple and effective ways that, if used properly, will make up help to recuperate lost income.

But before getting to the nuts and bolts, I have a few questions to ask.

Are you a dividend investor? If so, are you concerned about the upcoming fiscal cliff?

If you said yes, you should know that the same sentiment is shared by numerous other hard-working investors. The financial media has made investors acutely aware of the concerns facing dividends. Of course, the blame leans toward whatever political bias you prefer. And while I am concerned with the progress (or lack thereof) surrounding a resolution to the cliff, I can’t be fooled into thinking that the current posturing from both sides will cease just minutes before the deadline.

So the question is: As a self-directed investor, do I just sit idly by waiting and hoping for the best? Keep in mind that many of you could potentially lose 10% to 15% of your dividend income in less than a month.

Are you going to accept the loss of income and chalk it up to another way the government is taking hard-earned money out of your wallet? If so, you should probably just stop reading now because what I’m about to discuss is not for you. But if you’re not willing to accept what may be inevitable …

I will never allow political agendas to affect how I invest. Yes, they control the regulations and tax rates. And I have no problem following them, as it’s out of my control. And so is the fiscal cliff.

Several months ago I looked at historical dividend tax rates. Lower taxes did not have an overwhelming effect on the performance of dividend-paying stocks. In fact, returns on dividend-paying stocks were actually higher during periods of higher taxes on dividend income.

So what’s all the fuss about?

Simply stated, the information age allows the financial media to hammer us over the head with mostly useless news when it comes to investing. Little, if any, of it is actionable. And that is what we all want as self-directed investors … at least I do.

So, as self-directed investors, where do we turn?

First, stay the course. History tells us that the dividend tax rate has no bearing on the long-term gains of dividend stocks. So don’t make any rash decisions.

Second, calculate what the fiscal cliff will cost you by using the following fiscal cliff calculator. The calculator is rather simplistic, but it should give you a ballpark figure as to what you could potentially lose should the politicians fail to reach a resolution.

Third, learn strategies that will make up for your lost income. I have discussed in previous Daily Profits two statistically based methods that should help you to get started.

  1. The Only Way Dividend Investors Can Safely Avoid the Fiscal Cliff
  2. A Safe (and Permanent) Income Alternative to Dividend Stocks

When the dividend tax rate changes – and it eventually will – income from dividends will be no more disadvantaged than income from bonds. And dividends offer more opportunity for growth. Just ignore the constant stream of noise being thrown at you on a daily basis. Ultimately, we all know dividends will remain a sound investment over the long term … no matter how Congress finally decides to act.

But it’s up to you to combat your lost income. I have provided a few strategies that will hopefully kick start your journey into alternative investment strategies.

If you would like to learn more about alternative investment strategies – more specifically, options selling strategies – please join my free weekly newsletter, The Strike Price. Every week I teach self-directed investors how to invest using statistically based options strategies with a high probability of success.

Stay the course,

Andy Crowder

Editor and Chief Options Strategist

Options Advantage and The Strike Price

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