The great Warren Buffet has said, “If you like spending six to eight hours per week working on investments, do it. If you don’t, then dollar-cost average into index funds.”
This is exactly the situation I find myself in week after week. I’m a complete nerd when it comes to trying to find the right dividend stocks to fuel my portfolio because I view it as a type of wealth puzzle to solve. Meanwhile, my wife couldn’t care less about it, but she trusts me with paying taxes, mortgage, and essentially everything that has to do with money for us. The strategy that I’ll explain to you isn’t one that’s revolutionary or ground-breaking. It’s one that works for us and one that we feel safe in investing in. So without further ado, here it is…
For our retirement accounts, we are invested in well diversified mutual funds that will grow over time since they’re actively managed. For our taxable investment account, I have us in 17 holdings as of the writing of this post. My holdings are all dividend stocks that I can rely on every month or quarter to grow and to be reinvested. I invest $1,000 per month into our portfolio and I buy stocks whenever I find a great value to take advantage of.
That’s all there is to it. I don’t invest in companies that don’t pay a dividend. Which means to all you Tesla bulls out there, I’m not interested. The reason for this is to have our money work for us without having to worry about the overall picture of the stock market. I want to invest in companies that will pay me back just for investing with them because it’s the easiest source of passive income, you literally do nothing but hold your investments and you’ll get income from it.
Ultimately, years down the road, our goal is to be able to retire much earlier than 60 and live off the dividends our portfolio pays us every month or quarter while still growing our account. That is achieving FIRE for us.
For those of you who are new to the blog and new to dividend investing, I’ll give you an example. Let’s take Pfizer which is ticker symbol $PFE. As of the writing of this post, it is trading at $37.79. It has a quarterly dividend payment of $0.38 per share. This means that for every share that you own of $PFE, the company will pay you $0.38 since you are a shareholder in their company. If you own 10 shares, this means every quarter Pfizer will pay you $3.80. This may not seem like a lot, but you can reinvest that money back into $PFE and buy fractional shares with it so then it can compound the next time they pay out a dividend and so on, and so on.
I want to take advantage of the extreme compounding that dividend investing has to offer so my portfolio can grow at a higher rate. There are many different metrics to look at when it comes to finding the right dividend companies to invest in. Numbers like the P/E Ratio, Dividend Yield, Payout Ratio, and Free Cash Flow are very important to determining which companies to invest in and I will be going into depth on each of those in the future.
If you want an investment strategy to just set it and forget it, I refer you back to the Warren Buffet article back at the top of the post. There is nothing wrong with investing in index funds. They are very safe and are fairly consistent with slow but steady growth over long periods of time. There are plenty of people around the world who have done very well just sticking to safe index funds. But I thoroughly enjoy investing and love to actively do research on dividend companies. And hey, it’s a better hobby than collecting expensive cars or buying a bunch of useless crap I don’t need!
With this section of the blog, I’m going to update my portfolio and let you know which stocks I have chosen to invest in when I buy more. I’ll walk you through my thought process to help educate you on what I look for. I’ll also be sharing my progress with the portfolio and share my plans for the future as well as celebrating important milestones.
I’ll wrap this post up there, so with that being said, I really appreciate you following along with the blog and I’ll catch you on the next one!
Marcus