Thursday, January 31, 2019

Stock Investing Test Run....



After getting out of debt, building an emergency fund and taking advantage of tax-incentive investing (IRA/403b), I started looking at other investment options. Fidelity and Vanguard both make investing easy, with numerous low-fee accounts. After picking some high dividend paying index funds, I also decided to experiment with the stock market. After considerable research, I began investing in individual stocks which meet the following criteria:

·       Low debt ratios: After personally observing the positive impact that eliminating debt has had on me being able to start creating real wealth, I will only invest in companies that follow this same principle.
·       Good cash flow: This principle isn’t really possible without the previous one, as they go hand in hand, but I won’t invest in broke companies, even if they have no debt…
·       Low price to earnings ratio (P/E): I’m looking for companies trading at no more than 15 times their earnings to ensure the opportunity for growth, even though I’m really investing for…
·       High dividends: Let’s face it…another recession is coming, and likely sooner than later. However, dividend paying stocks pay out whether the company goes up in value or not, so if I can get 4+% in dividends from a stable company, I will.
·       Trading at a discount: I’m only buying companies trading at at least a 20% discount from its 52-week high. If all the other principles are met, this final requirement all but ensures a long-term profit.

A big reason for this test is that I plan on shifting the bulk of my retirement portfolio to dividend paying investments when I leave the workforce in a few years and what a better way to test the waters ahead of time….

I decided on the investment platform Robinhood for this test, as they do not charge any fees and are incredibly easy to work with to date, so….

This month, I invested in 3 different companies that met all of the principles listed above and have increased my portfolio by 11.75%. And to be honest, while the gains are nice to see, these investments are more about the dividends. More to follow in the months ahead as my test continues….

No comments: