Saturday, February 22, 2014

How Dividends will buy my Freedom!

Have you ever searched for a way to make money for doing nothing?  Does that sound too good to be true?  Well it is possible to do and 100% legitimately.  No cheating or cutting down anyone to get ahead.  In this article I am going to attempt to explain why dividend stocks are the best way to invest (especially for young people).  There are a few different ways to make passive income such as bond interest, rental properties, and of course my ultimate favorite DIVIDENDS!

 I believe dividends are the safest and most reliable way because of the proven track record coupled with the interest rates and ultra low yields on bonds.  The housing market may be a great investment as well, but I’m not near that stage where I can afford to drop enough money to participate.  I make a very small income from my job, but am still able to grow dividend income little by little by buying pieces of well run companies, holding onto them through time, and reinvesting dividends into them to build a compounding machine.  So many people I talk to are scared of investing and think it is like gambling.  I would say maybe day traders gamble a little bit, but still have much better chances at favorable outcomes.  I take a little bit of issue with those who advocate 4% withdrawal no matter market conditions.  Who knows how the market will act from year to year?  What if you are selling assets at their all time low during a recession instead of accumulating shares. 
I believe our plan (as well as many bloggers is a much more solid) See here of holding onto the ownership of these quality companies and at the same time being able to cover all expenses and thus live off of the income they throw off to you.  That gives you a safety net to fall back on in case you unexpectedly lose your job or take a pay cut.  The ultimate goal for most of us is to have the option to not work if we so choose not to and as soon as possible.  It will take a little discipline and some work to maintain your portfolio.  It is not exactly easy to do all the research always while working full time and/or going to school full time.  I know this firsthand, but I believe it will be well worth it in the end.  Do you think you need a high degree to figure it out?  I would argue that it may help you since I am going to school as I type this, but I don’t think at all you have to be a scholar.  Just do the research yourself, find what companies you are comfortable with and learn from your mistakes if you lose money on some then move on because you cannot always predict with 100% accuracy and win every single time.  Getting started may be the hardest part and a lot of people I know say don’t have enough cash to start an account.  At the same time I see a lot of those same people find enough money to spend on less productive things.  I am definitely glad I started investing early and very happy I found my primary strategy of dividend investing.  It will allow me to eventually OWN my time and one day give me the freedom to spend the time doing things I enjoy instead of adhering to the strict schedule someone else drafts out for me.

What about you?  Are you a trader or someone who invests for income?


  1. it is equally important to set aside some emergency funds unless one can liquidate some shares easily.

    1. Money Honey,

      Thanks for adding that. I agree it is always good to have a safety net or something to fall back on.

  2. I invest in dividend growth for long-term and income. I tried to trade, but end up earn nothing but time and tax. Dividend investing is the amazing way to retire early without worry about market ups and down. great post.

    1. S Arun,

      Dividend income and long term is undoubtely the best way to go for me. I still have not completely given up trading from time to time only because if I can make a quick gain by risking less it can provide me a larger amount of money to make reasonable purchases of share amounts. Kind of annoying and expensive paying a $9.99 commission to buy a few shares at a time. DRIP will be a great tool for my account I think to add fractional shares consistently without paying a dime.

      I hear you on the tax headaches and time it takes to report taxes and wish it was simpler to figure out then it is.