How to Earn Predictable Returns That Go Up Every Year

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How to Earn Predictable Returns That Go Up Every Year

Post  Admin on Wed Sep 28, 2011 6:47 am

By Dan Ferris, editor, The 12% Letter
Thursday, February 24, 2011

Some people like to invest in stocks. Some people like to invest in real estate. Some people like to trade commodities…

But what you really want – what we all want – is an investment that goes up every year.

If you had that, you could invest money regularly, perhaps each month, confident it'd grow enough to outpace inflation and keep your money safe from loss. With that kind of confidence, a person with a regular income can sock a little money away every year, no matter what the economy or the market is doing.

What you want is a chart that looks like this:


No, that's not a stock price graph. It's a picture of larger and larger amounts of cash placed directly in shareholders' pockets by a World Dominating dividend grower. It's the graph of the dividends paid out by Intel from 2001 to the present.

Now compare that to a chart of the S&P 500 from 2001 to today:


Be honest with yourself, look at the above chart, and please tell me what makes the stock market so attractive. I hope you answered, "Nothing," because that's how it looks to me, too.

The S&P is down. It's up. It's all over the place. The long-term effect on investors is maddening. Over the last decade, the market has gone nowhere, compounding at a negative 0.48% a year.

If you count on the stock market's action as a source of investment return, you are literally gambling with your life savings.

Now, you might object: A dividend-grower's stock price can fall, too!

What most people don't understand that when the dividend goes up, the value of your investment goes up. If you're buying an income investment, the investment's value is based on the income you receive. When the income rises, the value of the investment rises, too. The stock market might take years to recognize it. But smart income investors know that doesn't matter so much.

No one has the option of stock prices that always go up. That doesn't exist. But everyone has the option of dividends that always go up. That does exist, and that's why investors who want to make consistent returns from stocks need to focus on dividends... and relentless dividend growers.

Good investing,

Dan Ferris

Editor's note: For more insight and actionable investment advice on protecting your wealth in a difficult market from Dan Ferris, consider a trial subscription to DailyWealth.

Our mission at DailyWealth is to show you how to avoid risky investments, and how to avoid what the average investor is doing. We believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular. Click here for details on a free trial subscription.
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