"Wealth seeks the wise."
-- Christina Nikolov
ChartWatchCentral - Financial
Articles
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Investing
in the stock market - 9 Power Packed Tipsby Charles M. O'Melia
9 tips for creating wealth from the stock market:
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 dong 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 making a
buck in the stock market (Instead of trying to bend the spoon, that is
impossible, instead just think of the spoon as – 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 dividends each
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 reinvestment 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 reinvestment to dollar-cost average into your holdings. Every
cent you save and invest would work toward your ROI (Return on
Investment).
For more excerpts from the book ‘The Stockopoly Plan’
please visit http://www.thestockopolyplan.com
About
the Author
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’, published by American-Book Publishing. |
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