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Top 5 Dividend Paying Stocks You Can Hold Forever

September 27, 2018

If you believe that headline which regularly appears on many cover stories and asset manager research reports, then you can believe almost anything. How about a chance to own the Brooklyn Bridge?

With investing, nothing is guaranteed. Actually, there is one guarantee – you cannot lose money on short term U.S. Treasuries or insured bank certificates of deposits. That’s it. Everything else carries a risk. Of course with short term Treasuries you face a strong possibility to lose over a long period to inflation, so there is a risk to that too, but it is a stealth risk separate from the investment itself.

I wonder how the stocks did that were on previous lists during the last 10 years. Barron’s provides annual updates of their recommendations, that I’ve written about, but very few publications do, and even fewer investment managers. The truth of the matter is that most investment managers turn over their portfolios many times a year so “forever” is in most cases, only a few months, at best. If an investment manager actually believed this and followed this plan, they would not make much money for either of two reasons. If they maintained a static portfolio, their trading fees would be pretty low. If they charged a fee based on the assets under management and their customers saw very little activity for a couple or three years, they would wonder why they are continuing to pay the management fee and likely bail out. One way or another, fees are generated by activity.

This brings me back to alternatives to the “five stocks you should keep forever.” It is a myth. If you are investing in equities for income or growth or a combination of the two, I believe your best bet would be investing in broad based mutual funds including index or exchange traded funds.

Also, forever is a pretty long time but when it comes to stocks, it might not really be that long.

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