The Best Dividend Investing Tip

One of the statistics that I often think about, and have mentioned with some frequency on this site, is the fact that the average equity investor compounded his wealth at 3.49% annually from 1990 through 2010 while the S&P 500 Index posted annual returns of 7.81% during that time frame.

To check out the study yourself, click here: http://www.thewpi.org/pdf_files/dalbar.2012.roccy.pdf

When I pursue investing, my long-term assumption is that I will achieve returns somewhere between 8-12% annually (assuming 3.5% annual inflation). If everything goes right, and companies like Coca-Cola, Johnson & Johnson, and Procter & Gamble are able to replicate their former glories (in terms of earnings per share growth) due to a combination of population growth, share buybacks, and price increases/productivity increases, then I imagine that figure will lean closer to 12%. If I make some big mistakes along the way like buy a decaying tech stock or a bank that experiences a blowup (think Wachovia, Washington Mutual, Lehman Brothers, etc.), then that figure may be closer to 8% over the course of my lifetime. My job is to make sure that I can still get to where I need to be even if I “only” hit that 8% annual rate over the course of my lifetime.

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Originally posted 2013-08-15 23:56:35.

General Electric’s Dividend Cut Possibility

If I come up with an intelligent investment idea, the ultimate value of the the idea hinges upon my ability to actually put up funds and make an investment in the business that I believe will deliver excellent long-term returns. What is the old Mark Twain quote? Something like: “The man who can read but chooses not to read exercises no advantage over the man who cannot read.” Maybe there is an investing corollary to that: “One who can identify great long-term investment opportunities but does not actually put money into them exercises no advantage over the one who cannot identify great long-term investment opportunities.”

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