Snowball Investments

Jan. 23, 2016 7:57 AM ETPEAK
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Contributor Since 2013

Individual investor who is looking to grow income and capital

Since snow is blanketing most of the country, I thought this would be the opportune time to talk or in this case write about snowball investing. I assume that most people know this, but it might be worth a visit because I have been thinking about this subject for the past few weeks and I can't seem to get away from the affects of the giant snowball that can be accumulated with dividends and growing dividends.

When I was a child, I remember rolling snow from my front yard, around the back of our house and over the hill to a creek that sat about 300 yards away. As I would roll the snowball, it would start small but by the time I was by the creek I had created a huge mass of snow that I would then just push into the creek and watch as it fell apart in the water. The size of the snowball by the end was very impressive and I remember it taking every ounce of me to push it into the creek!

So what does this have to do with investing? Or maybe, you can already see where this is going, but I equate the snowball effect to HCP. HCP, Inc is a fully integrated real estate investment trust (REIT) serving the healthcare industry. HCP is the first healthcare REIT selected to the S&P 500 and the only REIT included in the prestigious S&P 500 Dividend Aristocrats Index following 30 consecutive years of dividend increases. Consider the power of the increasing dividend and the power of dollar cost averaging will have on your money and will eventually turn your small snowball into a sizable snowman! I am in my late 30's so I become giddy thinking about the size of the snowball that I can accumulate over the next 30 years. Just as I write this I am expecting dividend increases in HCP within the next couple of days. How will I take advantage of this? I will simply move a set dollar amount into HCP as it fluctuates between $32 low and its $49 dollar high. Buying around the ex-dividend date allows me to dollar cost average, control my buys and helps me limit emotions, which can be costly.

There are many authors and many articles that talk about the dividend growth model, but what about the investor that makes subsequent investments into that snowball. If I am going to build a sizable snowman then I have to add more snow! The impact of adding more money to our growing dividends will help me reach my goals and maximize my investment dollar faster and more efficiently. I understand about not wanting to put too many eggs into one basket and making sure I am diversified, but I can't help but think dollar cost averaging into Dividend Aristocrats that are pricing themselves into a buy zone will boost my savings and income and propel me into my retirement years. I am still learning to look at the fundamentals and charts and graphs but I can understand the buy zone and I can certainly understand most businesses that make up the aristocrats. This strategy may come across as too simple for some but I think it merits a look for the common person that is looking to grow money and income without too much thought. Especially in a market like this the past few weeks, when one focuses on the growing snowball and realize that it will take time and we can't fall into the trap of treating Wall Street as a casino. When used properly it is a wealth building, income generating machine. Expecting fluxuating prices to reach the moon is a false hope. Increasing divdends are real, meaningful and impactful!

So these are just my thoughts that I had to get out of my brain and onto some paper. Maybe someone will pick this up and a light bulb will go off in their head and they too can realize the impact of letting time be on their side and keep piling snow or money together to make an impactful splash at the end.

Disclosure: I am/we are long HCP.

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