Dear DTA,
I’m just getting started. I’m learning as much as possible for now. I’ve been looking at several different strategies that other successful market traders have used to get a feel for things.
-James B.
Hi, James.
Thanks for writing in.
We all have to start somewhere. Even Warren Buffett once started with $0.
The great thing about your situation is that you’re interested in learning as much as possible.
Being open to the learning process, building that foundation of knowledge, is imperative. Many people never even get to that step.
Since you’re interested in learning, I thought I’d impart a few nuggets of wisdom today.
Now, I’m not the most successful guy out there. I never aimed to be the richest person around.
However, I did go from below broke in 2010, at 27 years old, to financially independent in 2016, at 33.
I retired from my career at the young age of 32 – about three decades before most people.
And I now live off of the five-figure and growing dividend income my personal stock portfolio – the FIRE Fund – generates on my behalf.
Oh, and I did all of that on a middle-class salary from a very regular day job.
How did this happen?
Well, I’ve laid out the entire process in my Early Retirement Blueprint – a step-by-step guide to financial independence for early retirement, which almost anyone can follow.
But a key aspect of the entire plan is the investment strategy I used (and still use).
Dividend growth investing.
This investment strategy is essentially comprised of buying up shares in high-quality businesses that have lengthy track records of paying regular, reliable, and growing dividends to their shareholders.
These growing dividends are, of course, funded by the underlying growth these companies experience as they sell more products and/or services to more people, increasing their profit (and thus ability to fund and grow their dividends) in the process.
You can find more than 800 US-listed such stocks by looking over David Fish’s Dividend Champions, Contenders, and Challengers list, a compilation of invaluable data on stocks that have raised their dividends each year for at least the last five consecutive years.
Dividend growth investing is a long-term, income-oriented investment strategy. And it truly can unlock financial independence for the everyday person, as I’ve proven.
However, it’s not just growing dividends one can look forward to if they buy up great dividend growth stocks (although that’s a lot to like already).
Because a great dividend growth stock simply represents equity in a great company, there is a lot of capital gain to also look forward to.
The very growing profit that is used to grow dividends makes a company worth more over time, increasing stock value and, in the long run, price.
In fact, Ned Davis Research has put forth numbers that show that dividend payers and growers (i.e., high-quality dividend growth stocks) outperform the broader market.
So we’re talking growing dividends and plenty of capital gain. That translates into big total return.
That means you can have your cake and eat it, too.
But don’t take just my word for it.
I mentioned Warren Buffett at the outset of this article.
You can actually look at the common stock portfolio that is overseen by the legendary investor.
Guess what you’ll find?
Yep. Quite a few high-quality dividend growth stocks.
If the world’s most successful investor uses this strategy, that’s saying a lot!
As great as this strategy is, though, you can’t go into it blindly.
But you’re open to learning, which is fantastic.
For further reading into what dividend growth investing is, why it’s such a phenomenal investment strategy, and how to successfully use it to your advantage over the long run, fellow contributor Dave Van Knapp’s Dividend Growth Investing Lessons serve as a highly useful and educational series of articles that discuss just about everything you’d want to know about the strategy.
Before you ever buy a stock, there’s an investigative process that includes quantitative and qualitative analysis, looking at fundamentals, competitive advantages, and potential risks.
Of course, even when you find a great dividend growth stock, you have to make sure you pay the right price.
That’s why I helm the Undervalued Dividend Growth Stock of the Week series.
Every Sunday, I highlight what appears to be a high-quality dividend growth stock that is potentially undervalued.
These are compelling long-term investment ideas for the community to consider.
And so you’ll never walk that investment path alone. Not for as long as we’re here.
But it’s ultimately up to you, James, to do the work, come up with the capital, and execute the steps.
There’s no time like today to start walking that path toward a wealthier and more independent version of yourself.
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.