Monday, October 27, 2014
"If you don't take advantage of this idea," I told the crowd, "you can't call yourself an investor..."
I was recently in Nashville, Tennessee for the latest Stansberry Conference Series event. It was a great show. We heard from master resource investor Rick Rule, Agora founder Bill Bonner, and former Congressman Ron Paul.
And for the first time, I got up and told the crowd about my best idea... I said it was the day's top moneymaking strategy. And if folks only took one thing away from the conference, it should be this idea.
This idea has nothing to do with trading. It's the kind of thing you should buy now and forget you own... for decades, if you can.
Let me show you what I shared with the audience...
Take a look at the below chart. It compares the average annual return of individual investors from 1993 to 2012 with the returns of a bunch of other asset classes during that period.
As you can see, several asset classes averaged annual returns between 6% and 8%. But because he was buying and selling at the wrong times, the Average Joe investor did terribly... below even inflation, which means he was essentially losing money year after year.
Imagine looking back 10, 20, 30 years from now and realizing that, after all your effort, that's all you achieved?
On the other end of the spectrum, here's what some of the world's greatest investors did.
Bruce Berkowitz was named "fund manager of the decade" for 2000-2009. His Fairholme Fund made investors 13.2% over that time frame.
Leon Cooperman founded Omega Advisors after retiring as CEO of Goldman Sachs Asset Management. His average annual return since 1992, after subtracting management fees, was 14.3%.
Warren Buffett is probably the biggest name in investing... and for good reason. His average annual returns over 50 years of investing are just under 20%.
The promise I made to the folks in Nashville was that my idea could take them from one end of the chart – where the Average Joe is losing money – to the other end of the chart, where the all-time greats are building enormous wealth.
And there IS a way for part-time, amateur investors to get there... You can do it by compounding.
Compounding is "making money off the money you make," as my friend and mentor "Doc" Eifrig puts it. In short, if you own an asset that pays income, you use that income to buy more of the asset. And since you then own more of the asset, you earn even more income. Then, you use that income to buy more of the asset... and so on.
It's a snowball effect. Reinvesting your income increases your returns exponentially. Over the long term, it can turn even a small investment into a fortune. And there's a group of stocks that you should use to start compounding your wealth right away.
They're called the Dividend Aristocrats. A company gets into the Aristocrats if it has been raising its dividend for at least 25 years in a row.
In other words, these companies had to maintain their competitive advantages and generate plenty of cash year after year after year. They didn't get derailed by a bad economy, bad management, or a bad market. Only the world's best companies do that.
And the world's best companies will treat you way better than the average stock. Here's how the Dividend Aristocrats Index has done, with dividends reinvested, compared with the benchmark S&P 500 over the last 24 years.
And here's another way to look at it. Below, you'll find the average annual share price growth and dividend growth of the S&P 500 and the Aristocrats. And it's the dividend growth that makes the difference... An increasing income stream supercharges the effects of compounding.
You can see the effect in the next chart. If you take these average annual returns and project them forward by 30 years, you'll see that $10,000 invested in the Dividend Aristocrats would turn into $670,000. $10,000 invested in the S&P 500 would turn into just $320,000.
Now, I can't guarantee the Aristocrats will turn every $10,000 into $670,000 between now and 2044... But it's very likely they'll far outperform the S&P. That's the effect of compounding with growing income. It's mechanical.
And depending how long you allow your wealth to compound with the Aristocrats, you could very well find yourself in league with the world's best investors... Take a look.
Right now, there are 54 stocks in the Aristocrats index... that's a lot of stocks to buy and keep track of. But there's an easy, one-click way to own all of them:
The ProShares S&P 500 Dividend Aristocrats Fund (NOBL) owns all 54 stocks. It has low, 0.35% annual fees. And if you buy it and ask your broker to reinvest your dividends, you'll start compounding your wealth immediately.
Most Average Joe investors will never understand this idea or put it to work... and most Average Joe investors will achieve terrible lifetime results.
If you're looking to move from Average Joe returns to extraordinary returns, buy companies that relentlessly grow their dividends. The easiest way to do that is with NOBL.
Amber Lee Mason
"As an investor, one of the smartest things you can do is... nothing," Bryan Beach writes. Billionaire investor Warren Buffett summarized this secret with his famous mantra: "Lethargy bordering on sloth remains the cornerstone of our investment style." Learn how you can put this powerful secret to work in your portfolio today right here.
"Most investors will fail," Porter Stansberry writes. "This is the most important information I can possibly give you." To be successful, Porter says you need to understand why investors fail and how they fail. Learn the only chance you've got to be a successful investor.
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