Irrespective of what the Wall Street Gurus predict or what the economic indicators like Dow Jones Average say, a simple and foolproof way of knowing that a company is doing well is to keep a track of how much dividend income does it pay to its share holders every year. If the dividend rates have been rising steadily every year, you know you have a safe bet. To benefit from the future prospects of such companies, it is a good idea to rollback the returns into the company. Which means, instead of adding the dividends to your savings, you can invest them in the shares of the same company. That way, you can ensure that the dividends you receive are always higher than what you got last, with a larger number of shares getting added to your investment portfolio every time.

With this kind of an assured investment plan in place, investors with a gambling streak begin to think beyond making a quick gain. While those who were afraid to take risks get wiser.

Let us find out why companies that give ever-increasing cash dividend income are a good choice for investment:

Your Share Holding Goes Up And So does Your Dividend Income.

Your income begins to escalate with your owning more shares every year and the dividend income rising correspondingly.

Your Dividend Income Increases Even If Stock Prices don抰.

You are no more at the mercy of the market. Irrespective of what your shares are worth, you keep earning additional cash dividends. In fact, even if the market price dips, you are still at an advantage, as that allows you to reinvest to purchase more shares.

You are not hit by Inflation.

With the dividend income rising every year, you offset the effects of a rising inflation. This particularly provides relief to people who have retired and depend on a regular cash inflow to help them meet their expenses. At this stage one need not rollback the investment into further shares, instead, the cash dividend can be used as a kind of regular pension money.

Start Young

The ingenuity behind this investment strategy is that it protects you from the fluctuations that generally occur in the market. A lower stock market rate only means you buy more to increase your dividends more. It is advisable to start this strategy early in life while you are still working, so that your wealth builds up gradually and constantly over the years. And you are assured of a regular income, as you grow older.

Remember, the success of this proven investment plan depends significantly on the track record of the company you invest in. It should be one that declares a higher dividend at the end of each financial period. A simple way to find that out would be to calculate the dividend yield. You can do that by dividing the annual dividend per share by the price per share. Of course, no investment can be totally free of risks, neither is this one. Keep an eye on the dividend yield, and if that dips, it抯 a signal for you to opt out of the investment.

James Marriott is a finance writer with more than 15 years of experience in writing financial content, including those related to credit cards, mortgages, stocks, investments, and funds. He has been with RNCOS, a premier financial writing services company, for 2 years as head of financial writing. He is also a regular financial columnist with renowned business journals. For your comments on the article and further financial assistance, please contact our staff writer at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Stop losses are market orders designed to allow you to limit your losses.

When you place a stop loss you are instructing the spread betting company or stock broker to cut your position when it reaches a certain loss level (or in some cases, profit level - more later).

Therefore, a stop loss will automatically close your trade if the market reaches a certain point.

For example: You have bought ? a point of the German DAX at 4200. The most you are willing to risk is ?50 on this trade so you place your stop at 4050. If the market trades at 4050 you are taken out immediately and you lose ?50.

Normal Stop Losses

These are free but with this type of stop you can sometimes lose more than you specified when you placed the order.

Sometimes your stop loss order may not be filled at the level you wanted i.e. you may be taken out at 4046 instead of 4050.

The bookmaker will attempt to get you out of the trade at the price you specify but when the market is moving very quickly it may not be possible.

This is called "slippage" and tends to happen in a fast moving market.

You can also lose more than you wished if the market you are trading "gaps".

For example: You have opened a long trade on the Dow Jones for ? a point at 10000. As you were willing to risk ?00, you placed a stop at 9800. Over the next couple of days, the Dow moves down slightly to 9900 and at the end of trading on the third day it is sat at 9890.

The next day some very disappointing economic figures are released and the Dow opens well down at 9700. As this is past your stop loss, the bookmaker closes your bet at market price.

Your trade is closed at 9690, 110 points below your stop loss so your loss is now ?10 rather than the ?00 you were willing to lose.

Guaranteed Stop Losses

You can ensure you are closed out at the exact price you specify by using a Controlled Risk or Guaranteed stop loss order

These types of stops are designed as a type of insurance to guarantee that your stop loss order is filled at the exact price you specify.

Even if the market you are trading gaps 1000 points beyond your stop, if you are using a guaranteed stop loss you will still only lose what you have already decided is an acceptable loss.

You pay a little extra for a guaranteed stop. In the Dow example above, a guaranteed stop would cost roughly 4 times the stake (4 x ? = ?). Usually the premium is taken from your account balance when setting the stop loss level or is added to the spread.

Although they do reduce your account balance, guaranteed stops can save you a great deal of money and are certainly recommended if you have a small capital base.

Some Pointers About Stop Losses

- Never move your stop if you think it may be hit. If you move the stop further down to try and avoid being taken out you will simply lose more money.

- You don't have to close your entire position with a stop loss order. If you wish, you can set up 2 or more stops. For a ? per point trade you could set a stop 100 points away which reduces you exposure by 50p a point. Another could be placed 200 points away to take you completely out of the trade.

- It is better to let the stop take you out of the market and preserve the rest of your capital than to try and stay in the trade by moving the stop.

- You can lock in profits by using a stop loss. If you were to enter a long trade on the Dow at 10000 with a stop at 9900 and the Dow moves up to 10200 you could then move your stop to 10100 to lock in 100 points profit.

- Never trade without a stop loss, even if it is just a normal stop. To stay in the trading game you must preserve your capital and huge unexpected losses will certainly not help. See the Money Management section for more details.

Ben Catt is an active financial trader and runs a free website containing hints, tips and information about tax-free financial spread trading and betting in the UK. The site can be found at http://www.FinancialSpreadTrading.co.uk. He also runs a business opportunity information site - http://www.BizOppsUK.com