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So learn, Rules of 72.

Most successful dividend investors

Dividend investing is as sexy as watching paint dry on the wall. Defining an entry criteria that selects quality dividend stocks with rising dividends over time and then patiently reinvesting these dividends while sitting on your hands is not exciting. While active traders have a plethora of hedge fund managers on the covers of Forbes magazine there are not many well-publicized successful dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.

I did some research and uncovered several successful dividend investors, whose stories provide reassurance that the traits of successful dividend investing I outlined in a previous post are indeed accurate.

The first investor is Anne Scheiber, who turned a $5,000 investment in 1944 into $22 million by the time of her death at the age of 101 in 1995. Anne Scheiber worked as an IRS auditor for 23 years, never earning more than $3150/year. The one important lesson she learned auditing tax returns was that the surest way to become rich in America is by accumulating stocks. She accumulated stocks in brand name companies she understood and then reinvested dividends for decades. She never sold, in order to avoid paying taxes and commissions. She also never sold even during the 1972-1974 bear market as well as the 1987 market crash because she had high conviction in her stocks picks. She also held a diversified portfolio of almost 100 individual securities in brand names such as Coca-Cola (KO), PepsiCo (PEP), Bristol-Myers (BMY), Schering Plough (acquired by Pfizer in 2009). She read annual reports with the same inquisitive mind she audited tax returns during her tenure at the IRS and also attended annual shareholders meetings. Anne Scheiber did her own research on stocks, and was focusing her attention on strong franchises which have the opportunity to increase earnings and pay higher dividends over time.

In her later years she reinvested her dividends into tax free municipal bonds, which is why her portfolio had a 30% allocation to fixed income at the time of her death. At the time of her death, her portfolio was throwing off $750,000 in dividend and interest income annually. She donated her whole fortune to Yeshiva University, even though she never attended it herself.

The second investor is Grace Groner, who turned a small $180 investment in 1935 into $7 million by the time of her death in 2010. Ms Groner, who worked as a secretary at Abbott Laboratories for 43 years invested $180 in 3 shares of Abbott Laboratories (ABT) in 1935. She then simply reinvested the dividends for the next 75 years. She never sold, but just held on to her shares.

She was frugal, having grown up in the depression era, and was the classical millionaire next door type of person who was not interested in keeping up with the Joneses. Grace Groner left her entire fortune to her Alma Mater. Her $7 million donation is generating approximately $250,000 in annual dividend income.

The reason why dividend investors are not highly publicized is because dividend investing is not sexy enough to be featured in the financial mainstream media. In addition to that, it is not profitable for Wall Street to sell you into the idea that ordinary investors can invest on their own. Compare this to mutual funds, annuities and other products which generate billions in commissions for Wall Street, despite the fact that they might not be in the best interest of small investors.

The third dividend investor is Warren Buffett, the Oracle of Omaha himself. In a previous article I have outlined the reasoning behind my belief that Buffett is a closet dividend investor. He explicitly noted in his 2009 letter that "the best businesses by far for owners continue to be those that have high returns on capital and that require little incremental investment to grow". His investment in See's Candy is the best example of that.

Some of Buffett's best companies/stock that he has owned such as Geico, Coca Cola , See's Candy are exactly the types of investments mentioned above. He has mentioned that at Berkshire he tries to stick with businesses whose profit picture for decades to come seems reasonably predictable. Per Buffett the best businesses by far for owners continue to be those that have high returns on capital and that require little incremental investment to grow. In addition, his 2011 letter discussed his dividend income from all of Berkshire Hathaway investments, including his prediction that Coca Cola dividends will keep on increasing, based on the pattern of historical dividend increases.

In this article I outlined three dividend investors, who managed to turn small investments into cash machines that generated large amounts of dividends. They were able to accomplish this through identifying quality dividend growth companies at attractive valuations, patiently reinvesting distributions and in two out of three cases maintaining a diversified portfolio of stocks. These are the lessons that all investors could profit from.

Taken from: http://www.dividendgrowthinvestor.com/2012/06/most-successful-dividend-investors-of.html

bursa-dividend.blogspot.com

When 95% happens in the last 5% of its time

This is another interesting fact [95:5]. Most of of may be familiar with Pareto law, or the 80:20 rule.
But this 95-5 has turns many events upside down. Wealth destroyed as well is created when this happens.

Who are the losers? Sad to say in this event the majority is at losing end. Only the contrarian wins.

In the above example which happens nearly a century ago, you see the tides is slowly rising and it takes about 4 years to developed but took less than 5% of the total event time to rise 95% of its original value.

So next time when you see some response like "nah, it won't happen", think again because when it happens you might want to do like this.....

Rule of 72

72 rules? No, it is a rule in investment. Once you know this rule, it will change your investing return horizon. The hunt will start and maybe you will not consider fixed deposit at all! Well, at least for me.

A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.
For example, if you want to know how long it will take to double your money at 12% interest, divide 12 into 72 and you get six years.
You can also run it backwards: if you want to double your money in six years, just divide 6 into 72 to find that it will require an interest rate of about 12 percent.

Read more here and play with the calculator HERE

How much house can you afford to buy?

The rule: You shouldn't buy a house that costs more than 2 1/2 years' worth of your income.

Why it works: During the wild years of the housing boom, consumers seemed to stop grounding their housing decisions in income. This rule can help remind consumers that income should be a primary criterion when deciding how much to pay for a house.

Grain of salt: One problem with this rule is it doesn't take into account how housing costs can fluctuate based on interest rates, says Pomeranz. For instance, a house that costs 2 1/2 times your income may be unaffordable in a high-rate environment but easy to pull off in a low-rate environment, says Pomeranz.

A better guide to whether to buy a home is rental prices in your area, says Finke. If you could rent a home that meets your needs for less than it would cost to buy and maintain a home, then renting is a no-brainer, he says.

Like the article, read full article here

If you are a Parent with kids, are you ready?

Tahukah anda bahawa Kos Pendidikan IPS Swasta yang berjumlah RM 68,520 hari ini, akan menjadi RM165,133 selepas 18 tahun akan datang? Di sinilah yang ramai orang tidak sedar, betapa pentingnya untuk memulakan simpanan pendidikan anak-anak dari sekarang!

*Sumber : Education Guide Malaysia 4th edition