Warren Buffett has become one of the most successful investors our world has ever seen not by selling or trading companies, but by owning them. I will never amass the wealth of Warren, not even close, but you and I can apply some of his investing habits for our portfolios. Before I report my dividend income for last month, let’s take a look at some of Buffett’s most famous quotes and what dividend investors can apply from his words.
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
Never losing money might seem impossible because stock prices always float up and down. However, if you avoid selling the quality companies you bought in the first place when prices slide, and instead, keep the faith in your established companies that have a long history of paying dividends you can be rewarded for sticking to your plan long term.
Never invest in a business you can’t understand.
Although a subset of the rule above, even the best investor on our planet only invests in what he understands. Coca-Cola, a few big U.S. banks, Procter & Gamble and some big box stores like Costco are just a few of his holdings within his circle of competence – many of these companies have paid dividends for decades.
Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
Not much else to say really. If you’re not comfortable with owning stocks for many years then don’t bother with direct stock ownership at all.
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
When most investors feel panic-stricken when the stock market declines. Buffett feels the opposite and instead looks for opportunities to buy established companies at cheaper prices.
I’m definitely no stock market expert. I rely on some rather simple strategies to select and hold my stocks. When I see some of the companies I own hike their dividend recently I draw inspiration from the wisdom above, increasing my conviction that investing in established blue-chip companies alongside my indexing strategy is absolutely the right approach for me. At the end of last month, after most of my dividends were reinvested to buy more shares in the companies I already own I calculated the dividend income for the 2012 calendar year will be close to $6,300, instead of $6,220 projected a month ago. There’s one more month to go. Let’s see where I end up.
How is your passive income coming along in 2012? Are you investing in dividend paying stocks for income?