The not-to-do list, are you still doing these when it comes to investing?
This month I share with you my not-to-do-list. Here's my list of top 3 things not to do when it comes to investing:
1. Investing when stock prices are high
Everyone says to buy "low". But do you know how to figure out when a stock is priced low? In this article, I explain how to determine exactly when a stock is priced low (undervalued). You should never buy stocks when they are priced high (overvalued), and that includes buying mutual funds, index funds or ETFs that buy overvalued stocks.
2. Investing in stocks that don't pay dividends
Invest in companies that pay dividends. As a shareholder, you are part owner of the company, and as part owner you are entitled to share in the profits of the company. Dividends are part of the profits the company shares with you the shareholder. Here are some examples of companies and their annual dividends today:
- Coca-Cola, $1.60
- Colgate-Palmolive, $1.72
- Target, $2.64
If you own 1000 shares of Coca-Cola you would receive $1,600 in dividends every year, for as long as you own those shares and as long as Coca-Cola continues to pay the dividend. In fact Coca-Cola has had 54 years of consecutive dividend increases. You can watch my video on how to make money with dividends.
Without dividends you are just hoping for the stock price to go up.
3. Investing in lousy companies
Seek out quality companies to invest in. Quality companies are those that:
- have a history of profitability
- have a history of paying increasing dividends
- have low debt
- are recession proof
- have a competitive advantage in the marketplace
How do you find quality companies? Follow my 12 Rules of Simply Investing.
Don't waste your hard-earned money investing in companies or in mutual funds that invest in companies that are not profitable, don't pay dividends, have high debt, and aren't recession proof.
Your mission is build yourself an incoming producing machine, and you build your income producing machine by investing in quality dividend-paying stocks when they are priced low (undervalued).
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