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Five investing hacks you aren’t using
Make money, different(ly)
People love giving me advice, especially when I don’t ask for it.
“Try the vegan diet if you’re so tired.”
“You should walk more.”
“You should shower more than once a week.”
Relax, mom! Let me live my life!
One thing people love giving advice about is investing.
“You should buy this stock”
“Diversify more!”
“Don’t put all your money in that random crypto coin you learned about on Twitter.”
Relax, dad! Let me live my life!
Seriously though, there are plenty of investing tips you probably hear all the time about diversification, starting early, investing regularly blah blah blah.
Well, to change it up a bit, here are five easy investing tips you probably haven’t heard before to help you become an investing genius of yourself.
Me advising my dad to invest in scarves.
Look for stocks with insider buying
When company leaders—like CEOs and board members—buy shares of their own company, it's often a strong signal that they believe the stock is undervalued or poised for growth. Research shows that stocks with significant insider buying outperform the market by about 7% annually. When insiders put their own money on the line, they have a vested interest in the company’s success, making it a potential buying opportunity for outside investors.
Insider buying (or legal insider trading) is different from illegal insider trading!
Invest in companies you actually use
If you often use and trust a company’s products or services, you’re likely not alone. This familiarity can give you an advantage, as you're already a consumer and may better understand the brand's value compared to others. For example, Warren Buffett famously invested in Coca-Cola because he was a fan of the product, and it's turned out to be one of his most successful investments.
“I friggin love Coke” - Warren Buffett (probably)
If a company resonates with you personally, it might also be a good investment, especially if it has strong financials and a solid business model to back it up.
Focus on dividend growth, not just yield
A high dividend yield can be attractive, but it’s important to make sure the company can sustain and grow its dividends over time. Look for companies that have a track record of increasing dividends, known as "dividend aristocrats."
For example, companies that increase their dividends by 8-10% per year provide better long-term value than those with a higher but stagnant yield. According to a study by Ned Davis Research, companies with consistent dividend growth returned an average of 9.3% annually from 1972 to 2019, compared to just 2.6% for those that paid no dividends. Focusing on growth over yield can lead to greater stability and returns in the long run.
Diversify your country exposure
I know I called out diversification as something people always talk about, but this is more specific. Investing in companies across different countries can help reduce the risk of having all your money in one market. Different economies often move at different speeds, and international exposure can help balance out potential losses in one region with gains in another.
Non-U.S. stocks account for about 40% of the world's total stock market value, so if you’re only invested there, try looking at European companies or ones in emerging markets like India. By spreading your investments across countries, you're protecting yourself from market downturns in any single economy.
Pay attention to the business cycle
The economy moves through regular cycles of growth, peak, recession, and recovery, known as the business cycle. Understanding where we are in the cycle can help you decide which industries are likely to perform better.
For example, during economic growth, technology and consumer discretionary stocks often thrive, while during a downturn, defensive sectors like healthcare and utilities are safer bets.
Being aware of the business cycle and how it affects sectors can guide you to make more strategic investments at the right times. Check out our recent newsletter on the business cycle for more!
Start investing different
So I complained about people giving me advice and then I gave you some. Hypocrite much?
Take my advice with a grain of salt; I’m just a faceless guy with a newsletter. But seriously, these are five investing tips proven to help that are pretty easy to implement.
If this stuff is interesting to you, respond with “More”!
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