I have always been a firmer believer that the easiest and safest way to become rich in the stock market is to buy established blue-chip, high-yielding stocks, then just sit back and let the power of compounding perform its magic. Unfortunately, my view tends to be in the minority.
For as long as I can remember, the simple fact is that most individuals park the majority of their savings in either Cash ISAs or in low-interest current accounts. Indeed, for most of my adult life that is exactly what I did, and boy do I now regret that stance.
Debunking myths
There are a lot of myths out there regarding investing. Don’t I need to be clever to invest? Don’t I need a lot of money to invest? Isn’t the stock market just a casino? These are common questions many have asked me over the years. I always answer with the same statement: over the long-term, the stock market consistently delivers superior returns to cash.
Research shows that ISA millionaires predominantly invest in either individual stocks or investment trusts. Personally, I prefer picking my own stocks.
I see many advantages. Firstly, there are no fund management charges. Secondly, for stocks that provide one, I receive a dividend, and thirdly, I have complete visibility where my money is invested.
My philosophy is simple: buy and hold. Once I have done my research and hit the buy button, the only reason I will sell out is because something fundamentally alters with the business. For example, maybe a once-successful business model has lost its relevance. With high-quality businesses, with strong moats, this rarely happens.
Dividend champions
These are my top-paying dividend stocks in my Stocks and Shares ISA portfolio, each of which I have owned for more than five years. Over that time frame, some have seen their stock price move up, like HSBC, others not so, like aberdeen (LSE: ABDN).
| Stock | Dividend yield |
| Legal & General | 8.4% |
| aberdeen | 7.1% |
| BP | 6% |
| HSBC | 5.6% |
| Aviva | 5.6% |
Conviction
When investing in individual stocks, the most important attribute any investor must possess is conviction. That has certainly been required with aberdeen, whose share price has fallen more than a fifth since I first bought it. But during that time my original investment thesis hasn’t changed, which is why I have pound-cost averaged into the stock.
In a crowded wealth and investments industry, I maintain that aberdeen has one distinct advantage over its competitors: its ability to cater for a diverse set of clients from sovereign wealth funds, through to financial advisers and individual investors.
The business has struggled over the last few years particularly with institutional investors and high-net worth individuals because its funds have consistently underperformed benchmarks, such as the S&P 500.
But in 2021, amid a surge in popularity of web-based trading, it bought out interactive investor. That proved to be an outstanding strategic move. In the last few years, assets under management administration have soared. It now stands at £85bn, second only to Hargreaves Lansdown.
Interactive investor today accounts for nearly half of all aberdeen’s profits. As the company continues its growth journey, I maintain that it will be able to support market-beating dividends well into the future.
