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Investing in the Stock Market
– 9 Power Packed Tips!
1. Do not spread your money too thin.
My friend has a little over $200,000 invested in the
stock market through 27 different Mutual funds. In my opinion, 27 Mutual funds is 27 too many collecting load fees, management fees, commission fees, operating and advertising fees. Diversity is important, but just as important is over-diversification. Also, in my opinion, $200,000 should not be put into more than 12 stocks, let alone 27 different Mutual funds.
2. Do not pay commission fees to purchase a stock.
If you are going to invest your hard earned dollars into a company, the least the company could do is provide you a way to invest in their company commission
free – and they do!
3. Only purchase those companies that pay a dividend.
The same company that you invest in commission
free should also offer you another incentive for you to invest
– a dividend for the use of your money.
4. Only purchase those companies that have a history of raising their dividend every year.
The same company should continue rewarding you for your faith in their company by increasing the amount of their dividend every year. Rising dividends are also the proof that the company is doing something right.
5. Dollar-cost average into each
stock position.
By dollar-cost averaging (buying the same
stock at different prices through the years) you'll never pay too much for the company's stock, even if the initial purchase is at a 52 week high. Have all the dividends from each company rolled back into more shares of each company, until retirement. The companies you invest in should do this for you, automatically, commission free.
6. Forget making a profit; instead focus on the income provided from your
stock portfolio.
That's right! Forget making a profit. The burden is now lifted - no more pressure on tryingto make a buck in the
stock market. (Instead of trying to bend the spoon, that is impossible, instead just think of the spoonas
– omigosh! - I'm in the Matrix!) When you focus on the amount of money your holdings are providing in dividends
– and when those companies selected have a history of raising their dividendseach year
– a lower
stock price allows the dividends that are being rolled back into the
stock to accelerate your income. The total value of your portfolio may go lower, but your income from that lower priced portfolio would increase dramatically. Profit by income!
7. Make every
stock purchase with the intent that the purchase will be a long-term investment.
Do not trade in and out of your holdings. There have been many up and downs in the
stock market. The down markets only accelerate your income. GE has raised their dividend for 28 years in a row. Why sell it? 100 shares of GE ten years ago has turned into 1200 shares today due to
stock splits, and that is not counting how many shares you would have now if the dividends were being rolled back into more shares of the
stock through those years.
8. Understand that a lower
stock price, after your initial purchase may be a blessing in disguise.
The income from your
stock holdings should grow every quarter, no matter what the total amount of your
stock portfolio is worth. (If your Mutual fund declines in price from one year to the next and if your income is not increasing (accelerating) from that fund, why are you in that fund?) A company pays their dividend not on how much their
stock is worth in the
market place. For example, a company pays a quarterly dividend of 50 cents a share. A company has little control on how much its
stock price is worth in the
market place on any given day. You will receive 50 cents a share per quarter whether the
stock price is at 50 dollars a share, or drops to $40 a share or goes up to $70. While the
stock is down at $40 a share your dividend reinvestment is loading up on more shares.
9. Develop a savings plan to add to your holdings each quarter to help your dividend reinvestments to accumulate more shares on a dollar-cost averaging basis.
The savings could be as little as $5.00 a week. Why put that savings in a savings account at 1.2 percent, when there are so many companies out there that are paying a 4 to 5% dividend yield and increasing their dividend every year? And since none of the companies you are
investing in charge a commission, all of that $60.00 a quarter you saved and invested would help your dividend reinvestments to dollar- cost average into your holdings. Every cent you save and invest would work toward your ROI (Return on Investment).
To read the PREFACE from the book 'The Stockopoly Plan' please visit
http://www.thestockopolyplan.com
Charles M. O'Melia is an individual investor with almost 40 years of experience and passion for the
stock market. The author of the book The Stockopoly Plan
– Investing for Retirement; published by American-Book Publishing. To invest in a copy of the book:
http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml
Copyright Charles M O'Melia -
http://www.thestockopolyplan.com
