Andrew Satter is the co-host of The Investing for Beginners Podcast, which has 1.5 million downloads. A self-taught investor since 2012, Sather is also the publisher of einvestingforbeginners.com and the daily email newsletter, The Sather Research eLetter.“
Recognized by GOBankingRates as one of the top money influencers, here he shares why he’s a fan of dividend stocks, what investors should look for in a company, and the fundamentals that are key to an investment strategy.
What do most people not know about investing that you wish they knew?
I wish more people knew that receiving dividends over the long term can build serious wealth. By investing in companies that pay growing dividends each year and reinvesting those dividends, you get dual streams of income that multiply over time. People simply do not have the long-term perspective to appreciate this simple but powerful fact.
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What should anyone do to build their wealth, no matter how much money they currently have?
Everyone should at least start and put something into the stock market, even if they think they don’t have much to save and invest. The most powerful ally you can have as an investor is compound interest over a long period of time.
Think of it like rolling a snowball down a hill – at first it takes a lot of effort and there may not be much snow, but as the ball rolls, it naturally picks up more and more snow with little effort. The same thing happens with building wealth. The sooner you start, the more your money can roll, and as that money works for you, it creates more small workers (dollars) that also work for you. That’s how money multiplies.
A few dollars today can turn into many dollars in the future, but that only happens if you let it build and build and build on itself, like stock market investments do.
What should investors focus on in 2022 to make the most of their money?
Investors should first and foremost focus on paying themselves first and make these investments a priority habit. Then I would look for the companies that you think have a good chance of being around in 10 or 20 years.
Ask yourself, do 9-year-olds like the iPhone, and does that make Apple stock a good opportunity at today’s price? Are Fortune 500 companies building their IT infrastructures on cloud providers like Microsoft Azure, and are they likely to consume more or less data over the next few decades, making Microsoft stock a bargain today?
These are just a few examples; investors should first focus on educating themselves about the business models of the companies they are interested in potentially investing in, and then learn what is a fair price to pay for those types of stocks.
What investments should they avoid?
First, avoid investments you don’t understand. This is true for both stocks and strategies. Don’t buy things just because they sound good – use reason and logic and constantly challenge your assumptions. Keep the long-term in mind and always have the fundamentals of a sound investment strategy—diversification, dollar cost averaging, and a buy-and-hold approach.
Jaime Catmull contributed to the reporting of this article.
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