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Tuesday, December 30, 2008

Before you Choose your Stock,Think Minerals and Technology.

Let's face it. With the market dropping hundreds of points daily right now you not only need ways to protect your money -- but a big way to bounce back..Don't fall for it. If you need the safety and liquidity of a money market, go for a money market account. Beware of any "cash" account that offers significantly higher yields. It's either charging rock-bottom fees or taking on extra risk that leaves your account open to failure.Here's how dividends can make you a fortune.

Let's rewind to 1950, put $1,000 in your hand and let you choose between two solid stocks to invest in for the next five decades. Your option is to invest in Standard Oil of New Jersey (now Exxon) or International Business Machines, better known today as IBM.

Over the next 53 years Standard Oil earned a compound average of 14.42% while IBM garnered just 13.83% -- a difference of just 0.59 percentage points. I'll give you some added info. Oil stocks went from 20% to 5% of the overall market value between 1950 and 2000, while technology stocks soared from 3% to nearly 18%.In spite of the soaring market value of tech stocks and the seemingly paltry difference between earnings -- Standard Oil was not only the better investment you actually come out an astounding $300,000 ahead!

How can this happen? By reinvesting your dividends. You see, in the scenario above, IBM's share price actually grew more than three percentage points a year over Standard Oil's, but because Standard Oil had a higher annual dividend return -- 5.19% vs. 2.18% -- you end up with $300,000 more in cold, hard cash

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