Wednesday, October 4, 7:29 am EST. I taught my semi-annual class on The 5 Essential Principles of Successful Stock Market Investing again last night. Class size wasn’t half what it usually was. No matter.
The 5 Principles of Successful Stock market Investing are: 1.) Always know what kind of a market you are in, and there are 3. There is the upwardly trending Bull market, the downwardly trending Bear Market, and the transitioning market between the two. Always know what market you are in. We are presently in a raging Bull market, and have been since Monday, March 9, 2009. When it will end, nobody can say with any degree of certainty.
2.) Know what to buy. I am an advocate and devotee of shopping within that 12%, or so, of stock issues that could be said to be prudent. Typically, these are smaller companies that are still capable of growing their earnings, year-over-year, at a rate in the high single, to low double digits. These grow at an 8 or 9%, to mid-teen, 15, 16, 17%, rate. This growth is both reasonable and sustainable. They all pay a safe-dividend from out of less than 40% of their earnings to shareholders, and they raise their dividend annually, at a rate that is commensurate with their growth. Hence, the term, safe-dividend growers!
3. Know when to buy. Don’t let Wall Street fool you. You CAN time the market. Identifying lo-risk market entry opportunities is not all that difficult, at all. You can time your purchases to coincide with technical market measures of stock market risk. Whenever some, most, or even all of these measures, get to extremes in their measure of market risk as having been largely “wrung out,” it’s a perfectly good time to be a buyer… especially if it ever appears that everyone is selling! If your time horizon is decades long, perhaps even multi-generational, this principle becomes optional, but because we are buying for the safe dividend growth, understand that during market declines, as prices get lower… that means that a stock’s dividend yield is getting higher, and, you may even be able to accumulate a few extra shares, because of their lower price.
4. Know when to sell. I’m not meaning, know when to sell everything, but rather, know when to sell a particular stock. When it is no longer treating you as you expect, and for the reason you bought it in the first place; it may be time to sell. What do I mean? Well, if I am buying for the safe-dividend growth of my portfolio dividend income, and some company is not delivering on that promise to me, like it used to. I can sell it, and I will always have other candidates available from which to choose, to replace it. I find eligible candidates every time I run my search.
5. Have a goal! Know when to stop the process of accumulating shares and of growing your portfolio dividend income. My wife and I have established an investment income goal. Our retirement income goal is to replace all of our present income, 100%, of what we are presently bringing in, so that in retirement, we won’t have to cut back a thing. We have the added plus of monthly measuring our progress toward our retirement income goal. And, I find it actually fun to do! We’re 30% of the way there now, and compounding is doing its thing, so that it is now growing ever faster, propelling us toward our goal. We’ll know when we have enough, and have met our goal, and we measure our progress toward it every month. Talk about security and peace of mind!
Only last night, I saw and learned that we had just received another dividend increase “pay raise” during my presentation. That’s right, SNX just raised my “pay” from $1.00 a share to $1.20 a share, for a 20% pay increase. Where else can you get your pay raised for you like that? What this means is that the average dividend increase among all 18 of our current holdings, for these past 12 months, has now been, from an average of $1.06 a share, to the new average of $1.33 a share, or an average of $.27 a share, for a real increase of 25.47% all by themselves, had we done nothing. But, we add shares at every good opportunity, resulting in a compounding of our income growth!
I promised my students a live link to The Single Best Investment by Lowell Miller, and instructed them to read the Introduction, and first 4 chapters, at the very least, as these make the case for this manner of investing. here it is:
It’s a PDF file, and you can access it online anytime from anywhere, and, you can also download it, and save it on your computer. I have it on mine.
Our portfolio has been attaining unto new all-time highs in value, along with the market, but, by far more importantly, we have taken charge of this thing, and we are causing our portfolio dividend income, that which we want to live on in our retirement, and we are making it to only go UP, quarter-over-quarter, year-after-year, at a rate that very handily beats inflation. Isn’t that what you want? Come on along. You can do it, too!
For the lowest cost brokerage expenses that I know of, I trade thru eOption, at only $3 commission per transaction. Is anybody charging less than that?
Here’s to your successful investing!
Harold F Crowell