|S&P 500: Apr 2007-Apr 2008|
The first companies I picked were banking firms! I opened and funded my brand-spanking new investment account with $1,000 and could not wait to get started. I performed the following three trades in three days.
- Apr 16, 2008 (six years to this day) – Washington Mutual Inc – a savings bank holding company, which was the largest savings and loan association in the US. I bought 25 shares at $11.04 each for a total of investment of $276. The company would eventually go bankrupt on Sep 25, 2008.
- Apr 17, 2008 – Wachovia – was the fourth largest bank holding company in the US based on total assets. I bought 10 shares at $25.35 totaling $253.5. After the tremendous collapse, the company was eventually absorbed by Wells Fargo (WFC) and I got 1 share of WFC in exchange. I still own this share as part of my WFC holding.
- Apr 18, 2008 – Merrill Lynch – the world’s largest brokerage firm. I bought 8 shares at $47.95 each totaling $383.60. The company, under distress, was absorbed by Bank of America Corp (BAC) on Sep 14 2008 and I got 6 BAC shares in exchange. I held this for a long time and eventually sold it at a loss.
It took me a year or so after that when I started realizing the power of dividends and even there, I learned lessons the hard-way – going for the high yield stocks and funds. After a lot of trial-and-error, I finally found my way to dividend growth stocks and found that this mechanism worked and stuck with it. I now use a combination of dividend growth stocks, high income stocks and funds and index funds for my complete portfolio.
Why Dividend Growth Stocks?
Even though my learning curve was far from ideal, I realized that a majority of the investment philosophy out there was the traditional buy-low-sell-high, which works in theory, but is nearly impossible for anyone to time the market right. I decided that this performance-chasing was not going to work for me and turned to the concept of dividend stocks and passive income to fund my retirement. Dividend growth investors choose stocks in strong companies and participate as business owners staying invested while sharing the profits on a periodic basis; instead of active trading stocks in growth-focused companies where profits are unrealized until the investment is exited.
By subscribing to this mechanism, I am not trying to beat the market each month, quarter or year. My goal is to increase my cash flow and generate enough passive income to achieve financial independence. By following this method, I have grown my passive income by leaps and bounds over the last five years. My progress so far is shown in the chart below.
|Annual Passive Income Progress|
What was your first investment? How did you end up choosing your current investment philosophy? Share your story below in the comments section.