What’s the key to successful investing?


Did you brush your teeth today? Did you wash your hands? Did you eat today? Turn the lights on at home? If you answered yes, then you used toothpaste, soap, ate food, and used electricity. These are the essential products that you need on a daily basis. Twenty years from now people will still be using these products, and the companies that provide these products will continue to be profitable. I refer to these companies as recession-proof. Even if you were to lose your job you would still need to consume their products and services.

The key to investing is to buy shares in quality companies when they are undervalued. A recession proof company that is profitable, and meets my 12 Rules of Simply Investing is a quality company.

Investing in the hottest trends or fads is a risky proposition. Imagine what would happen if Instagram stopped working forever, I’m sure some people would be upset, but life would go on. Now imagine if the banks, utilities, or grocery stores shut-down. Recession proof companies provide basic needs, which make them extremely valuable.

Procter & Gamble produces tooth paste (Crest), soap (Ivory), shampoo (Head & Shoulders), laundry detergent (Tide), and many more household products, and currently pays a $2.68 dividend per share. This means that if owned 500 shares in Procter & Gamble you would receive $1340 each year for as long as you owned the shares and as long as the company continued to pay those dividends. In fact after 5 years you could earn over $6700 from just owning Procter & Gamble.

It gets better; Procter & Gamble has been increasing its dividend consecutively for 59 years.  The longer you own this stock, the money you receive from it will continue to go up each year. If you purchased 500 shares in PG back in 2005 today you would have received $11,235 in dividends alone. In addition during the same period the stock price went from $52.75 to $83.19. This is the power of owning recession-proof quality companies for the long-term.

Avoid the fads, stick with companies providing essential products and services, buy their shares when they are undervalued, then hold for the long-term. Your patience will be rewarded with increasing passive income from dividends.

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