So, is this index secretly a terrific opportunity for British investors? And how much could a 40-year-old make by retirement starting from scratch?

Setting expectations

Let’s assume that the Dow Jones will continue to generate a 10.8% average return into the future. A 40-year-old planning to retire at 65 has a solid 25-year time horizon. And investing £500 a month at this rate through a low-cost index fund would grow a nest egg to approximately £761,000.

Considering the average size of a pension pot in Britain at age 65 is around £145,900, that’s a pretty nice sum to retire on. And it’s notably more impressive than the £475,500 the FTSE 100 might produce at an 8% return.

However, sadly, past performance rarely tends to be a good indicator of future results. And with the shifting US economic landscape, some analysts are concerned that the Dow Jones may underperform compared to its historical average moving forward.

Looking at the insights from the analyst teams at Vanguard, BlackRock, and Schwab, most anticipate large-cap US stocks to slow their momentum over the next decade, with returns sitting near mid-single digits. Even if momentum picks up later on, this initial suspected slowdown might be sufficient to lower the average gain closer in line with the FTSE 100 or perhaps even lower.

Staying ahead

Assuming the Dow Jones does indeed underperform versus its historical norm, investors could still have the chance to enjoy double-digit returns. Rather than relying on passive index funds, investing directly in Dow Jones stocks could unlock superior returns over the long run.

One such company that might make a bigger splash is International Business Machines (NYSE:IBM). IBM has a bit of a reputation for being a laggard, relying on its old-school mainframe systems and failing to keep up with rapid innovation. However, in the last few years, management has begun delivering some impressive results with a firm-wide shift into hybrid cloud computing and AI.

Thanks to its relatively new Watsonx platform, the company has created a tool that lets large-scale enterprises build, scale, manage, and govern their own AI applications, all while meeting the rigorous compliance and regulatory standards – something that most off-the-shelf solutions can’t deliver. As such, in the space of just over two years, it’s already generated more than $7.5bn in bookings when combined with the group’s other generative AI solutions.

Combining this with ongoing operational improvements and expansion of its other activities, IBM seems to be in a stronger position despite its reputation.

Of course, that doesn’t guarantee it to be a winner. The firm’s track record is certainly inconsistent, and it does remain susceptible to weaker economic conditions, given that customers may decide to delay non-essential or larger-scale projects.

Nevertheless, for those thinking about investing in Dow Jones stocks, this business may be worth a closer look, in my opinion. But it’s also not the only one on my radar.

The post If a 40-year-old put £500 a month in Dow Jones shares, here’s what they could have by retirement appeared first on The Motley Fool UK.

However, there’s an old-school tech stock that has outperformed all of these shares in 2025 and that’s good ol’ IBM (NYSE: IBM). This year, it’s up more than 30%.

So, what’s going on here? And is the stock worth considering today?

An AI play

There are a number of reasons IBM shares are on fire at the moment.

One is that the company is now being recognised as a key player in the artificial intelligence (AI) space. Back in January, the company beat FY25 Q4 estimates thanks to strong spending on AI-related cloud infrastructure and software. More recently, in April, it told investors that it had built up a $6bn generative AI book of business. This was up $1bn on the previous quarter, fuelled by increasing adoption of its range of AI offerings.

Now, I’m not surprised that IBM is having success on the AI front. I actually highlighted this company as an AI play back in early 2023. At the time, I noted that it had just acquired a number of AI businesses including Databand.ai, Turbonomic, and WDG Automation. I just wish I’d bought the stock back then – it has more than doubled in price since that coverage.

Exposure to quantum computing

IBM shares are also seeing interest due to the company’s exposure to quantum computing. This is an emerging field of technology that harnesses the capabilities of quantum mechanics to solve problems far beyond the ability of regular computers.

In June, the company said that it plans to have a large-scale, practical quantum computer (named ‘Starling’) by 2029. And it laid out detailed steps it will take to get there. This is certainly an exciting development. However, it should be noted that quantum computing is still in its infancy and there are no guarantees that it will become a mainstream technology in the future.

Worth a look today?

Are IBM shares worth considering today near the $290 mark? Potentially. But I think it could be sensible to wait for a bit of a pullback if one is keen to invest in the company.

At present, analysts are forecasting earnings per share of $10.90 this year. So right now, the price-to-earnings (P/E) ratio is about 27.

That’s quite a high multiple relative to the level of growth being generated. While revenue growth is picking up, it’s still only expected to be around 5% this year.

Note that many of the Mag 7 stocks are generating stronger revenue growth. For example, Microsoft is expected to generate top-line growth of about 14% this financial year.

Looking beyond the valuation, another risk is competition from rivals. AI and quantum computing are competitive industries and IBM is up against some powerful players.

Given the risks, I’ll personally be keeping the stock on my watchlist for now. But I do think it has potential.

The post This old-school tech stock is beating all Magnificent 7 shares in 2025, including Nvidia appeared first on The Motley Fool UK.

However, I’ve uncovered three US stocks that could secure investors decent value via dividends in 2024.

AbbVie

AbbVie (NYSE:ABBV) is a pharmaceutical giant in the US and the largest company on this list with a $292bn market cap. In addition to being a good dividend payer, it’s a powerful growth stock, up 110% in the past five years.

Its growth could be affected from that one thing that always threatens pharma firms – patents expiring. The patent for AbbVie’s top-selling product, Humira, expired last year, allowing a flood of biosimilar products into the US. It also faces strong competition from Johnson & Johnson and Procter & Gamble, two larger US pharma giants with higher revenue.

Still, AbbVie is doing well enough to pay a decent 3.8% dividend yield, despite earnings per share (EPS) at half the cost of its dividend per share ($2.72 compared to $6.20). Yet that hasn’t affected payments – they’ve been stable and consistent for the past 10 years, increasing from $0.42 to $1.55.

Verizon

Verizon (NYSE:VZ) is one of the largest telecom companies in the US, providing mobile, broadband and wireless services to retail and business clients. It’s the 47th largest company on the S&P 500, with a market cap of $167.8bn and a $39.91 share price. That’s higher than fellow telecom stalwarts AT&T and Comcast but lower than key competitor T-Mobile, which places 40th with a $191bn market cap. 

Verizon’s share price growth has been slow of late, with only a 3.1% gain in the past year. I believe the company is facing a saturated market and the high cost of implementing new 5G technology. 

Fortunately, it has a great 6.7% dividend yield, albeit with a slightly high payout ratio of 96%. That’s because its EPS and dividend per share are very close, at $2.76 and $2.66, respectively. Still, it’s got a solid track record of making payments, with a $0.67 dividend due on 1 May.

IBM

Arguably the world’s oldest computer company, IBM (NYSE:IBM) is still pushing boundaries despite stiff competition from newcomers in the tech industry. It’s the smallest of the three companies on this list, just below Verizon with a $166.4bn market cap.

Although it has a lasting reputation and strong market presence, IBM’s pivot towards AI and cloud computing has been costly. Debt has been rising while revenue has declined, threatening the firm’s profitability. With Microsoft and Amazon taking the lion’s share of this market, IBM may struggle to remain relevant. 

But for now, it’s a strong dividend payer in the US market. The 3.6% yield isn’t great but still better than the S&P 500 average of 1.35%. It currently pays out $6.64 per share, which is sufficiently covered by an EPS of $8.20. So it’s unlikely that the dividend will be cut any time soon.

The post 3 top US dividend stocks for value investors to consider in 2024 appeared first on The Motley Fool UK.

I already own a number of AI stocks in my portfolio including Nvidia, Alphabet, and Microsoft. However, there’s space for more. With that in mind, here are three stocks I’m looking at right now.

Oracle

One tech stock I’ve had on my watchlist for quite a while now is Oracle (NYSE: ORCL). It hasn’t received the same level of attention as other tech giants in recent years and I think it’s worth a closer look at present.

Oracle offers a range of AI services including pre-trained models that can be custom trained with an organisation’s own data, machine learning (ML) services that help data scientists build ML models, and AI apps for businesses. These services are used by some big names including credit data powerhouse Experian and the UK’s NHS.

Looking beyond the company’s AI exposure, what excites me here is the growth the company is generating in cloud computing. For the quarter ended 30 November, cloud revenues were up 43% year on year.

One issue to be aware of with Oracle is that it doesn’t have the strongest balance sheet around. At 30 November, it had borrowings of around $82bn. However, this is probably reflected in the valuation. Currently, the stock’s price-to-earnings (P/E) ratio is just 18.

All things considered, I think the stock looks quite interesting at the moment.

UnitedHealth

Another stock I’m looking at currently is American health insurance giant UnitedHealth Group (NYSE: UNH). I’ve noticed that this is a top holding in a number of AI investment funds.

UnitedHealth prides itself on being a leader in its industry when it comes to AI. In recent years, it has developed a centralised data platform that uses artificial intelligence to improve patient outcomes by predicting conditions and decreasing the cost of care. It also uses AI in its virtual assistant platform to collect and classify patient data and improve customer service levels.

UnitedHealth is another stock that looks to offer a bit of value right now. Currently, the forward-looking P/E ratio here is 19. That seems very reasonable to me given the company’s solid growth track record.

One risk, however, is competition. UnitedHealth operates in a very competitive industry.

IBM

Finally, I’m also looking at IBM (NYSE: IBM). It also has a lot of experience in artificial intelligence.

IBM has bought at least five AI companies since mid-2020 including Databand.ai, Turbonomic, and WDG Automation. As a result, it now has expertise in areas such as AI-powered automation, AI-based data analysis, and AI-based risk and compliance management.

One company it has already helped in this regard is Dutch bank ABN Amro. Here, it introduced a conversational AI assistant powered by IBM Watson technology so the bank can understand customer needs in real time.

Now, IBM hasn’t been a great investment over the last decade. That’s because the company has experienced growth challenges.

Analysts do expect the company’s top line to expand going forward, however. So, I’ll be keeping a close eye on the stock. The forward-looking P/E ratio here is just 14, which suggests there could be some value on offer.

The post Artificial intelligence is the hottest investment theme of 2023. Here are 3 AI stocks I’m looking at appeared first on The Motley Fool UK.

Knowledge is power

One area in which Warren Buffett excels is sticking to what he knows. If he does not understand a business or its operations he avoids it in favour of those companies and sectors he does have knowledge about. For example, while he has an investment in IBM, he has never been particularly focused on new technology. Rather, he has chosen to focus on consumer goods companies, banks and other specific areas where he feels he can add value.

This could be an important takeaway for investors. It is extremely difficult to be an expert on a wide variety of sectors and/or companies. However, that is not necessary according to Buffett’s philosophy. Knowing a lot about a few companies could be all it takes to generate a seven-figure portfolio. Therefore, investors may be better served by focusing on specific industries in future.

Few decisions

Warren Buffett famously said that all investors should only make 20 investments in their careers. His rationale for such a small number is that it would cause someone to think long and hard before buying any stock. It is all too easy to dabble in a variety of companies without undertaking sufficient research, according to Buffett. Therefore, if an investor knew they had limited opportunities to place their cash, they may take more care over where they choose to invest their hard-earned money.

While 20 investments may be on the low side, the point is that making a million does not require investors to make a large number of correct decisions. They need to only get the big decisions right when it comes to where their portfolios are invested. And by limiting buying and selling activity, it may cause investors to only choose what they feel are their best ideas. These are likely to be the ones that generate the highest returns in the long run.

New opportunities

One area in which Warren Buffett may surprise other investors is his attitude towards cash. For someone who has been so successful in buying shares in recent decades, he remains very positive on the use of cash within a portfolio. This is not only so that an investor can take advantage of potential buying opportunities, but also because it can provide peace of mind in difficult periods for the stock market. This may help us to remain rational during bear markets, when the best opportunities may present themselves.

Clearly, finding new opportunities is never easy. But by focusing on a small number of industries and making sure stocks in a portfolio are the best ideas at that time, investors could generate higher returns – just as Warren Buffett has done during his career.

The post Making a million could be easier if you invest like Warren Buffett appeared first on The Motley Fool UK.

It trips off the tongue nicely, just like other catchy phrases such as ‘peak oil’, ‘commodity super-cycle’, or perhaps, ‘tech wreck’.

Getting serious

I used to think the Internet of Things was no more than a theory or device conceived to stoke up interest in tech firms to encourage investors to buy shares.

However, as news flow gathered pace over recent months I’ve changed my mind. Now I think the so-called Internet-of-Things (IoT) opportunity is a real potential driver of future profit growth for firms such as London-listed ARM Holdings (LSE: ARM) and IBM (NYSE: IBM.US).

Yesterday’s news from IBM gives me further reason to think seriously about the potential of the Internet of Things. A headline-grabbing announcement trumpets ‘IBM and ARM Collaborate to Accelerate Delivery of Internet of Things‘.

To me, that’s potentially big news. I’ve watched as ARM made a string of IoT-related acquisitions over recent months and then launched its IoT Subsystem, to ensure future generation IoT devices are designed with ARM technology inside.

Now, big players like IBM have noticed ARM’s progress and want to collaborate with the firm.

Another level

ARM’s IP has been in existing IoT devices for some time and it therefore seemed likely that the firm’s new ‘off-the-peg’ IoT solution would gain wide acceptance amongst manufacturers and businesses. That’s what is happening now, as IBM demonstrates.

IBM reckons it’s expanding its IoT platform — called IBM IoT Foundation — through integration with ARM by providing out-of-the-box connectivity with ARM mbed-enabled devices to analytics services. This fusion, IBM says, will allow huge quantities of data from devices such as industrial appliances, weather sensors and wearable monitoring devices to be gathered, analysed and acted upon.

ARM says that its collaboration with IBM will deliver the first unified chip-to-cloud, enterprise-class IoT platform, and that will empower companies of any size, big, small and in-between, with a productivity tool that can transform how they operate and the services they can offer.

Products powered by ARM mbed-enabled chips will be able to automatically register with the IBM IoT Foundation, and connect with IBM analytics services. That situation will unify the two firms’ offerings at the point where information gathered from sensors in connected devices is delivered to the cloud for analysis.  

It all boils down to an efficient structure to get the IOT vision working, so that washing machines can tell their owners when they are faulty, owners can open their garage doors two blocks before they arrive home, smart TVs can be operated remotely and security systems can talk directly with home and business owners, and whatever other applications we can think of.

What next?

The important thing for ARM investors like me is that the more ARM’s IOT solution gets into the supply chain the more revenue and profit the firm is likely to earn from the IOT trend.

Already, electronics manufacturers are adopting IBM’s cloud services to connect everything, and now ARM Holdings has secured its niche in the middle of that trade. Once again, ARM comes up smelling of roses and demonstrates how it keeps itself embedded in the latest trends and technologies of our time that keep driving the firm’s profit growth. 

The post ARM Holdings plc Partners With International Business Machines Corp. To Drive The Internet Of Things! appeared first on The Motley Fool UK.

In an attempt to modernise its offering, IBM is branching out and part of this expansion plan was a partnership with Monitise (LSE: MONI). However, after the release of IBM’s dismal third quarter earnings report, this partnership could be about to develop into something more. 

Keeping up

It has long been known that IBM is struggling to keep up with an industry-wide shift in technology. So, to try and keep up with wider industry development and return to growth, IBM is pushing into new markets, such as mobile payments and cloud computing.

This is where Monitise comes in. Indeed, around 90% of the world’s banks already use technology designed and supplied by IBM. The company is a trusted partner for banks and has been for decades but the group lacks experience in mobile payments. As part of IBM’s drive to increase its mobile presence, it makes sense to have Monitise on board. 

But it’s unlikely that IBM is contemplating an outright acquisition straight away. With 20% of Monitise’s employees set to transfer to IBM, it seems as if IBM wants to get to know the company and its business model first, before making an offer. 

Shareholder pressure 

IBM may be forced into action sooner than expected after the company’s third-quarter results disappointed investors and management discarded the company’s five-year growth plan. As a result, shareholders are clamouring for change at the company, which could force its hand into making an offer for Monitise. 

Moreover, if IBM were to make a move for the mobile payments processor, it’s likely that the company would have to offer a hefty premium for Monitise’s shares. With heavyweights like Visa and billionaire, Leon Cooperman owning a large chunk of Monitise, it’s unlikely that they will let IBM buy up Monitise at a low-ball price. 

Leon Cooperman is a vocal supporter of Monitise’s business model and firmly believes that the company is the next big thing in the mobile payment technology space. Cooperman recently revealed that he had not sold a single share in the company during the recent sell-off. The billionaire actually tried to boost his stake recently by offering to buy Visa’s stake. Visa refused to sell.

Still, IBM can afford to offer a significant premium for Monitise’s shares. IBM chucked out more than $13bn in free cash flow last year, making Monitise’s market cap of around $1bn look insignificant.

The bottom line

So all in all, IBM could be considering a bid for Monitise as the company tries to reinvent itself and drive growth. The two companies are already working together and IBM has plenty of cash floating around to fund a bid. 

The post Is IBM Weighing Up A Bid For Monitise Plc? appeared first on The Motley Fool UK.

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

Shares in mobile banking and payments service provider Monitise (LSE: MONI) lifted by more than 14% in early trade this morning, following the announcement of an alliance with US giant IBM.

The collaboration will see teams from Monitise’s UK development and integration business (Professional Services, comprising around 20% of its employee base) transferred into IBM, while the American technology and consulting corporation will deliver services back to Monitise.

Today’s agreement also means that Monitise’s ability to manage larger projects worldwide has been increased substantially, allowing the company‘s technology to be enabled, hosted and sold as an IBM cloud-delivered solution globally in the business-to-business space.

IBM’s resources and initiatives will become available to Monitise to pursue ‘Mobile Money’ opportunities, currently limited to financial institutions but the alliance hints at targeting retailers, mobile network operators and similar markets in the future.

The news strengthens Monitise’s target of 200 million users of Mobile Money products by 2018, each generating an average revenue of £2.50, as well as reaching a profitable status in the 2016 financial year, after having to lower its full-year guidance early last month after shifting to a subscription-based revenue model.

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