I’m back for another installment of the Dividend vs. Royalties experiment. I did not re-read part one because I want to ensure the most up-to-date emotions I carry about these passive income sources.
I have been having a great time watching my dividends and royalties grow over the last five months. Every day I think, wow, what if I keep doing this for the next 15-20 years? That is the power of compounding, also known as the 8th wonder of the world.
The compounding efforts react to dividends and royalties differently. For dividends, your money is buying more shares of the companies. Not only are the companies increasing their dividends and the share price rising, but you are buying more shares as well. It is a compelling path to wealth.
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For royalties, your brand is compounding. Your knowledge of creative work is growing; you have more products available, bringing in more people to your brand. New people then want to go back and consume your older media as well. It is also a potent source of compounding.
But let’s start from the top. What are dividends, and what are royalties? Dividends are a portion of a companies’ profits that you are paid by owning stock in the company. Royalties are payments that you receive for someone consuming your media, usually artwork, photos, music, writings, or videos.
How do you get started with dividends? You have to research what dividend-paying stocks you want to buy and then buy them via a brokerage or stock market account for dividends.
How do you get started with royalties? For royalties, you will need to create a piece of work that sells to another person. These works can be YouTube videos, blogs, books, stock music, music videos, instrumentals, background photos, stock photos, etc.
What is the main difference between dividends and royalties? As someone who is building a portfolio of both, the main difference is the cost of starting either. Put simply, dividends cost money to start, and royalties cost talent. Let’s take an in-depth look at both and decide which is better for you to begin your journey.
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I started investing in dividends two years ago, and I can tell you that it takes a lot of money to get the effect you want. When I started with dividends, I would receive $1-2/month in dividend income. However, it was magical to see money actually adding to my account. Now, I am receiving $500/month in dividends, and it feels even better.
To get to this amount of $500/month, it takes over $150,000 in our dividend portfolio. Not only have we had massive gains in dividends, but the share price of the stocks appreciates as well. Wealth begets riches. This statement means money makes money, which makes you rich.
I started in royalties with no audience and no product. I have been writing a blog and publishing books for roughly five months now. The first month I received $3 in royalties income, and this current month, I am on pace to receive $30. It may not sound like much, but that 10X the payment in less than half a year.
When you create products that produce royalties, you are entering a larger world of income. You see, you will be building an audience, and with an audience comes power. I have not even come close to tapping the earning potential of my books and blogs.
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Right now, I am in content production mode. I want to build the most extensive backlog of books that I can conceive. I am thinking of producing content for another two years, maybe three. Once I have all these books and blog posts, I can then make some real money.
Let’s say that I have 500 books listed on Amazon, with about 5-10 as top sellers. From there, I can load up my top sellers with affiliate links. I can create an online course on becoming a successful author on Amazon, which I can then link to in my books or blog. I can turn my bestsellers into audiobooks for another stream of income. I can also translate my best works into other languages, each creating its own streams of income.
I read two books on creating multiple streams of income from your writings; “Create Income Streams” and “How to Make a Living from Your Writing.” It is important to note that other sources of royalties have a similar branching path of income. For example, you can turn your YouTube videos into an online course or package them together into a compilation that you can sell as a Blu-Ray disc.
Now for the question of the day, which is better, Dividends or Royalties? My answer is, why choose when you can have both? I highly recommend creating both income streams for your personal growth and long-term financial success. Here are a couple of pictures from two of my dividend portfolios and my Amazon royalties account.
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The first picture is from my M1 Finance account, and the second is from my Wells Fargo account. The final image is from my Amazon royalties account. Royalties have a 60-day delay before being paid.
Needless to say that all this cash is very sexy. Take a step back; when was the last time you made money outside of your W-2 job? Not many people can say that they can produce income outside of their jobs. No matter how much your dividends or royalties are, you will feel rich as they drop into account.
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Now let’s get started with dividends and royalties. I wrote two articles that can help you with your journey into both realms of income. For dividends, “How We Plan to Retire on Dividends” is your article. For Royalties, “Retire Rich, Retire Comfortable with a Business” is the article.
If you look at these articles, they will lead to a great starting point for both income streams. As the stock market ebbs and flows, it is nice to have a source of income completely removed from this volatility.
In the larger picture, producing cash flow from the five sources of passive income, retirement income, investments, cryptocurrencies, real estate, and business should be your overall goal. If you can align all these sources of income, you will have maximum diversity as you move into retirement. Each of these sources of income has its own volatility, and each has highs and lows at individual times.
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I will leave you with my final thoughts. When I began my dividend portfolio, I didn’t know how powerful the concept of your money paying you was. Now, after two years, my wife and I can plan to go dining with our dividends. When you start getting dividends that are $35-50, it is eye-opening.
When I first started my royalties portfolio, I had no idea how much I would learn along the way. The first artwork and book cover I created was like the work of a kindergartener. But, by continuing to work, learn, and read, I have gotten better. I plan to keep going. As I have increased my skill and my back catalog, my income has increased as well.
For both Dividends and Royalties, I am here for the long haul. When I write part three of the series in a year, I want to have dividends of $1000/month and royalties of $200/month. These are powerful ideas and concepts. These are the steps to financial freedom, so start creating your own path. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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