Reducing Investing Risk

We’ve all heard the brokerage/financial advi­sor CYA dis­claimer: “past per­for­mance is no guar­an­tee of future results”.

I sort of pre­fer this quote, which I recent­ly saw at 37 Signals:

In the­o­ry there is no dif­fer­ence between the­o­ry and prac­tice. But, in prac­tice, there is.

An invest­ing the­o­ry tru­ism is that you can’t get reward with­out risk. In prac­tice this isn’t quite true. There’s an oppor­tu­ni­ty with respect to div­i­dends, div­i­dend con­ti­nu­ity, and div­i­dend rais­es that we can use to reduce the risk to our Elephant’s Paycheck Blueprint objec­tives.

When a com­pa­ny has raised their div­i­dend con­sis­tent­ly for 25, 30, even 50 years every sin­gle year in a row they are very like­ly to con­tin­ue with those increas­es. More like­ly than a com­pa­ny with­out such a track record.

In fact, large com­pa­nies who have raised their div­i­dends for 25 years or more are in a pret­ty exclu­sive club. There are just about 50 of them.

They’re called div­i­dend aris­to­crats, and they make great invest­ments for your Elephant’s Paycheck Blueprint because of our focus on max­i­miz­ing your Elephant’s Paycheck by com­pound­ing div­i­dend rein­vest­ments and div­i­dend rais­es over rel­a­tive­ly long peri­ods of time.

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