Dividends are an important part of a portfolio. Periodically, a percentage of the total value of a portfolio will be paid out as dividends. These payments are not only beneficial for the investors, but they are also tax deductible. The most common form of dividend is an annual dividend, which is paid out by the company each year. Other types of dividends include profit sharing, common stocks, treasury stock, and restricted stock dividends.
Another type of investment strategy that is often used is option trading. Option trading involves the buying and selling of a security or portfolio of securities without actually paying cash upfront. Instead, traders purchase an option or put option on an asset, allowing them to buy or sell a specific amount of the underlying asset at a pre-determined price in the future. These options give investors an opportunity to buy stocks that are lower in price than the amount they paid in option trading capital.
Some investors prefer to build their portfolio with bonds, as their investments are more secure than stocks in the stock market. Bond investing is done by issuing debt certificates. The debt is secured by the promise to pay the principal, and in the case of debt certificates, this usually means the issuance of mortgage-backed securities. Debt can be managed by diversifying the holdings of bonds and other assets into low risk, high yield investments. This type of diversification will ensure that a balanced portfolio of assets is in place even during times of financial stress.