The “market as a casino” analogy makes more sense than ever today. That’s because of the gamification of brokerage apps coupled with the focus (in general) on getting attention from financial media rather than providing sound advice and information. However, there’s a different, more patient and strategic approach to investing that has proven its worth over time: Long-term, buy-and-hold, dividend growth investing, counsels Ben Reynolds, editor of Sure Passive Income.
Since the goal is to buy and hold forever, I refer to this as “forever dividend growth investing.” Forever dividend growth investing is a strategy that focuses on investing in businesses that have a history of paying rising dividends over time and are very likely to continue paying rising dividends going forward.
These are established companies with long track records of a durable competitive advantage as evidenced by their dividend growth streaks. Forever dividend growth investing is about shifting your mindset and prioritizing the five principles below...
Mindset Shift #1: Patience Over Activity – It is in patiently buying and holding great, dividend-paying businesses for the long-run where dividends have the chance to meaningfully compound. Excess activity breaks compounding and increases frictional costs like capital gains taxes and trading fees.
Mindset Shift #2: Investing Over Speculating – One of the most significant shifts that occurs when adopting this strategy is the transition from a short-term trader or speculator mindset to that of a true investor. It's about seeing oneself as a part-owner of a business, rather than a trader looking to make a quick profit from price movement.
Mindset Shift #3: Simplicity Over Complexity – Forever dividend growth investing is not complex. It’s about buying great businesses that pay rising dividends and holding those businesses to build your own, growing passive income stream. The focus is on growing passive income, a relatively simple concept.
Mindset Shift #4: Dividend Income Over Price Fluctuations – With forever dividend growth investing, price fluctuations aren’t meaningful. What matters is rising dividend income. Since we invest for rising dividends, what the share price does isn’t nearly as important. An income focus helps you to more easily withstand price declines during recessions.
Mindset Shift #5: Long-Term Compounding Over Short-Term Gains – This mindset shift is the core of forever dividend growth investing. The focus is on long-term compounding of dividends, not short-term price gains. This naturally fosters a patient, income-focused investing mindset.
