How I Learned To Stop Worrying and Love Dividends

Having learned the true value of cashflow investing, I began studying various asset classes to determine where I should invest. I read about real estate and plan to get involved in rental real estate at some point, but I didn't have the level of working capital I would need to properly start in the world of rental properties.

One evening, I happened to be watching an episode of Charlie Rose and he had, for the hour, Warren Buffet as his guest. If you don't know who Warren Buffet is, let's just say, he's the richest person in the world and he did it all through brilliant stock investing. In the interview, Buffet did exactly what Buffet always does. He simplified the concepts of investing in such a way that a 10 year-old could understand it. Does the company sell a product that a ton of people use on a regular basis? Then it might be a good investment. Easy.

Well, mostly. This at least gives you a solid lead on companies that you want to research further, but you still need to know how to analyze a stock. I needed to know how to analyze a stock, utilizing Buffet style assessments. That lead me to a book titled Buffettology.

Written by Mary Buffet, a former daughter-in-law, who may be a little sleazy for using her married name to sell books, Buffetology takes a look at historic Buffet investments and explains the types of analyses applied to each of these companies. The book is rock-solid. She clearly explains the calculations involved and makes it very easy for the reader to perform the same functions when looking at companies for investment.

The primary advantage stocks have over real estate is this; a rental property can cost $200k, while a share of Pepsico is $56. You can start earning a decent return for a much smaller investment. It also allows someone like me to get started investing, despite not having a considerable capital base.

So, Kiyosaki has taught me that I need to invest for cashflow and Buffet has taught me how to invest in stocks. How do I make these teaching coexist? Easy. By investing in stocks that not only pay dividends, but increase those dividends by a fair amount each year.

Next post: How I Find Dividend Stocks