Next chapter: investing theory

IFO’s investing theory is dividends, dividends, dividends. No complex mathematics. Just find lists of companies that have paid high dividends regularly for 20 or more years. There are too many links to list, just Google: “long-time dividend paying stocks.” Pick names you like, know and trust. Buy.

This advice presupposes that you have NO debt except, maybe your mortgage, and your monthly credit card bill, which you pay off monthly and religiously. Also, that you have a cash stash – 10 percent to 20 percent of your net worth.

Don’t count the mortgage until it is paid off. So what is your net worth? The amount of money you have in the bank and any producing assets you own free and clear – computer, camera, car, tools – anything you own and use to make money with.

Be honest with yourself. Cool, but expensive living room furniture doesn’t count unless you entertain as part of building your business — and even then, that’s a shaky proposition, since resale value is about 10% to 30% of purchase price, if you are lucky.

Let’s say you’ve gotten up to $10,000 in goods and cash. The cash portion should be $1,000 to $2,000. Now let’s say you come into some extra money. A bonus. A big birthday check from your maiden aunt. A big commission on a big sale. Whatever.

When that money comes in, call your broker. Buy as much of that one stock as you feel comfortable with. If you are using a discount broker, you’re done – you’ve paid the broker something like $7 to $12 to make that trade. If you only want to spend about $1000 per company (see IFO’s Model Portfolio Index weekly reports), then when you have invested $1,000 in one company’s stock, save until you get another $1,000 and buy another stock.

Sit back and wait for the dividends to roll in. They’ll be about $35 or so per $1000 per company per year. Once you get up over about 15 or 20 stocks, you can start putting more money into the stocks you already have.

Check your Quicken software to see how much each stock has returned and decide whether you want to buy the winners or the losers. There are arguments for both strategies. IFO prefers going with winners, but that’s just her trip. (Anyone under 35 or unfamiliar with Firesign Theatre, check here.)

And now our weekly diversion:

From today’s headlines! “Foreclosure relief efforts take effect; Business optimism dims”

Coincidence? Probably, since these top two headlines came from our local Business Journal, but it seems so intentional.

Advertisements

About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
This entry was posted in Basics, Individual companies and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s