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I contributed a couple tips to Jimmy Atkinson’s article 101 Dividend Investing Tips from Experts:

  • The key to getting started is getting started. If you have modest funds, that’s OK. Brokerage commissions are cheap enough these days that you can start with as little as a couple hundred dollars without the commissions eating too deeply into returns. Open an account with a good online broker: I personally prefer Interactive Brokers and TD Ameritrade. And then, just do it. Get your feet wet. Buy that first stock.
  • In investing over the long-term, you really win by not losing. Keep your fees, trading expenses, and taxes to a minimum. Avoid wildly speculative investments that have the potential to blow up. Keep your position sizes reasonable; I recommend weighting individual stocks no more than about 5% of your overall portfolio. Doing just these basic things will get you a good way towards financial success. Stock picking really becomes secondary.
  • The characteristics that make a good dividend stock are remarkably unsexy. You want reliability and longevity. The longer a stock has paid its dividend without cutting it, the better. I had a general rule of thumb that is getting a little bit dated now, but it’s still pretty valid: What did the stock do in 2008? If the company continued to pay its dividend throughout the 2008 financial crisis, then that is a stock that can survive the end of days. As a general rule I like stocks that have paid a consistent dividend for at least five years (10 years is better). And I want to see average dividend growth of at least 5% per year over that time period.
  • Keep the most tax inefficient investments in an IRA if possible. This would include bonds, precious metals and stocks that you intend to trade regularly. Positions that you intend to hold for long-term capital gains (think index funds) and that generate minimal current income can be held in regular taxable accounts.
  • Avoid acting impulsively. Nearly every mistake I’ve ever made came from acting emotionally without thinking through the details rationally.

To read the full article, click here.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

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