Hi! My name is Amber, and I am not an investor in the stock market. Why? I’m 11! I am currently enrolled in a stock market game (non-competitive). I was hoping for some good information to share with my teammates. I would really appreciate some advice on how to determine which stocks are good and which are not. Thanks!
It’s a wonderful surprise to get this inquiry. I don’t think I’ve ever had a question come through from someone so young.
I do hope your interest in the stock market continues past your game. That interest could change your life.
Well, you and Warren Buffett actually have something in common.
He was also quite keen on stocks at that age.
In fact, he bought his first stock at age 11. The same age as you!
It pays dividends to develop an early interest in investing.
And I don’t mean that only in the figurative sense – it can literally pay dividends.
And this is where we get into the advice.
If you want to become a successful investor, you should think about investing in the best companies in the world.
You might be young, Amber, but you can look around you and figure out what your classmates are interested in.
Look at those products. Check out the brands. There’s a lot of profit there.
And you can personally profit from that in a very direct manner.
See, many of the best companies in the world are so adept at producing growing profit, they end up with more money than they can efficiently use.
And since shareholders are the collective owners of any publicly traded company, they deserve their fair share of that growing profit.
Dividends are the natural solution.
A dividend is a (usually cash) payment from a company to its owners.
This keeps a company honest and efficient, proving out real and growing profit, all while generating a sustainable and growing source of growing passive investment income for a stockholder.
The long-term investment strategy of dividend growth investing takes this idea and runs with it.
That strategy basically proposes investing only in companies that have a lengthy track record of increasing their dividends, year after year.
It’s simply following logic.
A great company should be able to produce a lot of profit, and grow that profit regularly. And shareholders, being the owners, should get their hands on some of that money. As profit grows, so should those cash payments.
You can find hundreds of these stocks by looking at the Dividend Champions, Contenders, and Challengers list, which was put together and maintained by the late, great David Fish.
I’m sure you’ve heard of many of these businesses.
That’s because it generally takes a great company to be in a position to consistently grow profit and also consistently pay growing dividends.
Many of the world’s best businesses have lengthy track records of growing their profit and dividends.
Think Nike Inc. (NKE), who sells the shoes many of your schoolmates surely love to wear.
Think Apple Inc. (AAPL), who sells the iPhones kids love.
Think Johnson & Johnson (JNJ), who makes the Band-Aid (and many, many other healthcare products) for when you get hurt.
Remember Warren Buffett?
Well, we track the public stock portfolio he oversees for Berkshire Hathaway Inc. (BRK.B), the company he runs.
If you take a look, you’ll notice quite a few of the same stocks are in David Fish’s list and the common stock portfolio Buffett oversees.
When the greatest investor who’s ever lived more or less follows a strategy, that’s saying a lot.
I can tell you that I’ve also followed this strategy for years.
I found myself broke and unemployed in my late 20s.
It’s been a lifesaver for me, allowing me to build my FIRE Fund (my real-life and real-money dividend growth stock portfolio) into a collection of some of the finest businesses in the world.
I built that portfolio in just a few short years. Better yet, it generates enough growing passive dividend income for me to live off of.
I was able to retire in my 30s, as I recounted in my Early Retirement Blueprint.
But there’s a lot more to read and learn, Amber.
However, we’ve got you covered.
Fellow contributor Dave Van Knapp put together a fantastic overarching series of articles that can educate anyone on the A-Z of dividend growth investing.
Those articles can be accessed by checking out the Dividend Growth Investing Lessons.
That’s the Undervalued Dividend Growth Stock of the Week series.
Now, these are long-term investment ideas.
Stock prices can go anywhere over the short term, but I’m generally pretty confident that these investments will do quite well over a longer period of time.
It’s now up to you to read further, expand your knowledge, share this information with your teammates, and take advantage.
This is your moment.
I wish you luck and success.
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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.