Dividend Yield-On-Cost Takes Stupid Impulses Out of Investing

Among almost any academic investor that you could possibly meet, the notion of caring about yield-on-cost is quickly dismissed as fool’s play; the hallmark of an unsophisticated investor.

What is yield-on-cost, and why is it so quickly dismissed?

There are two types of yield on cost: dividend yield-on-cost, and earnings yield on cost. It’s a comparison between what a company’s business performance is doing for you right now and the amount of cash you had to set aside to make that investment happen.

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The Most Uncomfortable Topic In Investing

For those of you who follow sports as well as investing, you probably crossed path with the news item last week that Denver Broncos owner Pat Bowlen is stepping down after the revelation that he has been battling Alzheimer’s for the past several years.

That naturally triggers a discussion of the most uncomfortable topic in investing: What is a self-directed investor to do upon receiving notice that he will be gradually losing his cognitive functions, and must plan accordingly?

It’s a complex discussion, and often the investment portfolio gets put on the back burner (when you’re wondering what it will be like for your wife of fifty years to deal with you not recognizing her anymore, or what it will be like for your children to continue growing up with a father who is there in but not in mind, you may not get around to figuring out what to do with those 10,000 shares of Altria, or whatever the portfolio may be).

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LOYAL3: The Current Savior Of Long-Term Investors

Even though I cannot attest to a lot of the criticism that the transfer agent computershare.com receives on a regular basis as a forum for buying stocks, I know a lot of people have written me, saying, “They’ve gotten a lot of bad online reviews. I’m not comfortable going there, are there any other options worth looking at?”

Normally, I’ve pointed to something like Sharebuilder if your goal is to keep costs low because they have a special plan that lends itself to dollar-cost-averaging into whatever you want (pretty much) for $12 month (which allows you to pick 12 different things to invest into each month). Or, you could just go through a brokerage house like Charles Schwab, pay the $7.95, and go to bed knowing that your money is secure. Given this is your life’s savings we’re talking about, fretting over a few bucks here and there could be missing the forest for the trees.

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Why Warren Buffett Built A Perpetual Income Machine

When studying what made Warren Buffett such a successful investor, it would be naïve to conclude that he was simply some guy who had extraordinary skill at stock-picking, and then climbed to the top of the investing mountain thereafter due to sustainable excellence in the stock-picking realm. But that only tells half the story. It would be like only discussing a famous self-help public speaker’s days and nights spent working on his public speaking without acknowledging the countless hours spent reading books acquiring the knowledge to provide the right message that was delivered in an attractive fashion.

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Yes, You Should Be Worried About Amazon’s Stock

I recently wrote to you about how the drop earlier this week GlaxoSmithKline wasn’t a big deal in the slightest, and how a hypothetical family in 2019 reviewing their reinvested GlaxoSmithKline dividends may actually look back fondly on the share price drop in the middle of Summer 2014 as it provided an opportunity to get a lower price, and thus a higher ownership position in the form of additional shares due to the decline.

Now, I want to discuss a company that does not share GlaxoSmithKline’s outlook. If you follow Amazon, you may have seen that the company reported a $126 million loss for the second quarter of 2014. Although the stock closed the day at $358 per share, it fell $38 in after hours trading to $320 per share, for a drop in the 10-11% range.

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