Here is an amazing true money story about a one-time $40 investment …
So, you have been waiting for a correction to buy shares of a good profitable stock (companies like Chevron or Exxon Mobile) that has been increasing its quarterly dividends for the past 50 years.
When the stock price of the company finally went down, you pounced on it and bought some shares, but a few days later the whole stock market dropped like a rock, and the price of your newly owned shares went down along with the others!
What Should you Do?
Foolish investors will let their emotions get the better of them, panic and sell off, but Intelligent Investors know that this is a good thing. Intelligent Investors know that at a lower price, the cash dividends will re-invest (assuming they are in a dividend reinvestment plan, aka DRIP) and buy more shares at these much lower prices.
Yes, we all want the stock markets to go up, up and up and away! However, that is very unrealistic–history has proven time and time again that the stock market does go up, but it must correct (come back down to a lower level).
The second guaranteed fact is this; after the stock market crashes, or corrects, for over 110 years now it always goes back up to a much higher levels than before. Intelligent Investors have an iron stomach–they buckle their seatbelts, ride out the storm and are wealthier in the long run.
Let’s use a very true story, one that even Warren Buffet even is on record telling. In 1919, when The Coca-Cola Company started selling shares to the to the public, the price per share was $40, but one year later the American economy was in turmoil and the Coca-Cola Company stocks plummeted to $19 per share–that is a whopping 52% decline.
If you were a foolish investor, and you panicked and you sold off, you would have lost over half your money! However, the Coca-Cola Company started to pay a quarterly dividend in 1920.
And here is this remarkable true story; for the people that were smart and held on to that one share that only cost $40 and did not add one penny more; they just sat back and let the all the dividends reinvested, the value of that one share that had dropped from $40 to $19 is now worth over $11 million U.S. dollars as of today September 11, 2015.
This amazing story is not only true with the Coca-Cola Company but any company that has been around and integrated into the American economy for over 30-plus years.
These are companies that you, I and millions of people MUST pay for their products and services each day; a few good examples are your gas and electric company that is a utility company.
Since I started off this topic with petrol companies, another good example is the fact that you, I and millions of people put gas in our cars and trucks every week or every two week.
Sometimes when I tell the amazing-but-true $40 story of the Coca-Cola Company, a few people always say, “that was then, but now it is different.” I always ask, “Did you put any money in an increasing dividends paying companies twenty years ago?” The answer is always no from these doubting people. However, I always ask again “How much do you have now” and they get the point.
The fact is that most people plan on being around twenty years from now, and if you do not start doing something, even if it is a small step, you are going to be worse off than you are now!
In summary, you cannot buy time, but when it comes to compounding dividends, time buys you lots of money!
Thanks for your time and attention, and for those of you who want to have a lot more money in the future, please get a copy of one of my powerful but easy-to-read investment books that are sold everywhere e-books on paperbacks books are sold.
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