Wednesday, April 2, 2014

Ways for achieving financial independence

People ask me why not save money and open a business? 'Hey, why not open a hot dog stand?". Well, although I enjoy eating hot dogs, I don't know if I'd like standing in one spot for 9 hours at a time serving them up. Although opening a hot dog stand is a very simplified version of the question, it is valid. Why not open a business instead of investing in dividend growth stocks? Why stocks in general? Let's examine that question.

1) Dividend investing is just a fancy name for becoming a part-owner of a dividend paying company. Why dividends? Dividends are simply put the litmus test for a company's health and well-being. And if one looks into historical records, he can see that over the last hundred years, dividends make up almost the 50% of total return in the stock market.

2) Investing in a public company, i.e. becoming a part owner, is a passive way for earning an income. Therefore, I have chosen this particular path very consciously. Dividends, that companies share with shareholders is a passive income, that I am after.

3) Evert person has unique personalities, and mine doesn't suit perfectly to becoming a business operator, but more attuned to beiung a business owner. So, again my goal is to generate as much capital as possible and become a proud owner of a number of great businesses, with valuable franchises.

4) Time is on my side. Time is in essence another litmus test, that over a long period shows if it has a sustainable business model and  attractive products. The companies, that I invest in are companies, that usuually has already proven to the world, that their mdoels work. So, the only conclusion that I like here, is that, I'd rather be a part owner of a great business, than try to compete with theses businesses. It is always better be a fan of a Barcelona, than Spartak Moscow.

These are just a number of reason, why I consider investing in securities of public companies is of utmost importance. This particular way works for me, but might not work for someone else.

No comments:

Why Companues Go Public: Rationality Comes First

This is a post that was written as a response to the post on FB. Here is the link: