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Dividend Investing at its Best

With all the negative attention the stock market has received over the past 24 months its easy for investors to get itchy waiting for turbulence and fear to take hold once again.

For the majority of 2010 all I’ve done is dividend investing at its best: dollar cost average (DCA) into my existing portfolio of high quality dividend stocks with cash, my line of credit and proceeds from the sale of portions of my portfolio as stocks move above and below my targeted allocations.

Dividend investing is supposed to be boring, infact super boring, and this is why the approach is so effective for investors who know how to construct a portfolio, maintain that portfolio and build its equity over a period of time.  Dividends paid in tax efficient cash each quarter are put towards buying more shares of underweighted stock positions fueling more dividends in future quarters slowing gaining ground one share at a time.

This economic environment is where investing is tough psychologically because each investor feels like they should be doing more; buying, selling or tinking with their portfolio.  This is the unavoidable evil within each investor because we’re so accustomed to change in our everyday lives.  Investors tamper far too often with a portfolio that works over the long-term but doesn’t demonstrate immediate results over the short-term.  When you tamper by selling, switching or repositioning a portfolio/stock you’re reducing the effectiveness of your portfolio to achieve success in the future.  The intended turnover makes an investor feel as if they’re being productive but what they’re actually doing is taking away from their future earning power by not allowing a stock and/or portfolio to compound adequately.

These periods are the periods in the economic cycle where investors, IMO, are most productive.  You can buy stocks cheap but maintaining a portfolio is more than just knowing when to buy or sell and when to allow an investing thesis work how its intended to.  These are times when an investor sticks to their plan and profits from patience.

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{ 7 comments… add one }
  • The Passive Income Earner July 5, 2010, 11:34 am

    I just got setup with Computershare and CIBC Mellon to DRiP at a very low cost. I can't wait to see it grow little by little.

  • Think Dividends July 5, 2010, 9:37 pm

    Great article… More often than not I add to existing positions than and a new name to the portfolio. In a 25 stock portfolio at least one of them is always selling on the cheap side. My last buy was Ritchie Bros when it made a new 52 week low.

  • Think Dividends July 6, 2010, 4:58 am

    Great article… More often than not I add to existing positions than and a new name to the portfolio. In a 25 stock portfolio at least one of them is always selling on the cheap side. My last buy was Ritchie Bros when it made a new 52 week low.

  • larry macdonald July 6, 2010, 8:27 am

    I am doing more right now — i.e. looking more closely for bargains and buying when found

  • Dividend Lover July 6, 2010, 5:06 pm

    start a blog and track your investements in spread sheets. That will keep you feeling productive and you'll tinker less.

  • MG (moneygardener) July 7, 2010, 8:06 am

    here here.

  • TinyPotato August 10, 2010, 6:52 pm

    I did a calculation (and wrote it up in a blog post) to illustrate how a DRIP performs over time.

    Seeing tangible numbers (Dividend Lover's suggestion of tracking) keeps me motivated and on track

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