The new year is the traditional time to make resolutions on things we'd like to do better. And unless you're one of Warren Buffett's superinvestors and have already mastered the stock market, you may find that you have room for a resolution or two for improving your investment strategy.
Unfortunately, resolutions are notoriously hard to keep. If they weren't, we'd all be rich, thin, non-smoking marathon racers.
But what if there were a way to get paid to keep your resolutions? Wouldn't that help motivate you, at least a little bit?
Fortunately, there often are ways to get paid from your investments, regardless of whether you're resolving to improve your ability to buy, sell, hold, or sock away more. This is the first article in a short series on how to do just that, and it focuses on how to get paid to hold on to good companies.
The power of time and compounding
Buffett has famously said that his favorite holding period is forever. In order to meet Buffett's criteria of a "forever" stock, though, the company needs to have both an outstanding business and outstanding management. That's a tough hurdle to clear, but the rewards of success can be tremendous. Just ask the folks at Lake Forest College, who inherited $7 million that grew from Grace Groner's initial $180 investment in Abbott Labs through the power of time and compounding.
Holding even a good company's stock forever is challenging, especially once you stop working and start trying to live off your investments. After all, if you need cash, there are really only two ways to get it from your portfolio: sell a stock or collect a dividend. That dividend can be mighty powerful, as it's not only how you can collect cash from your investment without selling, but it's also often a hallmark of an exceptionally strong company.
Indeed, if you take a look at the companies in the Berkshire Hathaway portfolio that Buffett manages, you'll see dividend titans galore. Berkshire owns significant stakes in companies that not only pay good dividends, but also consistently raise them, too.
Peeling back Berkshire's covers
For instance, Buffett's Berkshire owns 200 million shares of Coca-Cola
Berkshire is also a part owner of ExxonMobil
Also in Buffett's Berkshire portfolio is Wal-Mart
Strong-enough companies led by solid-enough leadership teams with good-enough dividend histories provide enough impetus to even pull the once-resistant Buffett into technology stocks. Recent purchases of IBM
Find your own forever stocks
If your investing resolutions include a desire to hold on to good companies, there's nothing like getting paid a good, solid, and increasing dividend to do that. Whether you choose to follow in Buffett's footsteps or to find other companies you'd like to own forever, a rising dividend is a great thing to see. The routinely increasing payments not only help you hold as the market moves, but the incredible strength it takes to keep those raises going helps you truly understand the company's staying power.
At the time of publication, Fool contributor Chuck Saletta owned shares of Intel. Click here to see his holdings and a short bio. The Motley Fool owns shares of Coca-Cola, Abbott Labs, Intel, Berkshire Hathaway, Wal-Mart, and IBM, as well as having bought calls on Intel.
Motley Fool newsletter services have recommended buying shares of Wal-Mart, Intel, Coca-Cola, Berkshire Hathaway, and Abbott Labs, along with creating a bull call spread position in Intel and a diagonal call position in Wal-Mart.
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