Here is a brief excerpt from “The Conservative Income Investor” at the Seeking Alpha website. To read the complete article and check out others, please click here.
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[Here are the first three.]
1. “The chains of habit are too light to be felt until they are too heavy to be broken.”
Most people look at this quote and treat it as a cautionary tale about vices and the slippery slope of bad habits. But I’ll try to take a more positive spin on this, and apply it to DRIP investing. Let’s say you set up an account with Computershare to buy $100 of Exxon-Mobil stock each month. Getting started is the hard part—it’s easy to put off investing until next week, next month, or whatever. But once you get in the habit of automatically investing each month, it becomes part of your budget, and it will become an ingrained habit.
2. “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
There seems to be a perverse human tendency to make simple things easy. Why buy a well-branded beverage company like Coca-Cola that brings in regular, steady profits every year when you can buy a foreign derivative from an African tech stock that also sells airplanes in Morocco? Instead of getting caught up looking for the next big thing, look to the blue-chip stocks with growing earnings and dividends that are selling in the 10-13x earnings range.
3. “If a business does well, the stock eventually follows.”
This quote seems to come right out of the Benjamin Graham playbook. Graham famously said of the stock market, “In the short run, the stock market is a voting machine. In the long-run, it is a weighing machine.” We should remember that stocks represent a real ownership stake in companies, not mere blips on the screen. Eventually, the stock will correspond to the earnings growth. Dust off the annual report and see if the stocks you own are doing well and growing as a business and enhancing their competitive positions—if you already own the stock and the business is growing satisfactorily, you might have to wait awhile, but eventually, you’ll get your price.
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Here is a direct link to the complete article.
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