When I started my own investing journey 30 years ago all I bought were high cost mutual funds. I'm sure most retirees today got their start doing the same.
What I've learned since then is that nobody will take better care of your investment dollars than you will. Also, saving on the cost to own those investments is job one.
If you don't know how to do this, it is a must that you find out how. Go to the library and or start subscribing to some financial newspapers. Becoming a DIY investor is something you should want to understand so you can better secure your retirement and your family finances.
Start Small
Keep your initial purchases to a minimum so you can better understand what you bought. I started with just 4 stocks initially. Take your time and dip your toe in slowly as you educate yourself on how a good quality high quality dividend portfolio works in your favour. A few investments purchased cheaply will over time will grow and reap great rewards.
What Stocks?
- I started with one bank. The bank I happen to do business with and have all my accounts with. This is an easy choice for you to make for an initial bank purchase.
- next buy a telecomm company. At the time I was with Bell, so I bought 100 shares of BCE.
- the next company I bought was Enbridge ENB. It's my gas company and they send me a monthly bill for the gas I use. Now, I collect a dividend every 3 months for the pleasure of owning them.
- I next bought a utility because I use power on a regular basis. My provider is a downstream customer so I had to settle on a parent company. At the time Fortis FTS was reasonably priced so I bought it.
It has since grown considerably to include upwards of 25 stocks. Start small and build from there.
For help on stock selection you can read or purchase:
Hold On Always
You are buying individual dividend stocks for the cash flow they provide you. Whether it's paid monthly or quarterly that's the reason you buy it. It's all about the future of your retirement and how much cash flow each investment pays you to fund your future and retirement.
Quality First
You buy the best stocks when they are priced cheaply first. Concentrate on quality and not quantity. Hold only a few of the best until you know what, how and when to add to your portfolio.
Yield Matters
I like to look at what the particular bank, utility, telecomm, real estate, energy or grocery store/restaurant stock is going to pay me. I pick the highest yielding top quality stock first. I'm with Tom Connolly on picking those stocks with at least a 10 year track record of growing that dividend. At this time all the banks are reporting earnings and announcing dividend increases (27 Feb 2018).
Ignore High Yield Investments
Right now I'm talking about those companies trying to seduce you with 8-10% or even higher returns. It just won't last and the price will erode over time. IOW, your investment will lose value and your account will show that ugly RED colour. Avoid that at all costs. Stick with quality companies that have been around for decades for low risk investments.
Stay Disciplined
Your investment returns come from yield + dividend growth over time. Our holding period is forever. When you hear talk of a recession looming, ignore it and stay the course. Use these rules I've learned through the years;
- don't chase the latest investment fads that don't pay dividends
- ignore IPOs Initial Public Offerings, they are hazardous to your long term financial health
- don't get overly excited and take risks with your money you can't recover from
- block out any advice you hear from brokers, most of the time they are just pushing their own products. AKA talking up their own book.
- never become a momentum investor and do dumb shit with your investing dollars
The Final Goal
Your goal should always be to construct a dividend stock portfolio that pays you enough yield on a monthly basis that you never have to touch your capital. Here in Canada it is a must to have to withdraw a minimum of 4% during the first year after you turn 71.
Eventually you will have accumulated enough money to double that mandatory withdrawal rate and still have your nest egg in tact. A growing income coupled with growing capital will equal a comfortable retirement and nice supplement to any pension you may be lucky enough to have.
It works for a simple guy like me and I'm confident this strategy can work for you.
It works for a simple guy like me and I'm confident this strategy can work for you.
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Do you buy dividend stocks to fund your retirement? What's in your portfolio?
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