I started my trading/investing about 20 years ago in Switzerland. Around 2000 when I just moved to Canada, I first heard about Buffett via a free investment newsletter. I clearly remember the story that author was telling in the letter: his friend bought a luxury watch worth about $50000. He said he would never buy such an expensive item which would only lose value over time. He would rather buy one share of Buffett’s company, which was about $50000 at that time. I also clearly remember what I was thinking then: could anyone really make money from such an expensive stock? What was the chance to have my money double with it? You can guess, I passed this idea and continued with my style that, I can bet most, if not all, of you are doing: more interested in ideas or tips of high-flying stocks, especially penny stocks. The conventional “wisdom” is that low priced stocks are easier to double than high priced ones. I was busy with trading in and out with no interest in long-term investment in the following years. What a stupid me at the hindsight!! Now in about 15 years time going through 2 very devastating stock market crashes in 2000 and 2008, BRK has quietly moved up 4 times in values, while during the same period of time, my style of trading had made me lose a bundle in my earlier years of investing. It would have made me much richer to simply buy BRK and sit there doing nothing for 15 years. Finally I got that in a very hard way!!
Investment is not gambling and you got to have patience and let the time work for you. Just like gambling, while there may be some supper lucky guys who can win and become rich overnight, the vast majority won’t become rich that way. You have to patiently build up your long-term portfolio with good dividend paying stocks and buying them at the right price and keeping them forever. Let dividends reinvest, which will bring you magic over time. You can become very rich, much more than you can imagine simply by dividend reinvestment due to the supper compounding power. See one example here I wrote last year how your small investment with $32000 could make you millionaire some day. If I were that smart 20 years ago, I could have already retired multiple times by now. But it is still not too late for us. Many of us will still have 20-30 years from now for investing, even if you start from scratch today. My goal is to build up a retirement portfolio that can generate monthly income of tens of thousands automatically for me, when I don’t want to do anything. Such a day will come inevitably when you get old: you need money to support your daily life but you cannot physically work anymore to make money. This is exactly what I have been doing since about 6-7 years ago. Looking for great dividend paying stocks and buying them when their price come down to a good level and then simply keeping them with dividend reinvested. You don’t need to worry about what the market is doing short-term. Actually borrowing Buffett’s words: 'Down days always make me feel good' , because you can buy great stocks at bargain. Initially you may likely not feel anything great as such stocks tend not to rise in a fast pace but keep steady. However, after observing them for 6-7 years, it becomes more and more evident that this is truly an effective wealth building machine: your number of shares becomes bigger and bigger every quarter and accordingly the dividend amount you get becomes bigger and bigger. All is working automatically without any of your further effort. As a matter of fact, a declining stock price will become beneficial for this type of investment as your same dividend amount can buy more shares, which in turn will bring you more dividend (see the example link here for MSFT). What a truly worry-free investment!!
This has become a cornerstone of my retirement portfolio. But I’m doing something more: I use option techniques to effectively boost income and dividends from such stocks and therefore to accelerate the pace of inflating my portfolio value. I have never felt so good nowadays in managing my portfolios. I’m also helping my son to build up his long-term investment. I’m sure in 20 years from now when he is in his 40s, he will likely be already financially free simply from his investment.
If you like what I’m saying and would like to start, take actions. At the moment, MCD, WAG and TGT are all at good valuation and are worth buying. Currently I’m discussing with a few good friends to think about pooling money together to set up a partnership company and invest using this philosophy and my well established trading techniques. I’m pretty sure this will be a very successful wealth building business.
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