Friday, November 11, 2011

Thoughts on Investing from Dividends 4 Life

Thoughts on Investing--from Dividends4Life

I. Valuation Matters

There comes a point where every stock is simply too expensive to buy. In these circumstances, you are better off finding other alternatives.

II. Time Helps Correct Our Mistakes

The trend of the market and most stocks is up, over time. Given a reasonable entry point, time will most often be on your side.

III. Quality Matters

To take advantage of a long-term uptrend, the company has to be around. There is no substitute for quality in a long-term portfolio.

IV. An Income Stream

A growing income stream can speed the correction process of a bad decision or ill-timed purchase. If the 2000's are considered a "lost" decade, then in some instances the only losses recovered were from dividends received.

The key to reducing your portfolio risk is to hold many different quality companies with a growing dividend, and be prepared to hold them through the good and the bad. Buy-and-hold is not buy-and-forget. We must understand when it is appropriate to buy and when to sell.