Yesterday I got a message from a reader who shared that although she wanted to put money aside to invest, she felt overwhelmed by all the jargon. She didn’t know where to begin and I got the feeling that she had already given up without really trying. While many new investors feel this way, being new to the game should not prevent you from getting started investing. Everyone has to start somewhere, right?
One of my favorite motivational speakers Rachel Hollis says that she built her business with a high school diploma and a Google search bar. Marie Forleo says everything is figureoutable. Both women share the sentiment that when you put in the work to learn, you grow and ultimately succeed.
For those who want to get started with investing I suggest educating yourself first and foremost. Listen to personal finance podcasts like Chain of Wealth, Choose FI, Afford Anything and Be Wealthy and Smart. Read books like Broke Millennial Takes on Investing and subscribe to Financial Independence (FI) blogs and other notable publications before putting what you’ve learned into practice. Get a mentor (even if they have no idea who you are) and remember that Google and YouTube are your best friends with a grain of salt of course.
While I’m still learning every day, I’ve noticed a lot of people talking about earning passive income dividend investing. While you’ll have to do a lot of research to find the right stocks, if you consistently invest in dividend stocks, you could grow your portfolio and amass wealth over time. If this sounds interesting to you, here’s what you need to know to get started.
What You Need to Know
Earning Passive Income Dividend Investing
What is dividend investing?
Dividend investing is a popular long-term investment strategy where investors grow their investment portfolios by buying dividend-paying stocks.
What is a dividend?
A dividend is a cash payout of a company’s profits to its shareholders.
Think of a dividend as a thank you card with some cash in it. When a company is doing well, they may say thank you by sharing a cash bonus with all those who invested in their stock for a while.
Most dividends are paid quarterly but some are paid monthly or annually.
Do all companies offer dividends?
No, not all companies offer dividends. Those that do not offer dividends reinvest their profits back into the company with the hope of seeing their stock price rise.
On the other hand, companies who regularly payout dividends are usually larger, well-established companies which have been around for a while. These companies are past the growth phase and have a long track record of increasing dividends over time.
Building Wealth with Dividend Investing
Buying stocks that pay dividends is a great way to generate passive income and build wealth. However, beware of the people that claim that you can make $5,000 right out of the back dividend investing with no experience.
The truth is, if you aren’t investing hundreds of thousands of dollars into the right dividend-yielding stocks, it’s unlikely that you will see a substantial boost in your portfolio. That doesn’t mean that if you start small and stay consistent, your portfolio won’t grow. Just know it may take years.
It’s also important to note that dividend payments aren’t guaranteed, even dividend-paying companies with a long track record may stop paying at any time.
What to do with your dividends?
Investors can withdraw the payout via check or direct deposit or reinvest it back into the company by buying additional shares or partial shares.
Why reinvest your dividends?
Otherwise known as compounding, by reinvesting your dividends your money earns money for you. Essentially dividends boost the amount of money you have invested.
Keep in mind that dividend investing works best as a long-term investment strategy. Look for companies that increase dividends over time and diversify across different industries and sectors.
How to get started with dividend investing?
While you can do your research and search for the right mix of companies that pay dividends, an easy way to get started dividend investing is with Emperor Investments, a robo-advisor which automates the process for you. Emperor helps you reach your financial goals sooner by building a diversified portfolio of dividend-paying stocks. Try Emperor for free for six months – start your free trial here!
Overall, if you’ve already paid off your student loans, built up an emergency fund and now find yourself wondering what else to do with your extra money, it may be time to consider creating a wealth-building strategy where you earn passive income regularly reinvesting dividends.
Other Helpful Resources:
Episode 122: Intro to Dividend Investing via Choose FI
Danielle is a travel finance strategist, author, speaker and podcaster. She paid off $63,000 of student loan debt in 4 years, bought a house at 27 and has traveled to 26 countries. She refuses to let her financial responsibilities hold her back from living life on her own terms.