There are many different ways to invest in the stock market, and with discipline, you can find success with all of them. You can invest purely in index funds or ETFs. Or you can start a dividend growth portfolio.
If you take the time to understand the securities you are picking and gather some information about the stock market in its entirety, it’s hard to lose.
Since I began investing, I have gravitated to income investing as my favorite type. There is just something about building your own paycheck that makes me feel right at home. Today, I will dive into the reasons why I love income investing. Let’s take a quick detour to the start of my investing journey.
Retirement Planning in Your 30s
The beginning. I began my investing journey in the country of Turkey in June 2019. I had just hit my 20-year mark as a US Marine. This accomplishment meant I could retire at any time.
My wife and I always talked about retiring overseas to Turkey (I wrote a ten-part series about retiring on passive income). But, I knew my military pension would be more than enough to live comfortably in this part of Turkey.
However, our children would most likely still live in America. Buying tickets back and forth, helping our kids, and owning property in Turkey and America would be expensive.
So, how could we retire and still earn income? During the summer of 2019, in the middle of Turkey, I first learned about passive income. Since that time, building passive income streams has been my driving force.
The beginnings of passive income. The first type of passive income I learned about was interest from a high-yield savings account. At the time, the interest rate on my Discover HYSA was 2%. I remember getting my first interest payment of $0.06 in June 2019.
The next type of income I learned about was dividend growth investing. DGI focuses on buying and holding large corporations with excellent dividend track records. DGI is a great place to start, and I maintain three DGI portfolios.
In March 2020 (the pandemic), I learned the importance of having index funds in your DGI portfolio. Hardcore DGI investors don’t care to have growth stocks or index funds; however, I like index funds to give me continual growth. Together with DGI, I can beat inflation with growth and income.
Stocks vs. Cryptos
Income Investing. So, I started my investing journey to build a paycheck to survive during my overseas retirement. DGI and Index funds aren’t necessarily a paycheck; they are more of a nest egg.
Yes, in the long term, DGI will produce vast amounts of income. But, that income would be more appropriate to leave to my kids. I wanted to have income in the next 5-10 years.
By chance, I began reading Seeking Alpha religiously. Reading the stock market news became my daily routine. I started to follow a fantastic author, Rida Morwa—a hardcore income investor.
Rida writes about income every day, and I read his articles every day. There is something to say about reading someone’s work every morning or evening. He is one of the main reasons I decided to start writing 1000+ words every day.
Become CEO of Yourself
Slowly adding income stocks. By reading about income securities every day, I slowly realized that building a paycheck was my dream. DGI is easy to set it and forget it; income investing can be a little more involved (if you like).
Income investing gives you massive income today to spend or reinvest—building even more income. We can call this the “dividend snowball.”
I woke up today to two nice high-yield dividends from my Cash App portfolio. These are two of Rida’s picks. Look at that sweet income. I can’t express how life-changing it is to have income coming in without exchanging your time.
I post about my dividends, rents, and royalties every day in my Facebook Group. I would love for everyone to have this feeling, but most people will not give it a chance. Too bad.
Why I love income investing. Today, I woke up with $55 in my cash balance, and I could do whatever I wanted with this money.
With DGI, the main principle is dividend reinvestment. You don’t start a DGI portfolio for current income; you begin to have a nest egg that pays you cash in the future.
$1,000 Dividend Shopping Spree
With income, you are at the wheel every day. You can let your income pile into your accounts and wait for great opportunities. You can spend some and reinvest others. You can reinvest all of your dividends. It is just a fantastic feeling to have “free” money to spend as you like.
Trained on paychecks. Rida says that they teach us to live off our salaries every month. We go to work to get wages that we use to pay expenses. Why do we think retirement will be any different?
Why not start building a paycheck today that you can use for today and tomorrow? I can use my $55 today anyway I wish. I can spend $20 on Peanut Butter M&M’s and reinvest the rest into AT&T (T) stocks.
I can buy my wife a Valentine’s day present or some AGNC stock. We rarely get to experience free income, so I appreciate each dividend I receive.
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” -John D. Rockefeller.
A word of caution. Income investing is much more complex than index funds and DGI investing. You must understand interest rates, the yield curve, treasury bonds, mortgage rates, etc. You have to do your homework.
Annuities vs. Dividends
Receiving a high dividend yield usually means you are sacrificing capital gains. You’re not going to receive a 9% dividend yield and get 9% growth simultaneously. The companies and funds pay you dividends instead of growing the stock price.
The best way to receive capital gains with income investing is to buy them when they are on sale. To understand when they are on sale, you must understand market cycles. It takes a lot of reading and predictions to keep up with income investing.
Do them all. However, you don’t just have to be an income investor; you can do them all. In fact, you can have multiple pies under one roof with M1 Finance. You can have an index, DGI, and income pie under one M1 Finance portfolio.
You can literally drop $500+ into the big pie, and M1 will distribute your income across all your portfolios. In the process, it is finding the best deals inside each fund. I use this mechanic to great success. It removes a lot of the day-to-day grind from the process.
I also have a pure income portfolio on M1 Finance and Wells Fargo. Wells allows me to buy preferred shares, which I love. It also has an amazing income calendar, which I use weekly to monitor my income.
Selling Covered Calls for Passive Income
Conclusion. Hopefully, I gave you more insight into why I became an income investor. I want to build a paycheck to live overseas on dividend income. The best way to do this is through income investing.
Outside of my wife and kids, there isn’t much that gives me more pleasure than seeing my dividends growing. It is comforting to know that you have a paycheck outside of work.
If you are determined to learn about various income products, then income investing may be for you. If you like the idea of building a paycheck, give it a try.
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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. All Right Reserved Military Family Investing
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