Dear DTA,
I follow some trading and investment sites. I love yours. But I have a question. There are so many different strategies out there. Isn’t there one that’s superior to all the others?
-Jonas B.
Hi, Jonas.
Thanks for writing in. Appreciate the readership very much.
So glad to hear that you love the site. We aim to please.
You have an interesting question.
I’ll certainly do my best to provide you with some insight today.
However, keep in mind that it’s impossible to actually pinpoint one “perfect” or “best” investment strategy.
That’s because billions of different people out there have billions of different financial objectives.
Not everyone has the same time horizon, risk tolerance, business acumen, etc.
So I can’t point you in the direction of perfection.
But I can point you in the direction of my personal favorite investment strategy.
I’d argue that this is the best strategy for a large swath of people simply because it can lead to a common objective among many investors I’ve talked to over the years.
That common objective is financial independence.
Indeed, most investors out there want to become financially independent. And the sooner, the better.
Well, the investment strategy that I believe is best for accomplishing that objective is dividend growth investing.
Fellow contributor Dave Van Knapp has laid out exactly what this strategy is, why it’s so fantastic, and how to successfully execute it.
Make sure to check out his Dividend Growth Investing Lessons for a treasure trove of actionable information on this strategy.
The strategy basically espouses buying equity in world-class businesses.
Specifically, it involves buying shares in companies that have lengthy track records of paying growing cash dividend payments to shareholders.
These rising dividends are funded from rising profit.
The rising profit is there because these high-quality companies are selling the products and/or services the world demands.
Over time, they’re often selling more products/services, to more people, at higher prices.
If you want to become truly wealthy over the long run, you want to hitch your wagon to great businesses.
Of course, the opposite of that idea would be to invest in terrible businesses. I don’t think you need me to tell you what’s going to happen if you do that.
This investment strategy is so powerful, I used it to go from below broke at 27 years old to financially free at 33 – on a middle-class income.
I was able to quit my job and retire in my early 30s, thanks to what I’m sharing with you today.
I recount exactly how that happened in my Early Retirement Blueprint.
A major aspect of my success has been my steadfast dedication to dividend growth investing, whereby I’ve allocated my savings to high-quality dividend growth stocks trading at appealing valuations.
Many of the stocks I’ve bought over the years can be found on the Dividend Champions, Contenders, and Challengers list.
The CCC list is a fantastic collection of data on more than 800 US-listed stocks that have raised their dividends each year for at least the last five consecutive years.
I hold these stocks for the long haul and let growing dividends reinvest and buy me more shares that are also paying growing dividends.
Before you know it, you’ve got a monstrous compounding snowball rolling at an ever-faster speed!
My snowball is my FIRE Fund.
That’s a real-life and real-money collection of high-quality dividend growth stocks.
It funds my early retirement because it generates the five-figure and growing passive dividend income I need to cover my essential expenses in life.
Imagine earning five-figure income without lifting a finger. And imagine getting dozens of pay raises without even showing up for work.
That’s what dividend growth investing can offer.
But don’t take just my word for it.
Warren Buffett, arguably the all-time greatest investor, also uses this strategy!
Take a look at the multibillion-dollar common stock portfolio he oversees for Berkshire Hathaway Inc. (BRK.B).
It sports numerous high-quality dividend growth stocks.
Shouldn’t be a surprise.
Buffett loves collecting growing cash flow, which he can use to profitably reinvest and keep the snowball accelerating.
Buffett is probably the greatest capital allocator to ever live. And if he uses this strategy to unlock growing cash flow, I think that’s a ringing endorsement.
If you need more proof, check out this whitepaper that shows that Dividend Growers & Initiators have absolutely trounced the broader market over the long run.
Does that make dividend growth investing the “best” strategy?
I guess that’s up to you to decide.
But if you’re looking to become financially independent alongside many fellow long-term investors, it’s about as good as it gets.
If you decide to also take advantage of this strategy, you won’t be short on actionable ideas, Jonas.
I personally highlight a compelling long-term dividend growth stock idea every Sunday, via the Undervalued Dividend Growth Stock of the Week series.
This series uncovers high-quality dividend growth stocks trading at appealing valuations.
And I even include valuation estimates from professional analysts in these pieces, which offers additional perspective and value to readers like yourself.
Jonas, you’ll ultimately have to decide for yourself what exactly constitutes a “superior” investment strategy. But I wouldn’t go seeking perfection.
Instead, I think you should carefully consider your personal financial objectives and weigh out every strategy for its pros and cons – then take action.
Regardless of how you decide to go an invest, there’s a simple truth that will always apply.
The best time to start improving your financial future is today.
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.