This series has already looked at some of the most important aspects to good long-term investing including:
- Understanding The True Nature Of Risk
- Keeping Stock Market Volatility In Context
- Having A Realistic View Of Your Long-Term Goals/Needs
- Mastering Your Emotions To Avoid Costly Mistakes
- How To Construct The Right Portfolio For Meeting Your Individual Needs
This article explains the four critical steps to building a stock portion of your overall portfolio. In other words once you have gone through the process of planning for your long-term future, including understanding your individual goals, risk profile, and optimal capital allocation, then it’s time to actually build the dividend stock portfolio that will hopefully serve as the cornerstone of your financial prosperity.
Step one involves picking the right stocks. The key here is you want to avoid taking on too much risk, by “reaching for yield”. Remember there is a big difference between a quality high-yield stock and a yield/value trap. A stock whose dividend isn’t safe isn’t worth owning. There are basically three factors that make a good dividend stock: