Andrew Sather is the co-host of “The Investing for Beginners Podcast,” which has tallied 1.5 million downloads. A self-taught investor since 2012, Sather is also the publisher of einvestingforbeginners.com and the daily email newsletter “The Sather Research eLetter.“
Recognized by GOBankingRates as one of Money’s Most Influential, here he shares why he’s a fan of dividend stocks, what investors should look for in a company and the foundations that are key to an investing strategy.
What do most people not know about investing that you wish they knew?
I wish more people knew that getting dividends over the long term can build serious wealth. By investing in companies that pay rising dividends every year and reinvesting those dividends, you get double compounding income streams that multiply over time. People just don’t have the long-term perspective to appreciate that simple but powerful fact.
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What should everyone be doing to build their wealth, no matter how much money they currently have?
Everyone should at least get started and put something into the stock market, even if they feel they don’t have much to save and invest. The most powerful ally you can have as an investor is compound interest over a long period of time.
Think of it like rolling a snowball down a hill — at first, you need much effort and there might not be much snow, but as the ball gets rolling, it naturally picks up more and more snow with little effort. The same happens with building wealth. The sooner you get started, the more your money can get rolling, and as that money works for you, it creates more little workers (dollars), which also work for you. That’s how you make money multiply.
A few dollars today can turn into many dollars way down the road, but it only happens if you let it build and build and build on itself, like investments in the stock market do.
What should investors be focusing on in 2022 to make the most of their money?
Investors first and foremost should focus on paying themselves first, and make these investments a prioritized habit. Then I would look for the companies that you believe have a good chance to be around in 10 or 20 years.
Ask yourself, are 9-year-olds taking to the iPhone and does it make Apple’s stock a good opportunity at its price today? Are companies in the Fortune 500 building their IT infrastructures on cloud providers like Microsoft Azure, and is it likely that they will consume more or less data in the next few decades, making Microsoft’s stock a bargain today?
These are just a few examples; investors should first and foremost focus on educating themselves on the business models of the companies that they are interested in possibly investing in, and then learn what a fair price to pay for those kinds of stocks is.
What investments should they avoid?
Number one, avoid investments you don’t understand. That goes for both stocks and strategies. Don’t buy things just because it sounds good — use reason and logic, and constantly challenge your assumptions. Have the long term in mind, and always have the foundations of a prudent investing strategy in place — diversification, dollar-cost averaging and a buy-and-hold approach.
Jaime Catmull contributed to the reporting for this article.
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