Setting the Stage
Where to Begin?

No investment approach is valid without some recognition of the other approaches that have come before it. We learn from those approaches that have worked in the past, such as the Dow Dividend Approach. With almost no effort, the Dow Dividend Approach offers you 20% annual returns. Without breaking a sweat, you could give your portfolio a healthy 20% average annual return using these high yielding Dow heavies.

Logic dictates that if we can trounce the market, which trounces the fund managers, with 20% annually and no work, we had better make it our business to look for stocks with potential much greater than 20%. Unless you can do some fundamental valuations and have confidence that your stocks are at least 20% undervalued before you buy them, don't bother.

*** NOTE: You won't always be correct.

Just because you do all the valuations doesn't mean you'll be right and your stocks will always rise, far from it. But, at least with a rock solid foundation to begin with, you'll have greater confidence in your choices. You will shift the odds heavily in your favor by examining these companies and figuring out their value.

So, begin with the Dow Dividend Approach. Build the rock solid foundation. Then, let's look towards different industries to find potential candidates. The best way to pick an industry is to look at a list of industry groups. Barron's and Investor's Business Daily both list industry groups. Look over the list and pick one that interests you. Many of us here are computer aficionados, so it makes sense that we would all be interested in industries like networking, software, hardware, etc. You should pick an industry that interests you. Peruse the full sample issue of Industry Snapshot and see if it is valuable to you. It's a great way to get stock ideas each and every week. In addition, check out subscribers online and begin to get a feel for the various ratios that are employed in the Industry Snapshot analysis. Some of the more Foolish ratios are clearly and fully explained in TMF Bogey's Industry Decathlon Primer, definitely worth checking out.

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