What do people want from their investments? I want to generate long-term passive income for my retirement. And what better way than to invest in housing? It’s been in short supply for decades, and that shows no sign of changing. But my Persimmon (LSE: PSN) shares are not performing well.
In fact, the Persimmon share price has fallen nearly 50% over the past 12 months.
But you know what? It hasn’t affected my retirement income strategy one bit. And that’s because I’m still getting big dividend yields. If I don’t intend to sell my Persimmon shares for another decade or more, today’s price doesn’t matter, right?
Lower prices
Oh, wait, it does matter in one important way. And I have to bring up billionaire investor Warren Buffett. He famously asked: “If you plan to eat hamburgers throughout your life, should you wish for higher or lower prices for beef?“
I think the answer to that one is clear enough. But it also implies that, if I plan to buy dividend shares for the rest of my life, I should wish for lower share prices.
Buying money
When I buy Persimmon shares, I’m actually ‘buying money’. Specifically, for last year I bought myself 235p per share in dividend money. And the cheaper I can buy that money, the better my retirement plans are going to turn out.
Forecasts suggest a similar total dividend for the current year. So investors today can buy 235p for half the price of a year ago. Half-price money! That’s not something we see every day.
What am I missing?
There’s no such thing as free money, so what am I missing? Well, I’d have to have lived in a tunnel for the past year to not see the problems surrounding us. The cost of living is soaring. Interest rates are rising. And mortgages are getting more expensive.
Fears of a possible stock market crash are growing. And it all means Persimmon shares could fall even further. If we see a prolonged housing slowdown, they might remain in the dumps for a long time. And the dividend might even decline.
So far, the UK’s housebuilders have still been reporting strong business in the first half. But the economic squeeze is in its early days, and the second half might not look so good.
Straight ahead
But back to that tunnel I mentioned. I reckon a tunnel is a great place to invest from. It means we can focus on what really matters — the long-term destination. And we’re shielded from short-term distractions.
Warren Buffett thinks similarly. He said: “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.“
I don’t care
So I’m not worried about what’s happening to Persimmon shares this year. The price will only matter when I come to sell, hopefully a long time from now.
In the meantime, I want to carry on buying cheap money. And that means I want more Persimmon shares while they’re down.
The post Why I bought Persimmon shares to help me retire early appeared first on The Motley Fool UK.
5 stocks for trying to build wealth after 50
Markets around the world are reeling from the current situation in Ukraine… and with so many great companies trading at what look to be ‘discount-bin“ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.
Claim your free copy now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
11% or 16% yield? Which of these two blockbuster income shares would I buy?
A 16.5% dividend yield from a FTSE 100 stock! Surely this can’t be right?
How wrong was I about Persimmon shares? They keep crashing!
Should I snap up Persimmon shares at £14?
Forget buy-to-let. I’d rather buy these 2 high-yield FTSE 100 dividend shares
Alan Oscroft has positions in Persimmon. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.