You might have seen reported last week that Paul Hogan and his now ex-wife Linda Kozlowski have come to an agreement on how to split their assets. Apparently Linda gets a cool $6 million and to live in their house in Venice Beach for another few years. Hoges gets to keep Crocodile Dundee.
The Crocodile Dundee movies tend to split opinion, though most people agree that each movie was less appealing than the last. I'm quite partial to them, especially the first one. Hogan and John 'Strop' Cornell wrote a movie that played on many of the stereotypes – some true, some less so – of the Australian outback, and seeing Hoges and John Meillon in action still makes me smile today.
Perhaps my favourite is the scene when Mick Dundee cooks up some bush food, before offering it to Linda (as US journalist Sue Charlton). She asks him if he is going to have any, and his reply, immortally, is 'Well, you can live on it, but it tastes like s…"
It's a great line, and it's something many people should remember when it comes to investing (be honest, you were wondering what Crocodile Dundee had to do with investing, weren't you?).
Gold? No. Iron Ore? Nah… Show Me The Dividends!
At Motley Fool Share Advisor, we make share recommendations (yes, we're beating the market, thanks for asking), but that's not all we do. Core to our company's purpose is to help our members become better investors.
We get a nice 'pulse' on the market from the correspondence we receive. When the gold price was flying high, we were lambasted for missing the point. Ditto iron ore.
We don't hear much about either these days.
But recent emails have clustered around a couple of themes which, if you'll excuse the language, are of the 'you can live on it, but it takes like s…' variety.
I've lost money… now what?
No-one likes losing money on shares, but it's an occupational hazard. Not on the total portfolio over the long term, but individual positions. Even the best stock pickers aren't right all the time, and occasional losses are unavoidable.
There is a big difference between 'I've done my dough' and 'the shares are down temporarily'. But being able to tell the difference isn't always easy. We all know the panic-merchant who sees their shares down 5 or 10% and sells, swearing off the market. And the 'true believer' who is down 80% but still hoping for a lottery ticket-like return. There's a fair chance they're both wrong.
In both situations you need to take a step back, and ask yourself a very simple question:
"Do I have confidence that the company can turn in a market-beating return from this point". Not 'Is it possible…?' or 'I hope…', but 'Do I have confidence'. Whether the share price is down 80% or up 200%, the same question applies… and the past can't help you.
Hope? Panic? You can live on it, but all too often it ends up tasting like you know what.
Show me the money!
I don't need to tell you that dividends are king. I love them, you love them, and overvalued banks are the result (that sound you can hear is thousands of bank shareholders typing up their angry emails). Bank share prices are a topic for another day, but dividends are top of the charts… with a bullet.
Investing with a focus on dividends is a tried and tested wealth-building strategy. I'm all for it… as long as you do it right. The big mistake many investors make, though, is focusing on the dividend at the expense of all else.
My father always told me 'If it looks too good to be true, it probably is', and he was dead right. Chasing a 10% yield is more often than not a ticket to the poor house – the yield looks good precisely because investors have bailed out, sending the share price crashing, and the yield skyrocketing. The market is sometimes wrong, but not that often. The other mistake is buying for yield and forgetting about the business. Sure a 7% payout sounds good, but if the share price falls 10%, you're 3% worse off than before you started.
The deal of the century? Chances are you can't even live on it, and you know what it'll taste like.
Invest Foolishly… and Profit
There are lots of 'possible' ways to make money in the stockmarket. Most of them just end up making money for those who are trying to sell you the 'next big thing'. Maybe you can live on it – maybe you can't — but it tastes like s…
Instead, there is a lot of money to be made — for you, not from those who are trying to sell you a magic formula or secret software — from keeping it simple, and not trying to look for lotto tickets or some complex trading strategy. Simple investing — great companies and good prices — almost always wins.
