Sometimes it’s hard to talk politics. So let’s talk about religion. Because when it comes to kneeling down in front of the stock altar, IBM has got some religion. I’m talking about DIVIDEND RELIGION—paying one since 1916. Can I get an AMEN!
Look at the chart for my Survival Guy Stock above and consider life back in 1986 for a moment. Tom Cruise was lighting it up on the big screen with Top Gun. IBM? Not so much. (Talk about needing to put out a fire.) But it still paid a dividend that year. Sometimes setting it and forgetting it works wonders.
What were you doing in 1986? Me? I was 14 and would pop the soundtrack to Top Gun into my Sony Walkman and pedal my butt off like an F-14 Tomcat to my friend’s house. And yes kids, Top Gun was awesome on the big screen. Remember going to the movies?
A memory I want missile-locked into your brain is this: When it comes to investing, you almost pray for your stock to go down after you buy it—just as long as it keeps paying you a dividend. Then, through all the turbulence, your faith elevates your stock market acumen to Top Gun levels. But you have to keep the faith. Reinvesting in a falling stock takes nerves of steel.
But a funny thing happens after all of that reinvesting. Your white-knuckled hands, clasped in prayer, loosen up a little bit, and lo and behold, you see the miracle of compound interest. All of your prayers are answered. What’s so hard about that?
Now run your finger to the year 1994 on my chart. As a recent grad from Babson College, I remember, like it was yesterday, asking a former classmate, who happened to be working remotely for IBM. “What’s working remotely?” Turns out they were on to something.
Action Line: When it comes to investing, you don’t want to be in the prediction business. Find a company that treats you like you’re a faithful member of the church, giving you the respect you deserve. Then, have a little faith, add in some patience, and let the miracle of compound interest do its magic. Miracles do happen.
E.J. Smith - Your Survival Guy
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