Yep, I'm pretty prolific right now. I just realized I'll write 200% more entries this afternoon than I did all of last year. Full context -- I'm proctoring a final exam, so I:
a) am stuck in place; and
b) have some time to write.
Something I've mentioned here and there on this blog is income investing. Each time, I probably included some sort of disclaimer that I wouldn't turn this blog into some stock-hawking site (and trust me, I won't).
However, I will say a little bit here about income investing, and why it suits certain investors' temperaments.
First, income investing is about buying and holding securities that generate cash flows to the investor. Those could be REITs, BDCs, closed-end bond funds, or just good old-fashioned companies that pay dividends back to shareholders each quarter. It doesn't require any special sort of talent or skill, and it's certainly not very time-intensive. However, it does require a lot of patience. Anyone can model returns on a spreadsheet and show you how well someone would've done over the past 20 years buying, holding, reinvesting, and periodically adding to a position of a JNJ or an MMM. However, people are often their own worst enemy -- they want some fast action, so they sell their shares when the value moves up a bit to realize a profit, or they panic and cut bait after a drop in value.
I'm not going to say that either of those approaches is necessarily "wrong" by the way -- just that it's not my style.
Just as Goldilocks rejected one type of porridge for being too hot, and another for being too cold, before settling on the 'just right' bowl, I see a parallel with income investing.
a) am stuck in place; and
b) have some time to write.
Something I've mentioned here and there on this blog is income investing. Each time, I probably included some sort of disclaimer that I wouldn't turn this blog into some stock-hawking site (and trust me, I won't).
However, I will say a little bit here about income investing, and why it suits certain investors' temperaments.
First, income investing is about buying and holding securities that generate cash flows to the investor. Those could be REITs, BDCs, closed-end bond funds, or just good old-fashioned companies that pay dividends back to shareholders each quarter. It doesn't require any special sort of talent or skill, and it's certainly not very time-intensive. However, it does require a lot of patience. Anyone can model returns on a spreadsheet and show you how well someone would've done over the past 20 years buying, holding, reinvesting, and periodically adding to a position of a JNJ or an MMM. However, people are often their own worst enemy -- they want some fast action, so they sell their shares when the value moves up a bit to realize a profit, or they panic and cut bait after a drop in value.
I'm not going to say that either of those approaches is necessarily "wrong" by the way -- just that it's not my style.
Just as Goldilocks rejected one type of porridge for being too hot, and another for being too cold, before settling on the 'just right' bowl, I see a parallel with income investing.
- Investors are who 'too smart' will always reject it. They are into something way better. Sometimes they'll even insult income investing (must be pretty miserable for some dinosaur company that can't do anything better with its cash than give it away to shareholders, eh?), and sometimes they'll just dismiss it without being insulting. They have some hot tip about an IPO, or they have some "can't fail" strategy that involves shorting or day-trading some triple-leverage crude oil fund, or S&P futures. If that's you? Power to ya. I personally couldn't care less. Go for it. You do you. But I also know I've never met a single person who lives off of their "short the VIX here" and "buy the out-of-the-money crude futures there" strategy, or some crazy options thing that's "just common sense, really" and involves the names of exotic birds. NOT A SINGLE ONE. But if you listen to someone tells you how obvious it is that anyone can just print money by executing some quick trading strategy, you should then ask that person why he's still working. Instant buzzkill, guaranteed.
- People who are too skeptical will always reject it. You could show someone that aforementioned JNJ/MMM data, or similar data about other "Dividend Aristocrat" stocks, and you might be met with "yeah, but isn't the stock market rigged so a bunch of white guys in the Hamptons can buy boats?" My answer to that would be something like this: "I have no idea, but even if it were, how would that invalidate the data that's right in front of your nose?" Answer: it wouldn't. Many others think that work is only 'work' when it involves grunting and sweating, and that any money earned otherwise is somehow stolen or just plain illegitimate. If that's how someone thinks, I won't make it my job to convince them otherwise.
Other types of people are 'just right' for income investing -- people who don't mind a little boredom, people with some patience, and people who don't think they can out-time or outsmart the market.
Every now and then, you might catch those news stories about a retired custodian or librarian somewhere who managed to squirrel away an $8 million nest egg, often without even telling anyone (it's the family that discovers it after the person dies, or it's the building or charity in some small town that unexpectedly gets a massive donation). When you dig past the headline to see what that person did, I can guarantee you that it wasn't some "short the VIX" crock of horseshit -- it was buying and holding Dividend Aristocrats.
Unlike the Gordon Gekko fast-talkers who ooze condescension when they think they've lost you in their complicated options strategy, lots of income investors walk the walk.
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