How Dividend Growth Investing Helps You To Avoid Being The Greater Fool

I’m sure you’ve heard of the greater fool theory. If you haven’t, it kind of goes like this. This theory states that the price of an asset is determined by whether or not you can sell it for a higher price. It doesn’t matter how high that price goes, or how irrational it becomes – it’s only about the higher price.

The greater fool is deemed as the person who buys an asset down the road for a much higher, and arguably irrational, price. It’s basically a term for a person who buys into extreme speculation and mania.

I think it’s fair to say that we’re seeing a lot of greater fools out there right now. The best recent example of rampant mania and speculation?

Well, an invisible sculpture was just sold for $18,000 by an Italian artist. Yes. A “sculpture” that’s invisible. $18,000.

That makes the infamous tulip mania of the 1600s look tame by comparison. At least you can smell and touch a tulip.

Today, I want to tell you how you can avoid becoming the greater fool through dividend growth investing.

Ready? Let’s dig in.

The greater fool doesn’t care about intrinsic value, cash flow, or even what the asset is or does. The asset could be anything. It doesn’t matter at all.

It could be a table, a piece of art, clothing, a coin, or even air itself. All that matters is the frenzied speculation, which they hope will continue after they’ve bought, so they can unload their asset down the road at a higher price to a fool even greater than them.

So how do you avoid becoming the greater fool and holding an expensive bag of nothing?

By focusing on high-quality dividend growth stocks. These are stocks that represent equity in world-class enterprises producing reliable, rising cash flow. They’re producing reliable, rising cash flow because they’re providing the world with the products and/or services it demands. It’s more people buying more products and/or services at higher prices.

This cash flow is real. It’s actual money. Based on actual products and/or services.

With greater fools, there’s often no “there” there. It’s often giant nothingburgers, or even outright scams. But with high-quality dividend growth stocks, there are real assets, real products, real services, real customers, and real cash flow.

This real cash flow is tangible. That’s because you’re collecting real dividends that you can actually go out and spend.

Want to pay rent? Want to buy groceries? Gotta fill up the gas tank? You can pay for all of that with your safe, growing dividends that you’re collecting from high-quality businesses working hard so that you don’t have to.

Let’s take something like McDonald’s (MCD) for example.

McDonald’s makes real money by selling real food to real people. They have real buildings where their real employees work. This is all tangible. If you invest in McDonald’s, you can actually go down to your local McDonald’s and see, touch, and even taste your investment. Let me tell you, a Big Mac has never tasted so good until I knew it was helping to pay for my passive dividend income.

Indeed, passive dividend income is the tangible proof in the profit pudding.

Don’t tell me how profitable you are. Show me. Show me the money. And don’t tell me that I’ve got something that maybe I can sell to someone else for a higher price down the road. Send me a reliable stream of ever-increasing passive dividend income that I can pay my bills with so that I can enjoy a financially free lifestyle.

See, I don’t ever need to wonder if I’ve got real investments or not.

I’m reminded almost every single day, because I’m invested in over 100 different high-quality businesses – and they’re sending me safe, growing dividends on the regular. There’s almost never a day that goes by in which I don’t wake up to fresh dividend income in my brokerage account that I didn’t go to sleep the night before with. My rent is paid and my belly is full with food. I don’t need a job for any of this to happen. I experience real-life, tangible proof and progress that offers a healthy feedback loop.

A lot of the stuff that is being speculated on right now isn’t tangible.

There’s often nothing to see or touch. You have nothing but the hope that someone else will pay more for whatever you bought. And if that someone else does come along and pays more? Well, that’s great. But what if they don’t come one day? Can you sleep well at night wondering about this? Are you okay if you’re not 100% sure that you’ve got something real?

I’m no fool. I know that. I’m invested in real products and/or services making real money. And my real passive income pays for my real bills.

Plus, all of these profits and dividends? They’re growing. The rising costs of life ensure that your bills will be higher in the future. That’s life. But when you’re invested in high-quality dividend growth stocks, you’re getting regular dividend increases from your investments, which help you to keep up with, or even exceed, inflation. Guess what that Big Mac cost in 1990? Yeah, a lot less than it does in 2021. And it’ll cost a lot more in 2050. I’m sure of that. And I’m also sure that the profits McDonald’s will be making in 2050 will be higher because of it, which means even bigger dividends for their shareholders. I’m lovin’ that.

If you’d rather wait for a greater fool to come along, have at it. I’d rather collect real dividends from real companies selling real stuff and enjoy financial freedom while I sleep well at night.

If this is the situation you also want to find yourself in, make sure to follow the website. All we do here is provide high-quality research and information on how to use dividend growth investing to your advantage so that you can build a dividend growth stock portfolio that one day produces enough passive dividend income to live off of. Financial freedom is the goal. And we’re here to help you achieve it.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.

Source: DividendsAndIncome.com

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