Debt Free

It's every investors dream; getting in on a fantastic company for a song. It's kind of like hitting on the company when it's down, but in a nice way. You can take advantage of a firm's temporary misfortune to give your investment portfolio a substantial shot in the arm. As with any investment you've got to do your homework. There are several keys to make this strategy successful in the long term. In the long term however, this could be one of the most powerful investment strategies in your arsenal. Here's what to look for when selecting these stocks.

Key 1 – You've got be alert for the buys. These don't come around every day, so you've got to be looking for them. When a solid company stumbles, it usually makes the news somewhere. You've got to be alert for such stories. Even better is to be looking out for the precursors to major problems so you can pounce on the firm's stock when the time is right.

Key 2 – The company has to be financially solid. It's easy to get a great buy on a long shot or an upstart with no history, but then that's not always a great buy, is it? Were not talking about gambling on a Phoenix-like rise from the ashes here, we're talking about firms with solid, long term track records, and enviable financial pictures. Reliable profitibility is what you're after. Even those companies will occasionally stumble, either through unforeseen circumstances, management snafus, or personnel problems.

Key 3 – The company in question must have solid prospects for long term success. Their products or services must have viability in the future, or they must have a track record of developing such products. There were doubtlessly many financially solid companies 100 years ago that made the proverbial buggy whips, but few were great buys. You want to invest for the long term using this strategy, and a company with a solid product and/or service line is essential for success.

Key 4 – The company must have innate value. If you're looking an equity that has a P/E of 80, unless they pay some pretty hefty dividends, you'll not likely see the stock go anywhere for a long while, no matter how great their turn around potential is. Look for a company that's undervalued, preferably by a substantial margin. The sage of Omaha has made a bit o dough choosing just such stocks over the years.

Key 5 – The company has got to reward you. Dividends are important. As I've noted in previous posts, you can have tremendous success by reinvesting dividends. The firms you choose when investing with this strategy should have a fairly long history of paying healthy dividends. You can reinvest the dividends to experience healthy portfolio growth. In the future, when it comes retirement time, you'll have a healthy source of dividend income to help you through retirement.

Take heed my friends. Look for those stocks in companies that were once great, and actually still are. Almost every great company has experienced a bit of trouble at times throughout it's life. You've got to know which are just experiencing the kind of trouble that creates an opportunity for you by driving down the stock price temporarily, and which is the next Enron. Having a stout investment and retirement portfolio, with high value components, is one of your best tools to remain debt free, especially later in life.