A Personal Stock Market Investment Philosophy
∙ Make every investment in the stock market a
long-term investment.
My Mother worked as a teller in a small bank in Dover, New
Jersey. The name of the bank was called The Dover Community
Bank. While working at the bank (she eventually became a
branch manager) she enrolled in the bank's dividend
reinvestment plan, making purchases of the stock through
pay-roll deductions. She continued purchasing the stock
through the years, having the dividends from her shares in
the bank reinvested into more shares every quarter. By the
time she left the bank (in the early seventies) she had
accumulated around 300 shares of The Dover Community Bank.
My Father, when he retired, had the dividends from those
shares sent home ? to help ends-meet. When my Dad passed
away at age 80, my brother and I inherited over 7,600 shares
of The Bank of New York, all originating from those 300
shares of what was once called The Dover Community Bank.
From this personal experience grew an investment philosophy
that all stock market investments in a security should be
purchased with the intent of providing dividend income to
help ends-meet during retirement, with the understanding
that no one can successfully retire without financial
freedom. So every investment now in a security is purchased
with the intent of holding that security (and adding to it
during the years) until the dividend income from that
security is ample enough to ease the loss of income from
retiring from my job.
∙ Make every investment in the stock market provide you with an ever-increasing cash dividend for the rest of your life.
With the philosophical investment approach of holding a
security position forever, what criteria should I be looking
for in that security? Certainly dividend income ? that's a
given! And since I never intend to sell the security,
capital gains may not even be an issue.
I would argue that a company that just pays a dividend isn't
good enough. Instead, I will only purchase those companies
that have a long history of raising their dividend every
year. This will eliminate a whole bunch of risk. It would
eliminate the possibility that the company is 'cooking their
books;' after all, the money has to be there to pay the
shareholder. And because this company has been raising their
dividend every year for many years, it eliminates the risk
of investing in a start-up company that may not even be
around in a year or so.
Also, the rising dividend every year would help off-set the
risk of inflation and the risk of a lower stock price during
the year would actually accelerate my income from the
security.
Since I would want my position in the stock to grow through
the years, thus increasing my dividend income, all dividends
would be reinvested back into the stock, until retirement. A
lower stock price during the year, therefore, would allow the dividend from the company to purchase more shares, at a higher dividend yield, and would simply accelerate my dividend income.
∙ Diversify into no more than twelve different companies.
Owning shares in twelve companies is plenty. It would provide the diversity to sleep well at night, and provide a cash dividend every week of the year. Start by owning three companies, and build from there. Determine how many shares you want of each company before moving on to the 4th, 5th, and 6th. Invest in sets of three different companies at a time, until twelve are owned.
∙ Persevere
Success in the stock market is not so much derived by buying
a company's stock at the lows, but is almost guaranteed
successful through dollar-cost-averaging over the years. One
of the most powerful methods of investing in the stock market is having the perseverance to continue adding shares to your stock positions over the years, through reinvested dividends and quarterly infusion of funds, be it 50 dollars, or 100 dollars a month. Persistence, persistence, persistence, and your stock market investment philosophy will become unbeatable!
To read the PREFACE from the book 'The Stockopoly Plan-
Investing for Retirement' visit: http://www.thestockopolyplan.com
Charles M. O'Melia is an individual investor with almost 40 years
of experience and passion for the stock market. The author
of the book The Stockopoly Plan ? Investing for Retirement; published by American-Book Publishing. You can invest in the book at:
http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml
You have permission to publish this article either
electronically or in print, free of charge, as long as the
author bylines are included. A courtesy copy of your
publication would be appreciated. Please email to
mailto:charles@thestockopolyplan.com
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