The constant stream of news that we live with now can be overpowering when we want to make simple investing decisions.
That's why two investing ideas from Warren Buffett advise investors to just focus on their research and conviction.
The first is to know and stay within your "circle of competence". If you have some experience or knowledge in an industry, you will probably do your best by sticking with stocks in that industry. You can learn about new businesses and industries, but straying out of your circle with inadequate knowledge opens you up to bad surprises.
Buffett knows what he knows because he has read thousands of company reports, yet if he can't understand what a company would be doing in ten years, he gives it a pass.
The second is "wait for the fat pitch". Buffett, a big baseball fan, says although a batter only gets three strikes before going out, investors can decide to wait for the perfect ball to come with an unlimited number of strikes. Even if a good investing "pitch" comes, you can say "not good enough" and stand your ground. The outside world (and even your inner self) may be yelling "swing", but you remain calm and wait for that big, fat stock pick that will really pay off.
Here are two blue-chip stocks that have fat dividend yields and could be the stock picks which pay you good returns over many years.
— Insurance Australia Group Limited (ASX: IAG)
The insurer holds the largest share of the general insurance market with brands such as NRMA Insurance, CGU and SGIO. Its dividend yield is a juicy 6.2%. The insurance industry is recovering from several years of major natural disasters, but this company has implemented improvements that will pay off over the next few years.
Over the long-term, having Insurance Australia Group in your portfolio should be a stable source of dividend income.
— Coca-Cola Amatil Ltd (ASX: CCL)
Although the company has slipped in share price recently, that is to your advantage. The bottler and distributor of Coca-Cola soft drinks and other beverages in Australia, New Zealand, Indonesia, Fiji and PNG is regularly a strong choice for long-term investors. A temporary setback in expected earnings is being met by management with a business shake-up.
Its hefty 5.6% dividend yield rewards shareholders who can buy in at discounted prices now, and reap the benefits of the restructure along the way.
