Index investing is not what it used to be

Lately all we here is, you should take an SP 500 index fund and invest in it. Put the rest on cruise control and you will end up with 7 to 8% return over the long term. I wish it was that simple,  be my guest and listen to this fantastic video from Jack Bogle, one of the Vanguard founder.

 

Basically, it tells you in plain English that if you get in now into an overvalued index fund you will lose about 3% return on valuation, on which you need to take off 2% for inflation. So let’s summarize now:

The S&P yields 2%. You might get an average of 5% business growth, so that’s 7 % total return. Like we said because of over valuation you have to expect a cut of 3% + 2% for inflation. So you end up with 7% – 5% = 2 % real return on your investment. Nothing to be excited about here. So if you’re are truly interested in doing better, you will have to educate yourself and manage your assets to the best of your abilities.

I have chosen the dividend growth strategy, other might take growth investment in stocks like facebook or amazon etc. In 2017 with very low interest rates and richly valued indexes, I believe it becomes a necessity to go and analyze yourself the companies you believe will bring you the best long term returns.

I am currently interested in the following potentials :

Starbucks SBUX:

WHY? people are addicted to their latte, I might as well partner with creative people opening a new coffee place every 15 hours.

The dividend? just read

sbux-div

Canadian National Railway:

Why? the stock is definitely not cheap but the Economic Moat is very strong, and it will protect the very good dividend growth record.

look at their network map

cnr-map

The dividend: are you loving it too?

cn-dividend

It’s a lot more simple than what you or other people might think.

Be well, and get wealthy!!!

 

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