Do you remember your first job? I forget what my father’s first job was, but I know he started working at a very young age scooping ice cream, pumping gas, and later selling Fuller Brushes. In addition to that, he was responsible for collecting rent from a number of his father’s rental properties in New Bedford, MA—where my dad was taught the most important lesson of all about money: compound interest.
The rental properties, according to my dad, were not in the best neighborhoods and sometimes he was knocking on doors to collect late rent. My dad was instructed by his father to never knock standing in front of the door, instead knock while standing to the side. “You never know what’s coming through that door,” his father said. But he would insist that my dad keep knocking. My dad didn’t like working for rents that were late, but he did the work. It was easier than coming home empty handed.
Instead of stressing out about collecting late rents, my dad worked at creating great relationships with the best tenants, often making them managers, and together they would run the different properties knowing which rents were going to be on time and which ones were going to be late. And thanks to his tight relationships with the managers, he would know why certain rents were going to be late and he would plan accordingly. Knowing why was always important.
Why am I telling you this?
Well, there’s an important lesson in my dad’s story that relates to investing in stocks. Today, just like yesterday and tomorrow, there’s too much hoping out there that the stock market will go up, and not enough working and studying about simply collecting rents or, in the case of stocks, collecting and increasing dividends.
Why do stocks go up?
Well, if we think about my father’s father, he wasn’t buying rental properties for price appreciation. He bought them for income. And if he or my father managed the properties correctly, then income would increase year after year after year, like it so often did. And yes, eventually the properties were more valuable because the income was double, triple, or some higher multiple from where they were purchased.
You, like my father and his father before him, want to think about stocks as a job, you are not buying stocks to sell them. You are investing for the long haul. You are managing your assets. You’re standing in front, sorry, to the side of the door. You are collecting rent. Occasionally the task will be stressful. But stay with it. Your dividends should increase year after year, as should the value of your stocks. No reason to be a seller. Your stocks may be so valuable you might never dream of selling.
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