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It is very important to use different perspectives in critical thinking because it allows exposure to different opinions. Everyone sees everything from a different angle, but they have to understand the subject completely and be able to back it up with evidence. Having different perspectives is a good thing because it can help a person understand or get new information they never got before.
According to the text, “critical thinking is an approach to reading, thinking, and learning that involves asking questions, examining our assumptions and weighing the validity of arguments (Dyer, 2011). We tried to develop an answer to an issue or problem using critical thinking strategies. Clearly identifying the problem is important part of this process. Also, it is essential to analyze the relevancy of the data and their quality when supporting the claims. It means the quality of the evidence should be assured using critical thinking strategies. How to underlying the assumptions and values is also an important part of the critical thinking process. Accurately establishing the causality among the events when making the causal inferences is necessary to find effective solutions. Presenting the ideas and how they are expressed to persuade the audience is also important perspectives in the critical thinking process. Convincing the readers and listeners after finding the solutions to problems or making proposals needs good critical thinking abilities.
When it comes to investing money, individuals need to know the aspects of the pros and cons of each investment. All investments have some level of risk and some level of reward. In the end, it is up to the individuals to determine if the investment it right of them.
Certificate of deposit, commonly referred to as a CD, is a low-risk saving investment that often has a low-rate of return. Gertrude and Gus are aware of this, being their CDs’ interest rate is near zero. Earning near zero is not the only negative to a CD. If Gertrude and Gus wish to remove their money from a CD they are stuck with only 2 options; wait until the maturity date or withdrawal early and pay a penalty (Simon, 2018). By removing their money from a CD early, Gertrude and Gus will forfeit almost all of the pros that came with investing in the CD in the first place. However, this risk may still be a better option than investing in a company.
When investing in a large company there are several advantages and disadvantages compared to a CD. The company Gertrude and Gus are looking at investing in has been in business for 30 years with a dividend yield at 5.4% and they have maintained a payout ratio of 80%. In addition to the dividend yield and payout ratio, Gertrude and Gus can sell their shares, without penalty, whenever they want. Based off of these numbers and the ability to pull their money at-will, it seems like a no-brainer to switch their investments. However, these results are not typical and with dividends, they are based of the company’s ability to generate profit. If the company has a subpar year or, worse, a poor year, not only will Gertrude and Gus not get paid dividends, they will lose part of their investment as share prices fall. The worst-case scenario would be investing in a company like Enron. Enron’s upper management and financial department intentionally mislead investors and in the end cost thousands of people their life’s savings.
Before investing in this company, Gertrude and Gus need to, or should have someone, research the company’s financial statements in combination with current business activity to determine the company’s accurate valuation (Horton, 2019). This would not completely eliminate risk, but it will help reduce it.
Getrude and Gus have found a decent stock. Dividend investments work a little differently than normal stock investments. The price of the stock is not as important as the payout reliability and the rate changes over time.
-Dividends are fairly safe investments if the company is reliable in payouts.
-dividends don’t suffer the same way other stocks do
-this is a good payout rate
-this is a good payout ratio
-don’t put all your money into one stock
-This is still stock investment and inherently more risky than investing in bonds.