Questions and Answers for Dividend Investing Tips

By | November 9, 2015

I have recently been invited by Jimmy Atkinson at Dividend Reference to contribute to a special article that combines all the great advice from expert personal finance/ investing bloggers around the internet. The article is located here, 101 Dividend Investing Tips from the Experts and my advice is listed on #86:

First, reduce excessive trading. Less trading also means you pay less brokerage commissions. A good tax strategy is to sell your losses against your gains before the end of the year. And if you are still bullish in that sector/industry, you can swap them with similar companies. For example if you take losses with one pharmaceutical stock / fund, you can replace it with another pharmaceutical stock / fund that exhibits similar characteristics, so that you do not need to miss out on quick rebound in that sector/industry.

Jimmy had asked me several questions for the article and below are all the questions and my answers:

What are some tips or first steps for first-time investors to help them get started?
Read! Do a lot of reading before you start investing. It’s very tempting to dive straight in the stock market and start trading blindly, but reading and learning others’ mistakes can save you a lot of headache and give you a big head start.

What are a few basic keys to successful long-term investing?
Be patient and disciplined. The market has a lot of stocks and noise that will distract you. It’s important to know what your end goals are and remain focused throughout the market ups and downs.

Slowly and steady wins the race. It’s better to have consistent returns of 10% every year than to gain 100% on one year and lose 75% on another.

How can an investor pick good dividend stocks?
Buy quality companies that have a competitive edge and a small debt ratio. Dividend investing is not sexy. It’s not about owning the “biggest and baddest” companies. Rather, dividend investing is about owning the most stable growing companies that will provide consistent income, regardless of the market conditions.

What are some tips that can help an investor keep his/her investments organized?
Try to keep all your investments in one account, or as few as possible and set up reminders to review your portfolio regularly against your focus and goals. Write down your purpose of investing and remind yourself every time you review your portfolio.

How can an investor minimize his/her tax bill? (shown as #86 on 101 Dividend Investing Tips from the Experts)
First, reduce excessive trading. Less trading also means you pay less brokerage commissions. A good tax strategy is to sell your losses against your gains before the end of the year. And if you are still bullish in that sector/industry, you can swap them with similar companies. For example if you take losses with one pharmaceutical stock / fund, you can replace it with another pharmaceutical stock / fund that exhibits similar characteristics, so that you do not need to miss out on quick rebound in that sector/industry.

What are some lessons that you’ve learned during your investing career, either from big mistakes or huge wins?
Some of the biggest lessons that I’ve learned are from my biggest mistakes. Stay away from dividend traps and be careful of fake stock pumps.

Dividend traps are companies that have a very high and attractive yield but do not necessarily have the means to back them up. In a market downturn, the dividend trap companies will cut the dividend in a flash and the stocks will crash accordingly.

Fake stock pumps are when the stocks have been artificially inflated for no evident reason. This causes a sudden surge in the stock price, but as soon as you buy the stock, the stock collapses and you’re left holding a depreciated and worthless stock, also known as a “bag holder.”

Do you have one or two book recommendations for novice investors?
The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham and Think and Grow Rich by Napoleon Hill

 

 

 

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