Dividend Growth Investor: Simple Investing Principles to Follow
In a challenging year for the market, investors who focus on the fundamentals can come out ahead when things turn around. Some investors have been frustrated during the past few years. Traders first put money into highly speculative stocks, driving prices significantly higher.
Now, things have flipped, and it may be time for value investors to see some outperformance as growth struggles. Investors who follow a few simple principles related to value can likely fare well in today’s environment.
The first principle is to never lose sight of the power of compounding. Compounding portfolio returns can make a massive difference over time.
Avoiding highly speculative stocks that could detract from that return in a bear market keeps the compounding process strong.
The second principle is that stocks tend to rise over time. That’s good to remember at a time when the market is falling, seemingly endlessly. But investors who continue to reinvest dividends and add more capital during down markets can further improve their returns.
Finally, many investors may have forgotten that stocks are ownership stakes in a business. They’re not a piece of paper to trade. Looking at holdings in terms of taking an ownership stake can avoid much of the excesses from the past few years.