Does investing take too long to make money?


Does investing take too long to make money? Yes, it does take time but the rewards are great for those willing to be patient. Don’t be lured by fast money, it comes with high risk. Value investors focus on long-term gain and are not tempted by quick money. Kelley Wright (Editor of IQT) writes:

“That, in a nutshell is what separates the value investor from all others. The value investor understands when a high-quality company with a long-term track record of managerial excellence, consistent dividends and dividend increases, is at a high-yield/low-price area [in other words undervalued], it’s because [most other] investors aren’t attracted to it, at the moment. Companies with these kinds of attractive fundamentals are eventually rewarded by the market with higher stock prices. In the meantime, you receive a return on investment from dividends and dividend increases.”

While waiting for higher stock prices, we collect dividends. For example, one share of TransCanada (TRP) purchased at $13.40 in 2000 has produced $23.59 in dividends. Here are some more examples of dividend increases:

  • Since 2013, BNS dividends have increased by 29.8%
  • Since 2012, BCE dividends have increased by 38.4%
  • Since 2013, CM dividends have increased by 77.9%
  • Since 2013, CNR dividends have increased by 130.8%

Avoid chasing after fast money, focus on buying quality stocks when they are undervalued. Your patience will be rewarded with increasing dividends.

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Photo by Noah Silliman on Unsplash
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Kanwal Sarai

Hi Dividend Portfolio, thanks for stopping by. The best method for determining when a stock is low (undervalued) is to compare the stock’s current dividend to its average (10yrs) dividend yield. When its current dividend yield is higher than its average dividend yield the stock is undervalued (priced low) and worth consideration. Dollar cost averaging is ok when the stock market is declining. But in this current situation of market highs you might be inadvertently buying stocks when they are overvalued. Simply verify a stock's current dividend yield is higher than its average dividend yield and you'll now the stock is undervalued. In addition to being undervalued, a stock must pass my 12 Rules of Simply Investing before I invest in any stock. Here are my 12 Rules:
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Dividend Portfolio

I think I have half of the equation nailed. That is, investing in quality stocks. The Dividend Aristocrats are a great starting point to identify quality stocks to invest in. My problem is figuring out the other half of the equation and that is determining when those quality stocks are undervalued. I will readily admit that I'm a beginner investor and have much to learn about investing. So, until I learn to figure out when a stock is undervalued, I choose to invest following the dollar cost averaging principle, whereby I invest the same amount of money in my portfolio every month to get the average priced of the stock. I have no clue if that's the best strategy, but I think it's a worthwhile thing to consider for a starting investor. Food for thought.
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