December 11, 2014

The Basics of Dividends

Lets talk about the basics of stock dividends, what they mean, and how we look at dividends as Rule #1 Investors.


What are Dividends?


What are dividends? Dividends are a distribution of a companies earnings, decided by the board of directors, to its shareholders. They may be in the form of cash, stock or property.


Dividends are the money that the company pays out to its shareholders in cash.


For example, Coca Cola probably pays about a 2% dividend. If Coca Cola stock is, say, $40 dollars a share, 2% of 40 dollars is about a buck, .80 cents to a dollar and thats what its dividend is.


A lot of people live on the dividends of a company. In fact, in the great depression, people thought that the only value of stocks at all is the value of the dividend being paid out, because stocks weren’t going up they were going way down.


How Rule #1 Investors Look at Dividends


When we look at dividends as Rule #1 Investors, we look at it very differently than most people do. we see dividends, not as a return on our investment of 2% or 3% a year, we see it as a simple return of our capital. We’re looking to get our money off of the table.


Using Dividends to Lower Risk


We want to lower our risk every year by receiving dividends, so that reduces the amount of what we call basis every single year. As our basis goes down every single year, our risk of owning that business goes down. If the dividend is very high, lets say 6% a year, then in 10 years we might have removed 60% of our risk off of the table and we have a very low chance of losing money on that investment.


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December 05, 2014

Why You Should Practice Paper Trading

I'm going to talk to you real quick about using something called “paper money” in order to learn how to invest. Paper money trading is really cool. Let me tell you about it.

What is Paper Money and Paper Trading?

What is paper trading? It’s an idea that basically means working with pretend money, but doing it with real numbers in real time.


By combining the internet with the idea of paper trading, we have a really great package for online stock trading that helps us develop ourselves as investors, without taking any real money risk. We can also trade paper money without incurring the kind of emotional trauma when we use real money and we know that we don’t know what were doing.


How to Set Up a Paper Trading Account

What you should do is get yourself onto one of the paper money trading sites. Think or Swim is the one that we use a lot, but there might be some other great sites out there. Just google “paper money” or “paper trading” and go out there and get your account set up.


After you sign up, on you end up with about 200,000 dollars of pretend money to “invest” with in a system thats using virtually real time data.


Why You Should Practice Stock Trading

When you start investing you want to see that the effects are going well for you before you go out and start investing with real money. You want to have the benefit of doing some real trades before you start using real money because, stock trading for beginners is scary using real money when you’ve never done it before.


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November 26, 2014

How to Be Thankful as a Guide to Investing

I spent some time in Japan with a good friend of mine named Wahei Takeda. He’s known as the Warren Buffett of Japan, who made his entire fortune from scratch in post WWII Japan. Let me share with you what he told me about being thankful...

Wahei told me that the most important thing that you can do every day, the thing that was responsible for him making billions of dollars, is...


"Be thankful 1,000 times a day."


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