Money is definitely the biggest taboo these days. People never talk about how much they make or how much they owe. Nonetheless, the place where information leaks is probably when we talk about investments and when someone was successful with his latest trades. You will never get the full details of the trade, but you will surely be aware that your friend, neighbor or brother-in-law made 100% return on his latest trade (before losing 50% on his past 4 trades, but he won’t tell you that!).


    The idea of making lots of money from investing is very seductive. You may dream of becoming the next Buffett but you won’t make it without a sound investing plan. As I’ve previously mentioned on this blog, this is my #1 investment advice for all investors: have a plan.


    One of my readers, Gary, asked me how to write down such thing. I thought it was a terrific idea to share with you not only my dividend search criterion, but to share with you my complete investing plan. I’ll share with you my plan step by step as you can use my model to build your own investing plan. Remember, this is my plan, not yours. You can’t copy it and think it’s a good plan for you. An investing strategy is very personal and should be tailor made for one’s needs.


    This article is the first of a series as I just started to write about this topic and noticed that if I want to give you a clear view of how to setup your investment plan, I should deliver it in segments.

    I must also add, this topic covered in detail through a series offered to newsletter subscribers only. The good news is that the subscription is 100% free ;-)


    Click here to subscribe to my mailing list



    Step #1: Why Do You Invest?



    Today’s step starts with a four word question. This sounds like a simple question, but the answer is crucial for the rest of the plan. Why do you invest? Why not go on vacation, buy a new car, a home or pay off your debts? What is the rationale behind you putting money aside in an investment account?


    I personally invest for many reasons

    #1 I have an account to fund my children’s private school (the oldest one will start in 3 years)

    #2 Another for my children future education (called an RESP in Canada)

    #3 And my biggest account for my retirement plan (called an RRSP in Canada).


    The focus of this article will be on my retirement account. It’s the biggest and probably the most common reason why someone invests. In order to answer the question why do I invest? I must give you a little bit of background:


    #1 I have a defined pension plan, meaning my employer will pay 70% of my salary at the age of 65.

    #2 I am turning 33 in 2014, therefore, I’m 32 years away from retirement.

    #3 I have limited space (and budget!) to contribute to my RRSP.


    The goal of my retirement account is to compensate for the 30% income loss at retirement. I’m already very lucky to have a defined pension plan that will allow me to retire peacefully. Technically, I could enjoy life, spend all my money and work until I am 65 and cash in my generous pension plan.


    However, I never take anything for granted in life and would rather save some money on the side just in case. In the best case scenario, I keep my defined pension plan and stop working at the age of 65 without losing a penny. The worst case scenario is that I lose my pension plan security and I’m left with my savings. Saving money in my retirement account also creates another possibility: retiring earlier than 65. If I accumulate enough funds, I might be able to retire at 60, who knows?


    Since I want to cover 30% of my income and have 32 years left prior to retirement, my investing strategy will be focused a lot more on growth and revenue creation. It would be a whole different story if I was 5 years away from retirement.


    This is why it is so important to understand clearly why you want to invest


    Some invest “play money” to make big gains but don’t expect to need this money any time soon.

    Some invest for a future project like buying a home, retiring or children’s education.

    Some have plenty of time in front of them to invest.

    While others have only a few years left before their project happens.


    When you ask yourself why you invest, it is also important to understand your own background. If I didn’t have such a pension plan, I would definitely focus on saving more and my investment strategy would definitely be different. The fact I have a pension plan clearly changes my risk tolerance.


    Speaking of which, this will be our next topic in step #2: Understanding your risk tolerance. I will not only cover the classic investor profile, but also help you understand the underlying risk there is between two stocks. It’s a whole different ballgame to invest your next $5,000 in a junior mining venture vs buying shares of Procter & Gamble (PG)!

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    As you can see, I’m back with my regular posting schedule. Vacations were great… but they are not over. I’m also currently working on a new system to rank all dividend stocks and give them a score. This will be the Rock Solid Ranking. Look for it in a few weeks!


    If you have missed it, I suggest you start by my #1 Investment AdviceNow it’s time to share yours!


    Great compilation of top 20 dividend growth stocks from 20 bloggers @ Dividend Growth Stock Investing – JNJ and KO are the most popular J


    Dividend stocks for consistent cash income @ Dividend Growth Investor


    New design and awesome post from Dividend Mantra: Selective Dividend Reinvestment Vs. Drip


    Interesting concept: you don’t need a million to retire @ My Own Advisor – Right… I need probably 2M$!


    Top 20 Dividend Stocks @ The Passive Income Earner



    Dividend Stocks Analysis


    Walgreen (WAG) @ Dividend Growth Stocks

    MacDonald’s (MCD) @ Passive Income Pursuit

    Wisconsin Energy Corp (WEC) @ Dividend Engineering

    Pepsico (PEP) @ Captain Dividend

    4 Comments   |   Read more >


    I think that I don’t have to convince anyone on this blog that dividend investing rocks. That it’s among the best investing strategies there are over the long term. It produces income and reasonable growth potential. It basically brings to the table what any investor is looking for: a source of both revenue and growth.


    There is one thing however, amongst all the arguments that we can discuss, what is more attractive about dividend investing than any other investing strategy. This is what I call the best thing about dividend investing. Since 2010, I’ve worked to convert my portfolio into a 100% dividend stock account. I’ve successfully made the move and am now cashing in the dividends (literally) of my *new* investing strategy.


    For a long time, I struggled to define why dividend investing was so interesting for me as an investor. I was able to find so many reasons to explain my decision but had a hard time to define it into one sentence… until I had this discussion with one of my friends who’s actually an ETF investor. He brought the point to me as we were comparing both investing strategies:


    The best thing about dividend investing is that you can build a system easily where you find high quality stocks


    When you think about it, dividend investing is far from rocket science. All you need is to find a company that shows a positive trend of revenues and profits paying an increasing dividend. You can combine other factors while building your own investing strategy, but dividend investing remains very basic and simple to understand for any investor. At the same time, it is a powerful way to invest over the long haul.


    You don’t need to spend hours each day on your computer to trade.

    You don’t have to analyze graphs and moving averages for hours to find the sweet spot to trade.

    You don’t have to follow your stocks every day to see if there is bad news on the horizon that will be a game changer.


    Definitely, the best thing about dividend investing is that it is a powerful, yet effective investing strategy.

    Now your turn, why do you like dividend investing so much?

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