Are these your top 5 goals for investing? (2024)

As you can see $20,000 invested in a typical ETF would provide you with $100 in dividends each year, but the same amount invested in IBM would provide you with $978 in dividends each year.

Lower your risk

With any type of investing you will always encounter risk. But at Simply Investing I have designed a set of rules (think of it as a checklist), the 12 Rules of Simply Investing are designed to minimize your risk by only investing in quality companies that are financially healthy, and have a history of profitability. Before you invest in any company make sure it passes all of the 12 Rules of Simply Investing:

1. Do you understand the product or service offered by the company?
2. Will people still be using this product or service in 20 years?
3. Does the company have a low-cost durable (lasting) competitive advantage?
4. Is the company recession proof?
5. Has the company had consistent earnings growth? The EPS growth must be at least 8%
6. Has the company had consistent dividend growth? The dividend growth must be at least 8%
7. Does the company have a low payout ratio? Payout ratio must be 75% or less.
8. Does the company have low debt? Debt must be 70% or less.
9. Does the company have a good credit rating? Company must have a minimum S&P Credit Rating of “BBB+”.
10. Does the company actively buy back its shares?
11. Is the stock undervalued?
    a. The P/E Ratio must be 25 or below.
    b. Is the current dividend yield higher than the average dividend yield?
    c. The P/B Ratio should be 3 or less.
12. Keep your emotions out of investing.
    A reminder to keep emotion out of the selection process. Discipline and patience are the keys to successful investing.

Save on fees
All mutual funds, index funds and ETFs carry fees, these are referred to as the Management Expense Ratio (MER). The MER is used to pay for expenses incurred by the fund company for managing the fund. Even index funds cost money to manage, the fund company needs to cover the cost of staff, offices, IT systems, and marketing. The MER is charged regardless of how well or how poorly your funds perform, let's take a look at two examples (where the MER is 2%):

As you can see from the above list, these companies have been consecutively increasing their dividends each year for more than 30 years. Think about how many recessions and market down-turns we've had in the last 30 years, stock prices have gone up and down, but regardless of market conditions companies like these have increased their dividends each year. At the beginning the dividends might seem small, but regular increases put more money into your pocket and lower your risk, have a look at my example with TRP:

In 2000 I purchased 185 shares in TRP at $13.40 each, here are the dividend increase since I've owed this stock:

My initial investment in TRP was $2479 and since then I've received over $7377 in dividends from this one company. With the dividends received the risk to my initial investment has gone down to zero.

The share price today for TRP is $60, the total value of my investment (including dividends) is now worth: $18,477

Save you time
I know what you're thinking, "this stock investing is going to take too much time and effort". The reality is, you do not need to spend hours and hours each day watching your stocks. In my Simply Investing Course I give you a spreadsheet that you only need to fill out when you are ready to invest, some people do this once or twice a year. The spreadsheet makes it really easy to apply the 12 Rules of Simply Investing to any stock in the world. In the SI Report I do the work for you, I track over 250 stocks in the US and Canada and apply the 12 Rules of Simply Investing to each stock. On average my students spend about 10-15 minutes a month on building their money-generating stock portfolio.

Bonus goal
A bonus goal of this system is that you never have to sell your shares (if you don't want to), and your portfolio will still generate growing income for you. With bonds, term deposits, mutual funds, index funds, ETFs, and non-dividend stocks you eventually have to eat into your capital in order to pay for the things you want (or just to cover your expenses). With our approach I have clients earning $10,000 to $50,000 per year in dividends annually and they don't have to sell a single share in order to receive their income.