Beginner Investing Questions Answered

I received the following investing questions from the subscribers to my email list. I know many of you share these common questions, so I’ve included the answers for your benefit here.

investing questions

Investing questions #1: My biggest frustration with investing is getting started in an investment worth investing in. I have thought of investing in the stock market but haven’t yet. Please help.

It’s good that you are selective in wanting to start. When it comes to investing in the stock market, it’s much better to be cautious than to be careless.

Let me try to help you ease your concern. The majority of your investment return will not come from just one investment. A well-diversified portfolio should hold around 20 individual stock positions.

That’s not to say you have to build all 20 at once. As a beginner, it’s completely fine to build one position, and then another one, and then another one as time goes by.

The first investment you make is important in the sense that it helps your confidence. Other than that, the results of this investment will not be substantial in the long term. It will be the consistency of your investing, and the fact that you are adding positions monthly that will compound your wealth and give the results you seek.

When it comes to finding an investment, I highly recommend researching about value investing. A well-diversified portfolio of value stocks tends to outperform the market average if done correctly and with the right principles.

So bottom line, don’t let your frustration cripple you.

A mistake in the beginning with your first couple of investments won’t kill you. The decision to stop investing will.

Investing questions #2: I’m brand spanking new to investing. What frustrates me the most at the moment is my lack of knowledge and a plan of action. Also, I represent two minorities in this area and have no one in my “circle” of friends or family that have the same interests I do. Hopefully you can help me get started.  Continue reading

Retirement Planning in Your 20s

I’d like to share this great email I received along with a response back. It’s about retirement planning, and it can be beneficial for those looking to retire early or just obtain a great start financially, especially if you are in your 20s.

retirement planning

Many first-time career workers and recent graduates will find value with this post.

“Your 20s are typically the perfect time to start planning for retirement, but sometimes life gets in the way. What did you do successfully in your 20s, or if you could go back in time, is there anything you would have done differently to ensure a better financial future sooner in life?

I would love to hear your thoughts on how you could’ve built your financial safety net in your 20s better–and how you can start it now if you haven’t already. What would be your ideal retire at 65 plan?”

I’ll start by sharing that I’m not any different from any of you. While I’ll admit I may have more awareness about financial matters than most peers my age, I don’t pretend that my plan is perfect.

In fact, if you take a hard and objective look at my financial plan… you’ll undoubtedly find places where I can be better optimized and more efficient. While processes to optimize work extremely well in the business world, they don’t always translate to real life.

This is important. What I’ve devised for myself works the best for the current situation I’m in, the lifestyle I desire, and the sacrifices and benefits I’m willing to take and keep.

It can change and should evolve as my life and situations evolve as well. This clarity is one that I’d recommend to anyone getting started with retirement planning in their 20’s.

Retirement Planning Motivation

Just do it. A slogan for a popular shoe brand, but also relevant advice for anyone starting out.

Of course, before we dive in we want to see some results to strive for. I’ll share a few that have helped keep me fired up.  Continue reading

Celebrity Investors are Smarter than You Think

Did you ever notice how people like to criticize celebrities for how much money they spend?

Take the boxing match that we witnessed last month. It was Mayweather vs. Pacquiao, one of the most anticipated and highest prized fight in the history of the sport. Naturally, this attracted much celebrity fanfare.

Some of the biggest names showed up to watch the fight. Along with this came big ticket prices as well. Once word of the high ticket prices spread, us mere mortals gathered together around the PPV to complain about how much money some celebrities were spending. But was it really that ludicrous?

celebrity investors

An affluent and popular Tom Brady was reported to have spent $128,000+ for his floor side seat to the event. Surely this was a frivolous and stupid money decision even for him?

I beg to differ.

Spending $128,000 on a night of fun isn’t that crazy. Especially when you look at the numbers. You know how much I love the numbers. They never lie.  Continue reading

High Dividend Yield– Too Good to be True?

Recently received a great question from a reader about a stock with a high dividend yield.

high dividend yield

Knowing my love of dividends, the answer may surprise you…

“Long time no talk, hope all is well. I’ve been really getting the topic of dividend yield today, and I’m contacting you because I know it’s a favorite topic of yours.

I stumbled upon a company that has a rather large dividend yield, $CGA, of 19%. It currently estimated to be undervalued by 370%. Although, at a current price of $2.10, that could be concerning. It has a jitta score of 3.79, which indicates that it’s not a “wonderful” company.

My question:

Could one really gain from a company like this strictly by investing in it to reap benefits from the dividend yield? At 19%, that might be something to consider, no? The only downside would be if the company decided to decrease its dividend yield and of course it would naturally decrease a bit if the price went up as well.”

If something looks too good to be true, it usually is.

Especially when you see a yield above 10%… it starts to really raise some red flags.

I looked a little bit into the company. It’s based in China, and the market capitalization is under $2 billion, both of which worry me.

When you read the annual report, they state that their earnings are highly dependent on the Chinese government. Regardless of how you feel about the politics behind that, it means putting a lot of faith in a communist government.  Continue reading

5 Dividend Investing Success Stories

History can teach us a lot. I’ve shown just how much we can learn from mistakes past with the bankruptcy research, and now I want to flip the script. Let’s examine 5 case studies of the most successful dividend investing stories from the last 2.5 decades.

dividend investing success stories

While we can’t expect to follow these guidelines exactly, the takeaways should help us increase our chances for finding the next dividend investing success.

Even one future successful dividend investment can set up a substantial cash flow for years to come. In fact, research from the world’s largest money manager BlackRock has indicated that dividends and dividend growth have made up 90% of investor returns in the past century.

There’s no doubting the importance of dividends. Yet even the most novice investor can agree that you can’t just throw darts at a wall and hope every stock you buy will continue paying dividends.

Not only does a company need to pay dividends, but increase earnings so those dividend payments can increase. That’s when the real power of compounding kicks in.

I implore you to additionally learn about the components of selecting a good stock after you read this article about dividend success stories. While the dividend component should be there, the promise of future growth and a strong balance sheet remains even more critical.

And you’ll only be able to find a company in such a promising situation if you know how to do fundamental analysis. So get yourself educated if you want to make some real money.

Caveats to the Case Studies

For this dividend case study examination, I took 5 of the most popular dividend growth stocks that have performed exceptionally well.  Continue reading