Chapter Nine: Create Wealth Through Total Return
Revised and updated | Build Wealth with Common Stocks: Market-Beating Strategies for the Individual Investor
CHAPTER NINE SUMMARY
On Creating Wealth from Total-Return Value Investing
High-yield dividend stocks and dividend growth investing were all the rage in the post-Great Recession bull market for the wrong reasons.
The patient, disciplined, and thoughtful investor is committed to dividend value investing, aiming for total return through both capital gains and dividend income.
The first mistake many investors make is trusting a tip from a broker, financial writer, or even a neighbor. Do your research.
A practical alternative to high-yield investing is to assess the yield-on-cost of quality companies with low payout ratios that are already in your portfolio.
Instead of chasing yield, focus on buying quality at a fair price and, like Aunt Beverly, hold onto it for as long as you can, maybe forever. Any dividend payouts are a welcome bonus.
Focusing only on dividend yields and ignoring growth leads to poor results. Build wealth through total-return investing — capital gains plus income — so that, in retirement, you can enjoy your bucket list instead of depending on higher dividend payouts.
I rebalance our family portfolio about once a year — by adjusting the holdings to maintain asset allocation — treating it as a total-return vehicle rather than just income. Remember, dividends offer short-term compensation while waiting for the stock’s long-term capital appreciation.
This chapter explains why and how total return is the best approach for the thoughtful, disciplined, and patient investor.
Click below to read or listen to the updated chapter in its entirety on Substack.
You can also click on the book’s QVI webpage, where you can read or listen to this and all previous completed chapters.
https://davidjwaldron.substack.com/p/build-wealth-with-common-socks
