Dear DTA,
I am new to the stock market. Currently doing research. I’m trying to gather information in order to properly invest without losing money. Please help.
-Timothy G.
Hey, Timothy. Thank you for taking the time to write in. We appreciate that. And in order to express our appreciation, we’re taking some time out to respond directly to your email.
First, welcome to the exciting world of the stock market.
The stock market is, in my view, simultaneously one of the most amazing and underutilized platforms in existence.
It’s this wonderful market of shares in businesses that can build a lot of wealth and income for everyday people, yet so few people take advantage of this due to improper perceptions and/or lack of knowledge.
Good for you for not letting these things stand in your way, which means you might be passing up tremendous opportunities over the long run.
That all said, the “without losing money” part of your query is troublesome.
I mentioned that only because even the greatest investors known to man occasionally lose money on investments. Even Warren Buffett, with all of his success and billions of dollars, has lost money on investments here and there.
Investing by its very nature incurs risk, which is why you expect a great return on your money.
You could put your money in a savings account and incur no risk – at least to your perception – but you’d not be getting much of a return on your investment. (Of course, one needs to keep in mind the risk of loss of purchasing power, meaning you’re going to “lose money” to inflation over time if money is kept in the bank at very low interest rate.)
We accept risk in exchange for the possibility of an exceptional return on our investment(s) over the long term.
In my experience, however, it’s really “volatility” that one needs to accept when investing in stocks, as the risk isn’t terribly high if one is investing properly and intelligently.
Shares in even great businesses can fluctuate, sometimes dramatically.
But as long as you don’t sell out as an emotional response to volatility, you can largely avoid locking in true losses.
The key, though, is focusing on these aforementioned great businesses.
I’ve personally stuck to investing in outstanding businesses by virtue of adopting the investment strategy of dividend growth investing.
This investment strategy basically means you buy shares in wonderful companies that reward their shareholders with growing dividend payments, payments which are funded by the growing profit these companies generate as they go out and sell more products and/or services to people all over the world.
And this strategy has allowed me to build a real-money, real-life portfolio that generates five-figure growing passive dividend income, which provided me with financial freedom a little over a year ago.
And I got to that point in just a few short years, starting out completely broke (actually, less than broke) as recently as early 2010.
As you can imagine, I’m a huge fan, supporter, and booster of dividend growth investing as a means to build wealth, passive and growing dividend income, freedom, and happiness for oneself.
Many of the dividend growth stocks I write about and personally invest in are blue-chip stocks that are household names.
Think Apple Inc. (AAPL), McDonald’s Corporation (MCD), and Procter & Gamble Co. (PG).
These businesses are easy to understand, right?
It’s not hard to figure out iPhones, burgers, and laundry detergent, respectively.
And due to competitive advantages like pricing power, brand recognition, economies of scale, and distribution networks, these companies are able to routinely pay out increasing dividends to shareholders that are funded by the growing profit they generate (over longer periods of time).
Products and/or services that the world relies on. More profit flows in. Greater dividends to shareholders.
It’s a fantastic flow chart.
So while research is certainly necessary to build the foundation of knowledge necessary to successfully invest in dividend growth stocks, the strategy is more tangible (due to regular and growing cash that hits your account(s)) and approachable (due to the inherent ease of understanding these businesses) than most other strategies out there.
Plus, all of the research you’re going to want to do has never been more accessible!
For instance, David Fish, an invaluable member of the dividend growth investment community, has compiled data on more than 800 US-listed stocks that have paid increasing dividends for at least the last five consecutive years.
This information can be found by pulling up his Dividend Champions, Contenders, and Challengers list.
Just think about that for a second.
You don’t have to do any of this research yourself. You can pull up Mr. Fish’s list… and voila.
There’s preexisting data that shows you all of the US-listed dividend growth stocks out there and the related dividend metrics.
So your homework has never been easier.
In addition, fellow contributor Dave Van Knapp wrote a series of articles that discuss the dividend growth investing strategy, how it works, why it’s so great, and how to successfully implement it in real life.
It’s a series of lessons on the strategy – and these articles have essentially culled much of the research you’d want to do into one, neat series of articles that easily distill this information down into digestible, focused pieces.
And then if/when you’re ready to actually invest your money, I highlight a dividend growth stock every Sunday that appears to be both high quality and undervalued.
These are actionable and compelling long-term investment ideas that are provided to readers like yourself every week… for free.
On top of all of that, brokerage fees have never been cheaper than they are today, which makes investing easier and cheaper than ever before.
We’re truly in a golden age for investing.
But all of this is for not if one doesn’t take advantage.
That’s where you come in, Timothy.
Nothing happens without action on your part.
Successful long-term investing requires action. And it requires it as soon as possible.
Of course, you shouldn’t invest until you’re comfortable. But you won’t be comfortable until you’re knowledgeable.
You have some fantastic tools at your disposal, but it’s up to you to follow through.
I wish you luck and success.
Jason Fieber
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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.