You wake up without an alarm clock around the same hour as most mornings, you head downstairs and start a brew of your favorite cup of coffee. As you savor the rich, smooth flavor of the hot coffee, you check in on your investment portfolio. You smile inwardly as you notice three of your stock holdings have paid you, a small-stakes part owner of the company, cash that result from the company’s profits. This is almost a daily occurrence, as your portfolio is well diversified with the stocks of quite a few companies that grow their reliable dividend payouts regularly. You look over your newsfeed and notice that there are no materially negative news stories from your holdings. You use some of your accumulated cash position to pull the trigger on a stock you’ve had your eye on for some time, and its share price is finally within buy range due to market fluctuation.
This daydream can be a reality for you or any true investor, thanks to the incredible power of dividend growth investing. It is quite simple in concept, but not easy in execution. A few best practices that help me:
- Have a written investment plan – define qualities – in writing – that you look for in a stock before deciding to buy
- Define under what conditions you will sell a stock. This is important: you are an owner in a company. This is a real business – with employees, customers, sales, profits, expenses – not just as numbers on a computer screen. Pro tip: tune out the noise and ebbs and flows of stock prices. As Warren Buffet is famous for saying, “Our ideal holding period is forever.”
- It should go without saying that your personal finances should be in good shape before you even begin to invest, meaning your income exceeds your expenses, you have a good cash position (“emergency fund”) in place that can carry you through an extended period, should the need arise, and you do not have any debt, except may a mortgage.
Now that part of the day is done, and you still have a bright and wonderful to look forward to, and not have to worry about trading your limited ans precious time to an employer in exchange for a paycheck. Go enjoy your day.