Myles of Investments

Read about my successes and failures. Learn from my experiences and gain insight without losing any cash!!!

Lesson: Catching a Falling Knife
Lesson: Currency Exchange
Lesson: Mutual Fund
Lesson: Paid to Wait
Lesson: Pricing in a Downturn

This is where you’ll find find my Blog. I will comment on the latest news relating to investing, real estate, and the financial markets.

Lesson: Get Paid to Wait to be Right

Want to get paid to wait? What I mean is, that you don’t really need to do any work, but you’ll get money on a set schedule while you wait for a bigger windfall. You can do this by purchasing undervalued stocks [see security analysis link] that pay a consistent dividend. The premise here is that the market either correctly or incorrectly values companies, and that this can differ with your opinion of what that company is worth. If you value a company substantially more than the market, you would be purchasing the stock and holding it until the market agrees with your valuation.

There are two problems with this: First, your money is tied up in an investment that only provides cashflow to you if the company pays a dividend. Purchasing a company with a dividend is like getting paid to wait for your investment to value, and it provides you with a steady flow of income in the mean time. Secondly, what if you are wrong about your valuation? Of course this is always a risk when investing. You get paid to wait, only to find out you were wrong. But, with this model, the risk can be reduced. If you total the amount of dividends you were paid, until you realize you don’t want to own that particular company after all, your purchase price is effectively reduced by this amount and you will have lost less money.

On a personal note, I bought an income fund that paid out a distribution monthly and the dividend was over 8%. The government changed legislation and the stock took a hit. In this case, I didn’t worry because it had been paying me for years, and I could continue to get paid while I waited for others to realize what a great company I owned! Since most of us may make a mistake or two, or need to wait years for a company to be worth what we believe it is worth, getting paid to wait is a great strategy.