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The Lazy, "Do Nothing" Way to Safely Make Money in Stocks

By Brian Hunt, Editor in Chief, Stansberry Research
Wednesday, August 8, 2012

Right now, DailyWealth readers finally have the opportunity to do something everyone wants to do...
Make money by doing nothing.
Many people are fine with doing hard work. It's the American way. But everyone likes income that comes pouring in without any real work. It's human nature.
And anyone who has taken our advice to buy dividend-paying stocks now has the opportunity to do just that. You just have to ignore the gibberish some of our fellow financial publishers are producing right now...
Over the past few years, we've stressed the importance of dividends and high-quality stocks dozens of times in DailyWealth. In a world full of risk and fraud, getting paid steady and growing dividends is one of the market's best strategies. Our colleague Dan Ferris even coined a term for the strategy of buying elite, dividend-paying blue chips. He calls them "World Dominating Dividend Growers." 
And anyone who took our advice has saved – and made – a lot of money over the past few years.
You see, our dividend idea went through a major "stress test" in 2011. The broad market endured huge swings... and was crushed during the summer European panic. It fell 17%, and some of the market's riskier companies fell 25%-50%. But most of our favorite dividend-payers – like Coke, Intel, and Wal-Mart – held up just fine.
I expected these dividend-payers would continue to do well. In January, I explained how owning these stocks would become the "fashionable thing" on Wall Street: 
Our guess is that, in 2012, more and more people recognize the safety and income-producing power of basic dividend payers. With interest rates low, the fashionable thing on Wall Street will be for fund managers to say, "I own blue-chip dividend payers."  
This will send a flood of new money into these stocks. Corporate managers will see the share prices of divided payers rise... so they will hike payouts. This will create a "momentum" trade in dividends.
Here we are, eight months into the new year, and dividends have become the "fashionable thing" on Wall Street. A huge amount of money has flowed into top dividend-paying stocks.
Wal-Mart (NYSE: WMT), for example, has gained 30% in just over three months. It's moving more like a fast-growing tech company than a blue-chip behemoth.
Wal-Mart (WMT) Soaring Over Last 2 Years 
It's not only Wal-Mart. Other reliable dividend-payers like Coca-Cola, Johnson & Johnson, and Abbott Labs have soared as well. Just look at the chart of Coke. Again, that kind of move is normally reserved for fast-growing, smaller businesses.
 Coca-Cola (KO) Soaring Over Last 2 Years
These huge moves have journalists and investment "experts" crawling out of the woodwork to claim that "dividend stocks are in a bubble." I know these claims have frightened some investors... even to the point of selling their positions.
What should you do in this situation? Should you sell because these stocks have soared so much recently? Should you sell because people are saying dividend stocks are in a "bubble"? 
First of all, you should realize that anyone who says dividend stocks are in a bubble doesn't know his financial history. And he doesn't know what a market bubble looks like.
In a market bubble, like Internet stocks in 1999, a huge amount of "non investors" get into the game. In a real bubble, personal trainers, taxi drivers, and schoolteachers suddenly become "experts" on the hottest stocks. In a real bubble, the hot stocks are all you hear about in the press. In a real bubble, stocks trade for 50... 100... even 200 times earnings.
We're nowhere near that with dividend stocks.
Sure, dividend-payers are getting a lot more press, and they've run much higher, as we predicted. But they are nowhere near "bubble" status. They are nowhere close to Internet stocks in 1999. So dismiss the ignorant talk of a "dividend bubble." 
If you took our advice to buy many of the dividend stocks that are soaring right now, here is what you should do: Nothing.
I repeat: You do nothing. That's the beauty of buying a great dividend-paying business at a great price. After taking your position, you do nothing.
You don't concern yourself with short-term corrections. You don't concern yourself with what people are saying on CNBC. You sit back and collect your dividend checks from the world's best businesses.
For example, if you bought longtime Dan Ferris recommendation and dividend-powerhouse Philip Morris International in early 2009, you are now collecting dividend yield of 7.7% on your original investment.
Philip Morris has more than doubled in price since then. It's had a great run in 2012. So sure, it's probably due for a short-term correction. A lot of dividend stocks are due for a correction.  
But sophisticated investors who bought at a good price – and who are collecting those big, safe dividends – simply don't care about a short-term correction in Philip Morris... or any other elite dividend-payers.
They don't care if others think their stock is in a "bubble." They only care about receiving those huge dividend checks.
So if you've recently made a lot of money in dividend-paying stocks, congratulate yourself. Go out for a steak dinner. But don't worry about a correction... And don't worry about the supposed "bubble." 
Just do what sophisticated, long-term investors have done for many years. Sit back and compound your wealth.
Do nothing.
Brian Hunt

Further Reading:

You can learn more about buying the world's greatest businesses – and increasing your income year after year – here...
The world's safest, best dividend-payers are different from typical stocks. They are different from "the market." They are vastly better...
The market can't promise you growing income. It can't even promise you steady income. Only these giant, "World Dominating" businesses can.
If you want excitement, go to Las Vegas. If you want to make money, invest in boring businesses that dominate their industries and pay higher dividends every single year.

Market Notes


The best time to own gold stocks is when they outperform gold.  
That hasn't been the case so far this year. Most investors have been better off sitting on the sidelines. But that trend appears to be changing… 
The ratio chart below compares the action in gold stocks (Market Vectors Gold Miners Fund) to the action in gold (iShares Gold Fund). For most of the past year, the chart has been falling. But gold stocks are starting to take the lead.
When gold stocks outperformed the metal in May, the gold sector rallied 20% in just two weeks. Since the chart retested its bottom two weeks ago, gold stocks have been outperforming gold, as well. In other words, they may be setting up for a stronger intermediate-term (several months) rally...
– Jeff Clark

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