All new investors are interested in learning from the best and investing like the best.
The truth is that most of the best stock investors use the stock dividend strategy.
Stock dividend investing can be a powerful tool in earning passive income in the stock market.
The stock dividend investing strategy is more of a passive approach to earn income as opposed more high risk options such as day trading.
Generally speaking – the passive approach is much less stressful and takes much less time and effort to maintain.
It’s sort of a set it and forget it approach.
Alternatively, a more active approach like trading, takes constant attention and quite a bit more intestinal fortitude to weather the fluctuationsA fluctuation is an irregular shift back and forth. It's when a price goes up and down with uncertainty. More of the stock market.
What is passive income?
Passive income is income received regularly from a source that you don’t have to maintain on a daily basis. Some examples of this would be stock dividends, rental property income, book royalties etc.
Wherever you fall along the spectrum of investing is up to you but I do believe that getting in the game is well worth your while. Literally. You will earn money that compounds and makes you more money over time.
You Get Out What You Put In
The beautiful thing about using the stock market to gain additional income is that each person has the ability to figure out a strategy that caters to their own education and risk level.
This is why as a starting point you should start familiarizing yourself with the basics of the stock market.
Each tidbit of knowledge you gain a long way will translate to better odds and better opportunities to earn money.
I’m not sure there’s an easier way to earn money then using investment strategies in the stock market – of course this is only my opinion.
And when I say easy, I mean easy as in it takes research, strategy, timing and luck as opposed to hard work and manual labor.
Self-Control is Key
The most important part of using the stock market as an income producing strategy is self-discipline.
You should have a goal and a well thought out plan for every investment you choose so that you can take the appropriate measure when necessary (buy, sell, close position, take profits etc).
You have to be disciplined and systematic so that no matter how much success or failure you have investing, you never treat it like gambling and steer away from your investing plan.
Sure its extremely tempting to jump into the hot stocks and newest crypto and bet big hoping for a big reward – and this is entirely possible.
Thus is the beauty of the stock market.
And sure you might get lucky sometimes.
But more often than not if you’re not taking a serious and systematic approach to playing the markets, then you will be in for a world of hurt and could potentially lose your money fast.
A Beginners Approach to Stock Dividend Investing
If you’re a beginner in the stock market you are better off taking a more passive approach and that is what I’ll be focusing on in this article.
Of course taking a passive approach still requires some due diligence.
You still need to be aware of the macro environment of the economy, which cycle we’re in, what’s happening now and what are the future trends.
Oftentimes trends in stocks are cyclical and if we keep a close eye on what’s happening in the economy and environment we’ll have a leg up when making investing decisions.
And other times, there is no rhyme or reason to the movement of stocks – at least there is no logic that can be seen on a superficial level based on the information the little guys like us have access to.
That’s what makes investing in stocks always a gamble to a certain degree.
There’s always a part of the full picture of a company that is not visible to us.
So how do we avoid losing all of our money in stock market?
One way we can avoid losing our shirt in the stock market is to make sure that we are investing in stocks that have a solid financial foundation and a long history of established, profitable business.
This approach means that you will generally miss out on all the newest and hottest companies that hit the market.
What you have to understand is that these new companies are untested and often overvalued and investing in them is a true crapshoot.
However, when we invest in companies that are tried and true, then at least we know that when things do take a downturn, these companies will persevere, eventually recover and not be forced out of business.
Which brings me to my next point – All stocks will go down.
That is the nature of stocks. They go up and they go down.
So you might as well earn dividends along the way.
The key in the stock dividend investing strategy is to:
- pick companies that continue to grow overall year after year.
- purchase companies that offer dividends.
- re-invest dividends to compound wealth.
This is the entire backbone of the passive investing style that I am discussing.
Note: When I say companies I am referring to stock in a company. I also include mutual fundsMutual Funds are a company that professionally manages and invests pooled money from different investors. More and ETF’sETF's are exchange traded funds. They are similar to mutual funds but tend to be better for investors because they are more flexible for trading, have less fees, and are more tax efficient. More as other good dividend producing vehicles.
Stick with the Winners
It is best practice to aim to earn dividends from established stocks that that are tried and true and have a history of solid performance.
Think AT&T, Apple, Walmart, McDonalds etc., these are stocks that remain profitable and during good and bad times and offer a percentage (dividends) of their earnings back to investors.
You can then opt to have your dividends automatically re-invested so that your income continues to compound and accumulate.
In order to gain wealth and financial freedomFinancial freedom is a term that usually means one has enough financial resources to retire early. One can then live the lifestyle they desire, and are not limited by a set salary each year. More first we have to work for our money but then we have to make our money work for us.
Investing in high quality stocks that offer dividends and reinvesting the dividends is a great way to put our money to work for us even while we are sleeping.
This allows us to grow our money through the rising value of a stock and through the dividends the companies pay, and then finally re-investing the dividends for accelerated growth.
So for the most part this is a buy and hold strategy similar to one that billionaire Warren Buffet prefers.
Obviously dividend stock investing is nothing new although it may be new to you. It has been an investment strategy that has been around for a very long time but for some of you reading it might be a new concept.
And for some it might be a refresher or reminder.
But most importantly I hope it helps to foster a mindset shift.
Switch from a Consumer to an Investor
Investing in companies is a good way to transition out of a consumer only mentality and into a wealth building mentality.
It allows us to view things from a different perspective.
Instead of rushing to buy the latest products from our favorite companies perhaps we can invest in our favorite companies instead.
I mean we already have a good sense of what companies are successful because we probably love their products and use them often if not daily.
Now, instead of buying the latest iPhone for a thousand bucks, perhaps we instead invest the money in Apple which is a solid company with growth year over year that pays dividends.
This is how we are able to reverse roles and instead of paying for a product, we can get paid from a company.
*I am not a financial advisor and I am not recommending any stocks, I am I just providing an example here.
Every investment decision should be made only after doing your own research and due diligence.
But a good start would be to simply Google search ‘blue chip dividend stocks’ or ‘dividend aristocrats’ or something similar and start doing your own research and getting ideas. You will come across many companies that grow year after year that consistently pay dividends to their stock holders.
What are blue chip stocks?
Blue chip stocks are usually larger corporations with an excellent reputation for profitability and longevity. They are companies that are able to make a profit through good times and bad.
What are dividend aristocrats?
Dividend aristocrats are companies in the S&P 500 that have both paid out and increased their dividend amount every year for the past 25 years.
Using Passive Income to Achieve Financial Freedom
The biggest shift towards financial freedomFinancial freedom is a term that usually means one has enough financial resources to retire early. One can then live the lifestyle they desire, and are not limited by a set salary each year. More takes place when we shift our mindset from being consumers to becoming owners, investors, merchants, creators, providers etc.
We can begin to understand that we do not only have to consume but can also participate in creating goods, ideas, services and get compensated for it.
The key principle behind passive income is to put a reasonable amount of work into creating something upfront – course, product, service – and then have it run mostly on auto-pilot thereafter.
It’s the strategy I’ve been personally using for years by creating an e-commerce business, a content creation business, as well as dividend stock investing.
Let me repeat that point for emphasis. Create something ONCE and then maintain it on auto-pilot.
Most times I re-invest my profits from all sources back into dividend producing investments to keep the cycle of compounding interest working for me 24 hours a day.
Closing Inspiring Thoughts
I hope this can information can help you increase your income passively, and then inspire you to actively create more passive income streams for yourself.
I hope this method will help encourage you to passively earn while you learn.
They say that the average millionaire has about seven sources of income. Investments that pay dividends allows you to create another source of income that can help get you one step closer to that goal.
If we want to achieve our eventual goal of financial independence then we need to start creating alternate streams of income.
We need have a plan that will allow us to earn income passively so we can spend our time actively pursuing our passions and dreams.
We need to plant the financial seeds now that will grow year after year, persevere in all climates and continually bear fruit for a lifetime.
Your future looks abundant.
