The best stock investment strategies are the ones that have been proven over a period of time, the longer the better. Few investment strategies have withstood the test of time. Great investors throughout history have used different approaches to investing according to their temperament and goals. The goal of every investor is to make money and compound their way to financial freedom while protecting their capital, whether the investor has a long term or short term view.
The different approaches are Value investing, Growth Investing and Income Investing and or Dividend Reinvesting. Each of these approaches can be used by the long term or short term investor, whether he is a day trader, momentum trader, contrarian investor, turnaround situations, buy and hold investor. These approaches can be used singly or jointly. Remember, every investor wants value from his investment. Everybody wants a bargain. Bargains can be achieved by analyzing the fundamentals of the company or by technical analysis.
Why is investing in dividend paying companies is the strategy to invest in the stock market when compared to other strategies? It is because once you have completed your analysis and you have decided to invest in the company, all you have to do is monitor the fundamental of the company including the payment of dividends.
Analysis of dividend income investing, value investing or growth investing is basically the same. All styles take effort and time to complete. However, keeping of income dividend is the easiest as you do not have to monitor the share price movement on an daily basis. With income investing you only need to monitor the fundamentals and dividends on a monthly, quarterly, semi annually or yearly basis. This gives you time to enjoy life.
All of the strategies study the Balance Sheet, Income Statement, and Cash Flow Statement to calculate the ratios such asset growth, rate of liability reduction, sales growth, earnings per share growth, and return on equity. Once a suitable company is found, then the investor studies the strength of the management. Finally, the investor calculates the intrinsic value. Intrinsic value is the value of a company based on an underlying perception calculated from different ratios of the business. If the market price is lower than the market price, then the investor has found a bargain.
The difference of each strategy is minimal that is seems they are the same. However, it is important to realize that each strategy seeks a different end result. Dividend income investing primarily seeks income first, value second and growth third. Value investing seeks value first, income second and growth third. Growth investing seeks growth first, value second and income from dividend is not important for growth investors. In reality all are seeking value hoping to profit from their investment strategy.
For each investor the value is different. The best strategy is dividend income investing because while waiting to get capital gains from growth you can still earn passive income along the way. Better still you can reinvest divined income to compound your net worth without having to sell the investment. You can hold the investment forever or sell when you think the full value as been achieved. With growth investing to only way to achieve income is to sell the investment. Why would you want to sell an investment that has grown in value? Therefore, income investing is always better. Remember, you must find value in every investment, you cannot pay too much for an investment otherwise you will never get value. As Warren Buffet says “price is what you pay, value is what you get”. What can be a better value than getting immediate passive income from dividend income investing?
So, are you looking to be an active stock investor, yet do not want to monitor your investments the whole day. Do you want to invest solely for growth or do you want income which will lead you to financial freedom through compounding your income.
All of these stock investment strategies can be used to achieve success. Do you want to choose the easy or the hard way? I am quite for the easy method will be your choice and that choice is Income Investing. In the long term income investing and reinvesting the dividends will help you achieve financial freedom. Remember to choose the strategy which is suitable to your temperament. Also, remember, the easier system will always be the better choice. Learn and become the master of income investing through dividends paying companies. Remember, the aim of investing is financial freedom.