Investing in Shares should be the main focus when you develop your
Investing in shares can secure a comfortable retirement
In order to build a retirement portfolio of income generating assets that is large enough to see you through retirement, which may well last 30 years or even more you will need the growth and income which investing dividend growth shares may provide.
So, what are the main types of investing strategies?
Investing in shares can normally be broken down into three popular investment strategies, including:
Value investing. Where is the value?
A value investor's focus is based on investing in shares of companies that ‘look’ undervalued. The key question a value investor asks, is:
if the company was to be sold tomorrow, what would it fetch?
If the share price is lower than this, a value investor should be interested to consider buying the shares.
So long as a value investor is capable to calculate, with some certainty, that the share price is lower than the value of the company, then, as a value investment, it's worth considering investing in the shares.
While some value investors prefer to invest in shares of solid businesses, others will buy almost any old company. From a 'pure' value investor’s perspective size doesn't really matter.
What do we like?
Our preference is clearly for high quality companies which are historically undervalued and at the same time offer a high dividend yield preferably with a track record of regular annual dividend increases.
We would consider selling when the share price no longer agrees with our fundamental analysis, because the price has risen too far, and the share price can be considered as being historically overvalued.
Show me where the growth is going to come from?
When a growth investor is considering investing in shares of a company the focus is based on businesses that are likely to grow their profits considerably year after year.
Rather than paying out any of these profits as dividends, these type of companies often reinvest their profits in the business to boost growth further.
When investing in shares in a growth company, a growth investor's return is primarily due to the growth of the business over the mid term in the form of capital gain once the investor exits from the company, rather than from recurring dividend income.
Growth versus value investing. What's 'best'?
While there is inevitably some overlap between growth and value investment strategies, the attitude and focus of the two kind of investors is typically distinctly different.
A value investor looks at the future earnings prospects of a company whose shares, according to the value investor, have been mispriced in the short term.
A value investor will usually consider at least some growth to be important. In contrast, a growth investor won't buy at any price and might sell quickly if the price 'overshoots'.
Why we prefer income investing
At Early Retirement Investor we focus on investing for income using high dividend stocks as the way to building wealth and to secure an early and rich retirement.
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