The Investing Advice That Makes Brokers Cringe
It’s one of the best investing strategies I know… and brokers hate it.
Brokers are in the business to make money. Every time you make a trade, they collect a fee. This means they like it when you make as many trades as possible.
They don’t care if you win or lose — every time you trade in and out of stocks, they make money.
#-ad_banner-#That’s why you’ll rarely hear Wall Street downplay or speak too critically of trading… It’s far too profitable for them.
But the truth is… when you trade every day… or every week… or even every year, you might be forfeiting your chance of earning BIG returns.
Why? Because the market‘s greatest stocks — not the extremely risky plays that skyrocket and crash seemingly overnight — take years to reach their full potential.
Take technology giant Apple (Nasdaq: AAPL) for example. Apple’s been one of the hottest stocks of the past decade… it’s undoubtedly been one of the market‘s best performers for years.
But even in the stock’s best one-year period, investors made 289%. I wouldn’t sneeze at a 289% gain, but anyone who bought for a year… or an even shorter time… sold themselves short.
Since 2003, Apple has gained 5,540%. That’s an average annual gain of 65% and enough to turn every $100 invested into more than $5,000 today.
Investing for a short period in a stock such as Apple is like ordering a seven-course meal and only sticking around for the appetizer. Sure you get a taste… but wouldn’t you rather have the whole meal?
How long then, is the appropriate amount of time to hold a stock?
If you’ve read my articles regularly, then you’ll know that I personally think there’s no better holding period than “Forever.”
Now when I say forever, I don’t mean invest in a company and take those shares to your grave… I’m talking about investing in companies that you can buy, hold and forget about without losing much sleep at night.
Of course finding these stocks isn’t always easy… stocks like Apple are few and far between.
And you certainly can’t buy just any stock, hold it “Forever” and expect to come out ahead. The market is littered with Enrons, Worldcoms even General Motors. Holding forever didn’t matter a lick with them.
But if you know what you’re looking for, then finding “Forever” stocks isn’t nearly as difficult as it sounds…
All you have to do is find a handful of companies that enjoy huge (and lasting) advantages over the competition… companies that pay their investors each and every year by dishing out fat dividends… and companies buying back massive amounts of their own stock.
These are the kinds of companies that can make you money no matter what. Once you find them, the strategy is simple — just buy their shares and hold “forever.”
I’m talking about companies like Philip Morris (NYSE: PM) and Intel Corp. (Nasdaq: INTC) for example. Both of these companies are industry leaders, commanding more than half of their respective market shares.
Furthermore, both companies also have a history taking care of shareholders by raising dividends and buying back stock.
In 2011, Intel spent more than $11.5 billion on share buybacks. It has also raised its dividend 110% in the past five years. Meanwhile, Philip Morris spent $4.4 billion on buybacks last year and has averaged a 39.1% dividend growth for the past three years…
These shareholder-friendly moves are just some of the reasons why both of these companies are currently trading at or around their 52-week highs. And they’re also why in a year where the S&P 500 barely moved, both stocks posted double digit returns — Intel earned investors a 39.4% return, while Philip Morris made shareholders 20.4%.
Risks to Consider: Of course with investing, there’s never a surefire thing. There’s no trait a company can posses that will guarantee its success. But in all my years of investing, I’ve found that strong shareholder-friendly companies are the ones that do the best in the long run.
Action to Take –> So instead of trying to beat the market day in and day out (racking up serious brokerage fees along the way), I suggest trying a different approach.
Pick a handful of strong, shareholder friendly companies that you feel confident in, buy them, and hold them “Forever”… Your broker may not approve of the idea, but as far as I’m concerned, it’s one of the most profitable ways I’ve found to make money in stocks.
[Note: Need help finding “Forever” Stocks? My research staff recently put together a report covering “The 10 Best Stocks to Hold Forever.” Simply put, these are the 10 stocks that we think you can buy today and basically hold for the rest of your life. You can find out more by visiting this link.]