Are these your top 5 goals for investing?


When it comes to investing what are your goals? You might say "to make money!", which seems to be the number goal for most people. But what about risk and other factors? Let's take a look at the goals of the Simply Investing approach which I hope you will adopt as your own.

Goals of Simply Investing
The goals at Simply Investing are simple:

  1. Help you to earn more
  2. Lower your risk
  3. Save on fees
  4. Help you generate income and growing income, regardless of market conditions
  5. Save you time
  6. Bonus goal (read below)

Help you earn more
At Simply Investing I teach you how to earn more without waiting around all day hoping for stock prices to rise. Hope will not cover your expenses or help you to pay for the things you want, only cash can do that. Therefore it is important to invest in companies that pay you cash just for holding their shares. The cash that companies pay you is called a "dividend". For example, if a company is paying $1 dividend per share and you own 100 shares, you will receive $1000 each year for as long as you own those shares and as long as the company continues to pay the $1 dividend. The dividends are deposited (monthly, or quarterly) directly into your trading account, you can spend the dividends if you wish or re-invest them. So how do you earn more than mutual funds, index funds, or ETFs? Easy, first you save on the fees (I talk more about this below), and secondly have a look at the typical dividend yields (the return on your investment while you own your shares):

Investment Type
Dividend Yield
Typical mutual fund
Typical index fund
Typical ETF
IBM stock
Pfizer stock
Kellogg stock
Coca-Cola stock 3.18%
MetLife stock 3.03%

Based on the data shown in the above table, here's how much you would receive in dividends if you invested $20,000 in each investment type:

Investment Type
Annual Dividends
Typical mutual fund
Typical index fund
Typical ETF
IBM stock
Pfizer stock
Kellogg stock
Coca-Cola stock $636
MetLife stock $606

As you can see $20,000 invested in a typical ETF would provide you with $100 in dividends each year, but the same amount invested in IBM would provide you with $978 in dividends each year.

Lower your risk
With any type of investing you will always encounter risk. But at Simply Investing I have designed a set of rules (think of it as a checklist), the 12 Rules of Simply Investing are designed to minimize your risk by only investing in quality companies that are financially healthy, and have a history of profitability. Before you invest in any company make sure it passes all of the 12 Rules of Simply Investing:

  1. Do you understand the product or service offered by the company?
  2. Will people still be using this product or service in 20 years?
  3. Does the company have a low-cost durable (lasting) competitive advantage?
  4. Is the company recession proof?
  5. Has the company had consistent earnings growth? The EPS growth must be at least 8%
  6. Has the company had consistent dividend growth? The dividend growth must be at least 8%
  7. Does the company have a low payout ratio? Payout ratio must be 75% or less.
  8. Does the company have low debt? Debt must be 70% or less.
  9. Does the company have a good credit rating? Company must have a minimum S&P Credit Rating of “BBB+”.
  10. Does the company actively buy back its shares?
  11. Is the stock undervalued?
    a. The P/E Ratio must be 25 or below.
    b. Is the current dividend yield higher than the average dividend yield?
    c. The P/B Ratio should be 3 or less.
  12. Keep your emotions out of investing.
    A reminder to keep emotion out of the selection process. Discipline and patience are the keys to successful investing.
Save on fees
All mutual funds, index funds and ETFs carry fees, these are referred to as the Management Expense Ratio (MER). The MER is used to pay for expenses incurred by the fund company for managing the fund. Even index funds cost money to manage, the fund company needs to cover the cost of staff, offices, IT systems, and marketing. The MER is charged regardless of how well or how poorly your funds perform, let's take a look at two examples (where the MER is 2%):

Example 1: Your funds do really well and gain 5%
Your actual return: 5% - 2% = 3%

Example 2: Your funds do poorly and loose -4%
Your actual return: -4% - 2% = -6%

As you can see from the above examples, in good times your gain is reduced by the fee. In bad times your loss is amplified by the fee.

In Canada the average MER is 2.2%, and the average amount held in a retirement account (RRSP similar to a 401k) is $100,000. Therefore the average Canadian over their lifetime could pay $642,212 in fees. How do you save on fees? Invest in individual stocks (they don't charge annual fees), but not just any stock, only those companies that pass the 12 Rules of Simply Investing.

Help you generate income and growing income, regardless of market conditions
I already discussed generating income from dividends, but how do you make sure that your income will increase every year? You will invest in companies that have a  history of increasing dividends each year, have a look at this table below:

Company Name Symbol Consecutive Years of Dividend Increases Dividends Paid Since
American States Water Company AWR 66 1931
Northwest Natural Holding Co NWN 66 1951
Dover Corporation DOV 65 1947
Genuine Parts Company GPC 64 1948
Emerson Electric EMR 63 1947
Procter & Gamble PG 63 1890
3M MMM 62 1916
Cincinnati Financial Corporation CINF 59 1954
Johnson & Johnson JNJ 58 1944
Coca-Cola KO 57 1893
Lancaster Colony Corporation LANC 57 1963
Lowe's LOW 57 1961
Colgate-Palmolive CL 56 1895
Hormel Foods Corporation HRL 55 1928
California Water Service Group CWT 54 1931
ABM Industries Incorporated ABM 53 1965
SJW Group SJW 53 1932
Stanley Black & Decker SWK 53 1876
Stepan Company SCL 53 1967
Target TGT 52 1965
Black Hills Corporation BKH 50 1942
Becton, Dickinson and Company BDX 48 1926
W.W. Grainger GWW 48 1971
Kimberly-Clark KMB 47 1935
Pepsi PEP 47 1952
PPG Industries PPG 47 1899
RPM International Inc. RPM 47 1969
Walmart WMT 47 1973
Consolidated Edison ED 46 1885
Illinois Tool Works Inc.  ITW 46 1933
S&P Global Inc. SPGI 46 1937
Automatic Data Processing ADP 45 1974
Archer-Daniels-Midland ADM 44 1927
Walgreens Boots Alliance WBA 44 1972
McDonald's MCD 43 1976
Pentair plc PNR 43 1976
Sherwin-Williams Company SHW 43 1979
Clorox CLX 42 1968
Medtronic MDT 42 1977
Old Republic International Corp ORI 40 1942
Sysco SYY 40 1970
Franklin Resources BEN 39 1981
Aflac AFL 38 1973
Air Products and Chemicals APD 38 1954
Atmos Energy Corporation ATO 38 1984
Sonoco Products Company SON 38 1925
Brown-Forman Corporation BF.B 37 1946
Cintas CTAS 37 1984
Exxon Mobil XOM 37 1882
Cardinal Health CAH 34 1983
Chevron CVX 34 1926
Federal Realty Investment Trust FRT 34 1962
McCormick MKC 34 1925
Worthington Industries Inc. WOR 33 1968
Nordson Corporation NDSN 31 1969

As you can see from the above list, these companies have been consecutively increasing their dividends each year for more than 30 years. Think about how many recessions and market down-turns we've had in the last 30 years, stock prices have gone up and down, but regardless of market conditions companies like these have increased their dividends each year. At the beginning the dividends might seem small, but regular increases put more money into your pocket and lower your risk, have a look at my example with TRP:

In 2000 I purchased 185 shares in TRP at $13.40 each, here are the dividend increase since I've owed this stock:

My initial investment in TRP was $2479 and since then I've received over $7377 in dividends from this one company. With the dividends received the risk to my initial investment has gone down to zero.

The share price today for TRP is $60, the total value of my investment (including dividends) is now worth: $18,477

Save you time
I know what you're thinking, "this stock investing is going to take too much time and effort". The reality is, you do not need to spend hours and hours each day watching your stocks. In my Simply Investing Course I give you a spreadsheet that you only need to fill out when you are ready to invest, some people do this once or twice a year. The spreadsheet makes it really easy to apply the 12 Rules of Simply Investing to any stock in the world. In the SI Report I do the work for you, I track over 250 stocks in the US and Canada and apply the 12 Rules of Simply Investing to each stock. On average my students spend about 10-15 minutes a month on building their money-generating stock portfolio.

Bonus goal
A bonus goal of this system is that you never have to sell your shares (if you don't want to), and your portfolio will still generate growing income for you. With bonds, term deposits, mutual funds, index funds, ETFs, and non-dividend stocks you eventually have to eat into your capital in order to pay for the things you want (or just to cover your expenses). With our approach I have clients earning $10,000 to $50,000 per year in dividends annually and they don't have to sell a single share in order to receive their income.

I'm here to help

I can help you to start investing today, why re-invent the wheel when you can learn from my 20-years of being in the stock market. I've witnessed first hand the ups and downs of the market, and I know what it's like to start investing your hard earned money. I created the 12 Rule of Simply Investing to help you get started right away, so you don't have to wait on the sidelines any longer. The sooner you start investing the sooner you will be on your path to financial freedom.

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

P.S: Read about how I saved Tracy over $1M in mutual fund fees, for more information you can also download the Case Study here.

Fees & Your 5 Common Questions to Investing
Don't lose 65% of your orginal investment to fees.


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