Total Return
So here's why it's important to not just throw a dart at the stock market dart board. I always say to invest in best of breed companies that pay you a decent dividend - the dividend is the gift that keeps on giving even when the stock price isn't particularly going your way. AND you want to invest in companies with HIGH HISTORIC TOTAL RETURNS. While this TR won't be a guarantee of the future - it is a "metric" (measure) of what the market thinks of the investment over time.
There's steady eddies -- there's high beta (volatile) -- there's high risk that pays high dividends -- there's ETF's that are baskets of stocks that cover every conceivable category -- there's even higher risk IPO's (initial public offerings)... and this is what confuses people. There's just so many choices. Pick the wrong ones and they can kill your investment nest egg... while getting "lucky" could make you a millionaire. My feeling there is you might as well go out and buy $300 a month worth of Lotto tickets. I'll wave to you while you're dining in the food line. LOL
We've used ALTRIA (MO) many times as a steady eddy that pays a decent dividend. It's a SIN STOCK (Booze and smokes). It's very unsexy.... it's even hated for what it is! But it's GROWTH (share price increase) this year is like 33%.... all the while paying out a 4% dividend.
IBM (IBM) meanwhile is DOWN almost 16% while paying a paltry 2.7%
These are just examples I'm going to pick on -- to show why I use the history of their TOTAL RETURN to help guide my investment decisions...
IBM has a 1 year TR of DOWN 9.6% a 3 year of DOWN 8.8% and worse yet is a 5 year TR of UP 35.6%.....
MO has a 1 year TR of UP 39% -- a 3 year of UP 97% and a 5 year TR of UP 231.5%
Which one would you have rather invested in?? So my point is -- don't just pick names that you know (like IBM) because you THINK they're best of the best... do just a tiny bit of research and really make those important comparisons!
So just using the TR as a guiding light.... I would have bought the Altria (MO) over IBM.... and IF I'd done that - I'd have made a better return in ONE year with MO than 5 years with IBM. That's HUGE guys -- just huge. Is that metric 100% accurate? No. Nothing is.... but it's a pretty decent place to hang your hat. I ALWAYS use it as another point of reference before I hit the buy button.
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