Are You Trying to Beat the Market?

Are you trying to beat the market? Do you think if you spent large amounts of time researching stocks that you can can achieve extraordinary returns? Very few people can consistently outperform the stock market. The chances are extremely slim that you can compete with experts who have the latest data and research at their finger tips.

The goal here is to build yourself a portfolio of safe quality dividend-paying stocks. Over time your portfolio will start generating increasing passive income for you. Here’s what Lowell Miller has to say about  investing:

“Remember, we’re not trying to ‘beat the market’ here, nor are we even seeking what others might call the ‘best’ stocks. We’re trying to create a compounding machine that will be robust and durable for at least an entire investing life, one that will provide equity-market returns with some measure of reliability and predictability over time, one whose income will rise. And because its income rises, the investment will also rise in market value.

It is the easy path and the sure path in the stock market, one that requires time and patience more than it requires cleverness and heroics. So don’t be too clever, or too much of a hero.”*

Focus on building your own portfolio of safe quality dividend-paying stocks, and you will do very well for yourself.

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* page 166, “The Single Best Investment” by Lowell Miller

Building a Portfolio is a Marathon not a Sprint

Building a portfolio is a marathon not a sprint. I know many of you are eager to invest right away and invest everything, so that you can achieve maximum returns. But remember you must buy quality stocks  when they are undervalued. Buy low and sell high, not the other way around.

I’m a big fan of Investment Quality Trends (IQT), and I’d like to share with you the latest nugget of wisdom from IQT:

“As long as the Federal Reserve maintains a zero interest rate policy there is no alternative for investors except to invest in stocks. Subsequently, since there are no decent yields to be found in fixed-income, and traditional “growth” companies pay little to no dividends, investors have been flocking to dividend paying stocks in droves.

Of course we are big proponents of dividends; they are after all the straw that stirs our drink. The fact is though that simply because a company pays a dividend, it doesn’t mean that the company represents good value. Cash flow is nice, and the dividend is the most fundamental measure of return on investment, but in terms of the risk/reward equation, even dividend paying stocks have downside risk if they aren’t acquired when they offer good value. This is the sole reason to establish Undervalued and Overvalued boundaries, which lowers your downside risk and increases your upside potential.

There are also those that fall into the activity dictates results camp, which feeds right into Wall Street’s wheelhouse. Our contention is that portfolio construction is a marathon and not a sprint. This is to say that it is the rare occurrence where you can construct a well-diversified portfolio of 25 to 30 high-quality companies that offer historically great values in one fell swoop.

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When Harry met Sally he lost $94,378

Re-investing dividends will grow your savings much faster than if you spent your dividends. But how much faster will your savings grow?

John Heinzl wrote an article recently at GlobeAdvisor.com looking at a fictional portfolio for Harry and Sally.

“Consider two investors, whom we’ll call Harry and Sally (my age is showing, I know).

On Dec. 31, 1993, each invests $10,000 in shares of Royal Bank of Canada. They hold their shares for the next 20 years, the only difference being that Harry spends his dividends while Sally reinvests the quarterly payments in additional shares of Royal Bank.

Now, it’s obvious that Sally will come out ahead. After all, she’s not spending her dividends like Harry is. But the magnitude of the difference may surprise you.

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Dividend Mutual Fund Reduces Dividend by 17%. Surprised?

RBC’s Canadian Dividend Fund had a dividend of 66¢ in 2009 and 2010. Now this fund’s dividend is 55¢. What ever happened to dividend growth? In addition to the high fees, this is another example of why mutual funds should be avoided.

Tom Connolly from DividendGrowth.ca had this to say about it:

“Never having purchased a mutual fund, I was fascinated to learn from Rob’s research that RBC’s Canadian Dividend Fund had a dividend of 66¢ in 2009 and 2010. Now this fund’s dividend is 55¢. Dividends paid by the country’s biggest dividend fund went down by 11¢ over this period. So much for dividend growth inside mutual funds! Their goal, it seems, is not the same as ours. What we do is different: we buy individual dividend growth stocks and hold for the increasing yield. We win by holding: funds trade too much.”

Avoid mutual funds, and buy your own high quality dividend paying stocks when they are undervalued.

Did you enjoy reading this article? If so, I encourage you to sign up for my newsletter and have these articles delivered via e-mail once a month…and it’s free!

 

More Dividend Increases!

Dividend increases mean more money in your pocket. Your stream of passive income increases each time a company you own increases their dividend.

Over time dividend increases can amount to a lot of money,  imagine earning $385,024 each year from dividends alone.

Here’s a list of recent dividend increases:

Altagas (ALA) 16%
Chevron Corporation (CVX) 7%
Colgate-Palmolive (CL) 6%
Costco Wholesale Corporation (COST) 15%
Exxon Mobil Corporation (XOM) 10%
General Dynamics (GD) 11%
General Mills (GIS) 8%
IBM Corporation (IBM) 16%
Johnson & Johnson (JNJ) 6%
Newalta (NAL) 14%
ONEOK (OKE) 40%
Procter & Gamble (PG) 7%
Shawcor (SCL) 20%
TJX Companies (TJX) 21%
Wells Fargo & Co. (WFC) 17%

Do you own any of these stocks?

Remember to buy quality dividend paying stocks when they are undervalued, then hold for the rising dividends (income)!

Did you enjoy reading this article? If so, I encourage you to sign up for my newsletter and have these articles delivered via e-mail once a month…and it’s free!

How to Invest Your Tax Refund Wisely

Most people spend their tax refund even before it arrives. Your tax refund is your hard earned money being returned to you, because over the previous year the government charged you too much tax.

Will you spend your hard-earned refund on toys, the latest gadgets, vacations, beer, sporting events, or lottery tickets? Or will you spend your refund wisely?

The key to financial success is to acquire revenue generating assets. During your peak earning years it’s important to invest in assets that generate income. My favorite revenue generating assets are dividend paying stocks. Why? Because owning dividend paying assets require no additional work or annual expenses. Dividend paying stocks continue to pay dividends (cash) year after year, and the best ones pay increasing dividends every year.

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How I saved 4672% in Fees, and Continue to Make Over 14% Each Year on a Single Stock

Success: red graph over coinsToday I’m going to share with you one of my success stories. The purpose of my story is to show you that great returns are possible without resorting to expensive mutual funds.

My story begins in 2000 when I decided to buy 185 shares in a company called TransCanada (TRP). After applying the 12 Rules of Simply Investing I decided that TRP would be a great investment. TRP had:

  • A strong history of profitability
  • A strong history of growing dividends
  • A product that would be in need for a very long time
  • A stock price that made the shares undervalued

I paid $13.40 for each share for a total investment of $2479 ($13.40 x 185 shares). In 2000 TRP was paying a dividend of $0.80 per share, since then the dividend has increased each year, today the dividend is $1.92 per share.

This year my investment in TRP will produce $355.20 in income:
$1.92 x 185 shares = $355.20

$355.20 of $2479 (my original investment) represents a return of 14.33% annually and possibly more if the dividends continue to increase every year.
$355.20/$2479 = 14.33%

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