Our readers' biggest stock market fear...

The 12 dangerous supplements you MUST avoid...

In today's Digest Premium, we continue Doc Eifrig's discussion of supplements... and a dozen you need to avoid...

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Our readers' biggest stock market fear... How different assets react to inflation... The income-producing vehicles you need to know... How to generate thousands of dollars in your portfolio... Trading for income...

 We recently asked Digest readers a simple question...

What's your biggest concern for your finances and the stock market going into 2014?

We received a wide range of responses. Most of the fears readers have are valid: The government's inability to pay its debt (or even agree on simple issues like raising the debt ceiling), possible confiscation of retirement assets, the future of the U.S. dollar as the world's reserve currency, etc...

 But by far, most were worried about inflation and how it will undermine the income they receive from their investments.

Inflation has been called "the thief that robs us all." Among its biggest victims is the income investor.

The yield you generate from your investments must outpace inflation. Otherwise, you're losing money. There's not much you can do about the rate of inflation, but the assets you choose can protect you from it.

 Different assets react differently to inflation.

Generally, stocks rise with inflation. If inflation causes prices to rise, a company can raise its prices. All of its "on the books" assets – like machinery and real estate – will rise in price, too. Since many companies hold real assets, stocks offer some protection from inflation.

This is true especially with stocks (or other investments) tied to commodities. Inflation pushes up the value of "real assets" – things like gold, oil, natural gas, and agricultural commodities. If you own stock in companies that control these kinds of real assets, the value of your investment should rise as well. For example, an oil company, like Chevron, profits when oil prices go up... and the price of its stock rises accordingly.

 Bonds react differently to inflation. Since they pay out a fixed dollar amount – say, $100 a year – that $100 won't be worth as much in the future if inflation is high. You'll be stuck earning the same $100 every year from your original investment... but that $100 buys less and less, thanks to inflation. The same goes for government bonds, corporate bonds, preferred stocks, and fixed annuities – all so-called "fixed-income" investments.

 But you need to focus on more asset classes than just "stocks and bonds" if you want to achieve the highest possible income in your portfolio. And there are certain strategies you can follow to maximize your income.

Dr. David "Doc" Eifrig has developed a set of strategies he calls "trading for income" that anyone can use to increase his portfolio's profits by thousands (even tens of thousands) of dollars... But in today's Growth Stock Wire, Doc describes the simple timing indicator that can produce those results.

 Doc has six different and easily tradable assets he likes to recommend. For the next few days in the Digest, we'll walk you through the basics of each of these different income vehicles, how they work, what to look for, and what each asset can add to your portfolio...

Today, we'll share Doc's explanation of dividend stocks and corporate bonds – probably the two most familiar income vehicles...

Dividend Stocks

The Asset: As a stockholder, you hold a partial ownership in a business. The assets of that business can be all sorts of things: property, equipment, or other hard assets. It can own patents on technology or valuable brand names (like Coca-Cola).

Regardless, all dividend stocks share one big similarity – their ability to produce earnings. Pay attention to the history and safety of these companies' dividend payments (and the potential for these payments to grow)... and increasing wealth follows from there.

The Price: The share price for a dividend stock is easy to find on Yahoo Finance.

When it comes to dividend stocks, the most important numbers to consider are the market cap – the value of a company's outstanding shares – and valuation metrics, like the price-to-earnings ratio, price-to-book ratio, and price-to-cash-flow ratio. We prefer companies with larger market caps and valuation metrics that are lower than the market averages.

The Income: Stocks provide income in the form of a dividend. Remember, you own a share of the business. If the business makes enough money, it can choose to reward shareholders with a dividend payment. Of course, many stocks don't pay a dividend. Instead, they keep the earnings and reinvest it in the business.

When searching for income in dividend stocks, you must consider how safe the dividend payment is. Big blue-chip stocks rarely reduce their dividends. But when they do, it's seen as a sign of weakness... and the share price often tumbles.

To avoid getting caught with a dividend-cutter, we look at things like the "dividend payout" ratio – the percentage of earnings that a stock pays out in dividends. As a rule of thumb, we like to see companies in this category maintain a payout ratio of less than 50%. That offers enough breathing room for the company to survive an economic downturn or a slump in sales without needing to reduce its dividend payment.

Like any income investment, the yield on a stock is calculated as the yearly income (dividend in this case) divided by the current share price. So a stock that pays $1 in annual dividends and trades for $25 offers a 4% yield.

Corporate Bonds

The Asset: When a corporation needs money, it often issues bonds to borrow that money. As individuals, we usually think of debt as a liability. But to the owner of the debt, that debt is an asset. So for bonds, the asset is an interest-bearing loan to a corporation from us.

The basic bond arrangement is simple. The company borrows a specific amount (called the face value) and pays interest on that every year (called the coupon rate). At the bond's end date (called its maturity), it pays back the face value.

Let's say a company can borrow $1,000 for five years at a 10% coupon rate. Each year, it will pay $100 in interest. At the end of the fifth year, it will pay back the $1,000.

While stocks can be affected by sales, earnings, growth, and new products... only one thing matters for bonds – whether the company can pay you back.

That's why solvency – the company's ability to meet its expenses – is the most important measure for bond investors. If things go wrong and the company declares it can't pay its loans, bondholders become owners of any assets the company has... and receive the proceeds from any bankruptcy to recoup losses. This is a huge advantage over people who just own shares of the company's stock, since they are guaranteed (and usually end up with) nothing when the company goes belly-up.

But corporate bonds don't default often. Since World War II, just 3% of bonds have defaulted. If you follow the news on bonds, it might seem like they are complex. That's because a bond's price fluctuates over the course of its life.

The Price: Since a company can have dozens of different bonds, finding specifics is a little more complex than for stocks. Anyone can look up bond prices from FINRA.

Since bonds trade after they are issued, investors can change their attitude about bonds over time. So a company may issue a bond at $1,000. However, a year later, investors may be more fearful of a bankruptcy. They won't pay as much to own the bond. Now the bond may only be priced at $900.

This is where the important concept of yield-to-maturity comes in. Take a five-year bond with a face value of $1,000 and a 10% coupon rate. (Remember, the company pays that same coupon rate no matter where the price of the bond goes.) As long as the price of the bond stays at $1,000, bond investors will earn a 10% yield.

But if the price drops to $900, investors will still receive the same $100 interest payments and the same $1,000 at the end... but they can put in a smaller investment upfront. The new investor's "yield to maturity" is now around 13%.

Yield-to-maturity considers the interest payments and final price and relates them to the current price of the bond. You won't need to calculate yield-to-maturity on your own. It's provided by any site that tracks bond data. But you can see the formulas here.

The Income: Once you own a bond, you simply collect the regular coupon payments (which are usually paid twice a year). Barring bankruptcy, the income a bond will generate is determined ahead of time, as long as you hold the bond to maturity.

 In tomorrow's Digest, we'll explain two more assets you can buy for income. But right now, I'd like to share some more details of Doc's "trading for income" strategy...

Most folks simply buy an income-producing asset and hold it. There's nothing wrong with that approach... Buying and holding an excellent company that pays healthy and increasing dividends is one of the surest ways to get rich in the market. We stand by that...

However, by following a few, simple rules, you can increase the income you receive on certain assets by several times.

As Doc has shown his Retirement Millionaire and Retirement Trader subscribers time and time again, he likes to look at the facts. And by looking at the facts, he has uncovered a number of indicators that show you the exact moment when you should purchase certain income-producing securities.

Doc's researchers conducted numerous tests against historical data going back more than a decade... and ran computer modeling on countless historical trades to refine these indicators. He calls his findings "timing triggers." And these triggers allow you to extract the maximum amount of income from your assets.

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The 12 dangerous supplements you MUST avoid...

Editor's note: In yesterday's Digest Premium, Retirement Millionaire editor Dr. David "Doc" Eifrig described the danger of the empty claims made by many dietary supplement marketers... In today's installment, he shows a dozen ingredients to avoid in your supplements.

In addition to the FDA's MedWatch, the consumer magazine Consumer Reports is another good resource to help you avoid harmful supplements.

Consumer Reports has a list of 12 dangerous supplements and ingredients it calls "The Dirty Dozen." It looked at the effectiveness of the ingredients and their availability to consumers.

The Dirty Dozen are:

1) Aconite is used in Aconitum supplements to ease inflammation and fevers. While aconite can help, the difference between a safe amount of aconite and a toxic amount is small. Aconite poisoning leads to muscular paralysis, vomiting, and death. So leave the use of aconite in medicines to companies that are obligated to monitor how much aconite is in each pill.

2) Weight-loss supplements use bitter orange to control appetite. Nature's Way sells a bitter orange supplement that claims to "provide thermogenic action" – another way to say "burn fat." Bitter orange contains a chemical called synephrine – a powerful drug that can lead to heart attack or stroke.

3) Chapparal supplements claim to reduce inflammation, pain, and skin irritation, and fight cancer. But no evidence supports these claims. The truth is that chaparral can cause permanent, even deadly, liver damage.

4) Colloidal silver is silver particles suspended in liquid. You'll find bottles of colloidal silver with claims that it boosts your immune system. Some bottles also say the liquid is nontoxic. However, consuming too much colloidal silver will not only turn your skin blue, it can lead to kidney damage and seizures.

5) People typically use coltsfoot to treat respiratory issues like bronchitis and asthma. But studies show chemicals in coltsfoot cause liver damage or cancer.

6) In 2001, the FDA recommended the removal of comfrey supplements from the market. Comfrey is safe for external use. Most companies sell comfrey in the form of ointment or oil. Some sell the whole herb or powders to use in teas. Ingestion of comfrey can damage the liver or lungs.

7) Country mallow is used as a weight loss supplement. It contains ephedrine – an ingredient known to cause high blood pressure, heart attacks, or numerous other health difficulties. Country mallow is banned in the U.S. because it contains ephedrine, but it's still in use across the globe.

8) Some "health professionals" say germanium prevents cancer (although you're unlikely to see this exact claim on a germanium product). The American Cancer Society refutes this. Some of the side effects of germanium include kidney damage, nerve damage, and heart problems.

9) Greater celandine is sold in bottles with handy eyedroppers to put drops of it in water for easy consumption. Greater celandine supposedly treats gastrointestinal issues or lung problems like asthma. Despite these "benefits," greater celandine can also damage the liver or cause a skin rash.

10) Supplement manufacturers of kava claim it reduces anxiety. According to the National Institutes of Health (NIH) – a government medical research center – it does. But both the NIH and the FDA say the risk of liver damage or death is too great to make it a worthwhile treatment.

11) Lobelia is another supplement that supports the health of your respiratory and nervous systems. Despite those possible benefits, lobelia can dangerously increase your heart rate, lower blood pressure, cause a coma, or even lead to death.

12) Yohimbe is marketed as a "natural" alternative to Viagra. The danger with yohimbe (and most supplements) is the difficulty in monitoring the dosage. The potency depends on what part of the yohimbe tree is used. Too much yohimbe dangerously increases heart rate and blood pressure.

Often, marketers of natural products don't measure and report on the dosages accurately. We've written before about how the potency and purity of something thought to be perfectly safe – like vitamin D – varied. Some supplements had 80% more of the compound than the label indicated. So you could easily be taking twice the amount the marketing company recommends... or taking next to nothing.

Even worse, all of these "natural herbs" have potentially lethal interactions with other over-the-counter or prescription medications. The FDA has issued warnings on chaparral, colloidal silver, comfrey, germanium, kava, and yohimbe. Currently, none of them are banned.

Despite the mounting evidence showing the dangers of supplements, the FDA has only banned two: ephedra and DMAA.

The FDA banned the use of ephedra in supplements in 2004. Before the ban, ephedra was used as a weight loss supplement. Supplements containing ephedra also claimed to boost energy and athletic performance. More than 30 deaths were linked to ephedra use.

In July 2013, the FDA banned a second ingredient – 1,3-dimethylamylamine, methylhexanamine, or germanium extract (DMAA). Many bodybuilding supplements included DMAA, until five deaths were linked to it.

More bans don't occur because it's difficult to monitor supplements and their dubious efficacy. The FDA has to take many steps to prove an ingredient or supplement is dangerous through scientific and legal routes. The FDA claims it doesn't have the resources to undertake these steps. This is largely the reason the FDA just issues warnings.

So before you decide to start taking a supplement, do your research. First, use the FDA's MedWatch site to check for current alerts on ingredients. Then, check your supplement against Consumer Reports' "Dirty Dozen" list. WebMD is a trusted resource. The website gives an overview of supplements and potential side effects.

– Dr. David Eifrig Jr., MD, MBA

Editor's note: Doc regularly shares health tips in his Retirement Millionaire newsletter. In the November issue, he recommended his top way to profit off the long-term boom in health care. If you'd like to access Doc's health tips and his latest recommendation, click here to learn more about a four-month, risk-free trial subscription to Retirement Millionaire.

The 12 dangerous supplements you MUST avoid...

In today's Digest Premium, we continue Doc Eifrig's discussion of supplements... and a dozen you need to avoid...

To continue reading, scroll down or click here.

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