Strategy

This is my personal investing strategy that I use to grow a consistent cash flow from businesses I invest in. In essence, it is very simple, I Earn, I Save, I then Invest.

 

A road towards financial independenceI follow an investing strategy called Dividend Growth Investing (DGI), which comes from origins of value investing. DGI is not a get rich quick type of strategy, but a getting rich slowly and consistently with very real life results, cash flow in the form of dividends. DGI is a long-term type of strategy where investor buys investments to hold on to them in hopes of forever. There are some rare but discretionary exceptions that I do sell business ownership and mostly that is due to company's deterioration of fundamentals such as dividend cuts. I don't do any kind of day or option trading. I focus on investing into very high quality companies that have long histories of distributing their profits by paying growing dividends to its shareholders. These same companies are also known as Dividend Champions (Aristocrats) and they tend to increase their dividend payouts on annual basis consistently regardless of recessions, depressions, wars, or any other political or economical events.

saving-money-in-a-clear-piggy-bankThese dividends increases benefits the us, the shareholders, enormously over time as dividend cash flow received continuously grows larger on annual basis. A good example of this would be getting a pay raise every single year without asking for one, because a shareholder is small percentage, but a true invested part owner of the public company and dividends are our claims on future generated income. Once the company pays the dividend to its shareholders, the dividends are then are automatically deposited straight into my brokerage account. I then reinvest all of the dividends I receive from these companies manually when my capital allocation gets accumulated anywhere from $1,000 to $3,000. I stopped using DRIP program since it costs $0 for me to purchase company stocks with my brokerage. With more capital reinvested regularly, my share ownership in these companies continuously grows and with increased amount of shares I own, then my future dividend payouts increase simultaneously as well. Its like one thing feeding another thing. Plus, I work for a living so I love bringing fresh capital to invest in worlds greatest businesses. I like to think of it as a never ending compounding machine or virtuous cycle of mathematical wealth building. The portfolio receives dividends and then I try automatically buy more company shares. By rinsing and repeating, the DGI strategy continuously grows the cash flow uninterruptedly. With the magic of compounding, cash flow grows in the form of future dividend income and with dividend income continuously growing, this makes the shares more and more valuable over time to future investors and retirees. Which essentially grows the total value of the investments in the portfolio and income. I am talking about stock appreciation growth and dividends, not just growth. Win & win!

growing-money-tree-with-compound-interestTime is extremely important and valuable element. Since we cannot control it, it is our most valuable resource of our lives. It is slowly slipping away day by day and year by year. It is essential we carpe diem our financial position. That is why it is paramount to invest as early as possible, so that over time, the compound interest can work its magic by compounding the reinvested dividends, interest on interest or dividends on dividends, annual dividend increases, share buybacks, company's organic growth, earnings growth, retained earnings growth and currency inflation to growth of our portfolio of investments into a tremendous passive income stream of forever cash flow. This is why DGI is such an exceptional wealth building strategy that can be created to supplement regular job income and most importantly, income stream during retirement years and beyond.

DGI strategy is used by many including one of the most famous investors and father of value investor by the name of Ben Graham. A legendary investor and one of his disciples was Warren Buffett. Also, some other famous investors that arcanely use DGI strategy include Charlie Munger, Mohnish Pabrai and Joel Greenblatt to name a few.

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