How I purchased my first stock

I have been reading about passive income for the past few years, and last October decided to test the waters. The basic idea of passive income is that after you do some initial work, you start receiving an income with little effort required to maintain it. My first thought was, why isn’t everyone doing this? You may want to google ‘passive income’ and get a feel for what it is all about. It is not difficult, but not as easy as it sounds.

After doing a little research, I decided to try Stocks, and purchased The Motley Fool Investment Guide by David & Tom Gardner, and Beating the DOW by Michael O’Higgins.

In O’Higgins’ Basic Method, you make a list of the 30 DOW stocks and sort them by yield, then pick the highest ten. Then take those ten stocks and sort them by price. Now pick the penultimate lowest priced stock and buy it. Buying it is actually the easiest part.

When I did this on September 8, 2015, Pfizer was the penultimate. I wanted to spend about $500 (because of the pendejo factor) and that day Pfizer was at $32.86. So I purchased 16 shares and paid $7.95 commission, for a total investment of $517.71.

Pfizer pays quarterly dividends and so far I have received three payments for a total of $14.08. Yesterday the stock closed at $35.44, so today my 16 shares are worth $567.04. My total return to date (stock value plus dividends) is $581.12. My original investment, including commission, was $517.71, so I made $63.41 in eleven months, which is 12.25%.

No bad.

Per O’Higgins I will need to sell Pfizer on September 2016 and go thru the same process of picking the second lowest priced stock out of the 10 highest yields.

O’Higgins points out that some years you make less and some you make more. And some years you lose. But over a 10-year period, you will handily beat the DOW (I could not find the percentage that he states).