Since investing is a passion of mine I’ve decided to start sharing my thoughts on how I invest, and my strategy. I’ve gone as far as to make my stock holdings publicly available on this site on the My Holdings page. I will update the list when I buy a new stock.
Please always do your own research.
This is a term I came up with when I couldn’t find a system that matched my investing strategy. There is growth investing which is close to my strategy but it doesn’t focus on low price stocks. First let's define what I deem as dividend value investing.
The stock has a dividend yield (the amount it pays out relative to it’s share price) of 3% or higher. I do however try not to go above 8% as anything over that percentage tends to be risky.
The stock price consistently is below $100, preferably below $50.
The dividend has a track record of consistency. By this I mean it’s not up and down, it pays the same amount every quarter or only increases. You can check this at nasdaq.com by putting the stock symbol in the search bar, selecting the stock from the search results, and then clicking dividend history on the left hand side.
My goal with dividend value investing is growth. I want to get every stock I hold to buy one share per quarter with DRIP (Dividend ReInvestment Plan) and then not touch it after that. Once I’ve gotten a stock to that point I move on to the next stock and start all over. Sure it’s tempting to sell some shares to give yourself a boost on the next stock but that is a mistake, just let it grow and focus on steady buying and growing.
I decided to stop buying new stocks at eight separate diversified holdings. This is an arbitrary number but I’m happy with what I have at eight, you can have more or less, just pick what you’re comfortable with.
Once I’ve got all eight stocks buying one share per quarter I start building them up to buy 2 shares per quarter. Now the DRIP plan does help with this as it’s also buying shares but I continue to put my own money in to speed things along.
Once I have all eight stocks buying two shares per quarter I start building them up to buy three shares per quarter. It’s basically a rinse and repeat building up the amount I own to grow faster and faster all the while allowing DRIP to do more of the work. Compound interest for the win!
Dividend value investing in my opinion would work best for average people who don’t have a lot of extra money or time to spare. I don’t put in hundreds of dollars every month, but I’ve been able to build up a nice amount of holdings by constantly every week putting a small amount into my brokerage account and investing that money consistently. At first you may think you're wasting your time, but as those shares build up you’ll feel better and better as you see growth.
What if I don’t have time?
I don’t sit in front of my computer all day trading stocks, just like the famous line from the infomercial, I “set it and forget it”. That’s what you have to be able to do, walk away. Place your trade and walk away. I admit, at first I had a hard time walking away, but once I saw how leaving everything alone and letting it build worked, I stuck to it and now I may only check my account once a week.
I have a 401K, why should I invest?
While I started investing when I was self-employed I now work for a company that gives me a 401K, but I still keep investing. If your money's tight and you can't afford %10 or %15 a week then don’t invest. But if you can afford that small amount then you should think about it. Sure your 401K will provide some income in your retirement but just think how having dividend payments on top of your 401K payments could boost your retirement. Investing now gives you more money later.
Research
ALWAYS DO YOUR OWN RESEARCH. I can’t stress this enough. Yes I’m sharing my stock watchlist on my Watchlist page, but that is not a replacement for doing your own research and investing in what you are comfortable with. If you don’t know anything about investing check out investopedia.com it’s a great resource that can teach you the terms you need to know, and help you understand how the stock market works. They also have a simulator, you can join this for free and practice trading stocks. This is a great way to learn without risking any money.
Above all, don't go blindly into the stock market, educate yourself first, and don’t invest in something you're not comfortable with. Remember people who have gone to Harvard have lost money on the stock market, so don’t think you’ll outsmart the market, you won’t. The only way to not lose all your money is to educate yourself and to do research.
Let me remind you I have no formal training, and am completely self taught. Anything I say should be researched before you act on it. I will give my rationale for why I think a stock is good or bad, but I will never tell you to buy or sell. I am not responsible for any money gained or lost on your part. There are no guarantees in the stock market, anyone who says otherwise is a liar, you can always lose money. If you aren’t comfortable investing then don’t invest.
