Dear DTA,
I know absolutely nothing about investing. I’ll be 47 soon, and I’m afraid I’ll never be able to retire! I’d like to learn how to invest so that I can have a more secure future.
-Janet D.
Hey, Janet. Wonderful to hear from you!
We take our readers’ questions and concerns very seriously, which is why we’re addressing you directly today.
That’s still relatively young, giving you plenty of time to learn what you need to learn, catch up, and end up in a much better financial position.
That said, it’ll still be important to start as soon as possible, as every minute lost is an opportunity lost.
Compounding needs time, so you want to start seasoning your investments quickly.
You’re starting fresh, but investing isn’t really that difficult to learn and understand.
In fact, I write about and personally use an investment strategy that is about as simple and straightforward as they come.
That investment strategy is: dividend growth investing.
I can tell you that I knew absolutely nothing about investing as recently as early 2010.
It was back then that I was worth less than zero dollars. My net worth was a negative number, meaning my liabilities outstripped my assets. I was quite literally below broke.
But I was determined – as you are – to turn things around and build a more financially secure future for myself.
Well, once I started researching how some of the world’s most successful investors invested, I found a common thread: they often buy shares in wonderful businesses that pay growing dividends, and they hold these shares for a very long time. Furthermore, they like to buy when these shares appear to be undervalued.
Warren Buffett is a great example of this.
The guy built a fortune worth billions of dollars by buying stakes in great businesses.
These businesses become great by routinely racking up more and more profit year in and year out – and they often share that growing profit directly with their shareholders via growing dividends.
If it worked for him, could it not work for me?
After educating myself on how to read financial statements, how to value businesses, and how to manage a portfolio, I felt compelled to take similar steps to the “man” himself.
Well, the end result (as of now) is a real-money six-figure stock portfolio that generates enough passive income to render me financially independent in my 30s.
And I did this starting from below broke, as noted. Plus, I didn’t know a thing before I started. Finally, I did it on a middle-class salary, working for a car dealership.
I couldn’t have been further away from Wall Street if I had tried!
I simply lived well below my means.
This involved tough choices.
Do I want a car or financial freedom?
Do I want to eat out at restaurants or retire early?
Do I want to own an expensive house or my time?
Well, they’re not actually tough choices at all when you see what you’re choosing between.
The answers are painfully obvious now.
And so you’ll probably have to make similar decisions in your own life.
That’s because you’ll have to generate excess capital to invest. The old adage about needing money to make money is partially true; you can’t invest what you don’t have.
But once you have the budget under control, and once you’re living below your means, there are numerous tremendous resources out there designed to help you build that more secure financial future for yourself.
One resource is David Fish’s Dividend Champions, Contenders, and Challengers list, contains information on more than 800 dividend growth stocks – all US-listed stocks with at least five consecutive years of dividend increases.
So if you’re looking for some of the best businesses in the world to invest in – especially those businesses that directly share their growing profit with their shareholders – Mr. Fish’s list is an excellent place to start.
Of course, you don’t want to buy random stocks at random prices.
As such, reading through Dave Van Knapp’s dividend growth investing lessons is a very worthwhile and thorough step to take next.
These lessons go about instructing even beginners like yourself how dividend growth investing works, where to start, how to value stocks, and eventually how to successfully invest for the long haul.
But you’re not alone after you have that basic foundation of knowledge built up.
I actually discuss what appears to be an undervalued high-quality dividend growth stock at the end of each week, as part of the undervalued dividend growth stock of the week series.
These are compelling long-term ideas that I present to the dividend growth investing community.
But even great dividend growth stocks need time to season.
Your wealth and passive income can grow right before your very eyes.
It is possible to secure your financial future and control your retirement destiny.
However, you need to take action in order to make this happen.
You have some great resources here at your disposal, Janet.
Use them to your advantage, and make sure you do so as soon as possible.
I wish you luck and success.
Jason Fieber
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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.