Passive Income Road Trip #3: Dividends

I woke up today in Fort Stockton, Texas, somewhere in the middle of this enormous state. It is hot as all heck here, and I wasn’t used to the heat. 

No matter how hot (or cold), passive income continues to flow into my accounts. Probably the most sought-after form of passive income is dividends.

Welcome back to the Passive Income Road Trip series (Financial Mindset, Retirement Planning), where we reflect on the path to success.

The dividend mentality. A mistake I see many people make when starting as a dividend investor is getting too emotionally attached. 

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This attachment comes because they work hard for their money and then invest it directly into the stock market. However, the stock market is not a wealth generator. 

The best way to invest in the stock market is to make profits BEFORE investing. You can do this by seeking an infinite return outside of the markets.

Creating infinite dividends. If I can release a book I create for free, any profits I make will have an infinite return. I made money without any of my capital (money) inside the asset.

If I take that infinite money and invest it in dividends, any profits from there are also infinite. I call this cash flow “infinite dividends.” The books “Unfair Advantage” and “Infinity Investing” go deeper into these methods. 

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There are many ways to create infinite returns, but using the sharing economy is the most accessible method when starting your journey. 

Emotionless investing. Now, back to your dividend journey. Now that you have started earning money outside the markets by renting rooms, releasing videos on YouTube, or renting cars, you can invest those profits. 

By investing profits from a successful investment, you’ll have much less emotional investment in the happenings on the stock market. Additionally, you keep the other income stream as well. Too many people freak out with gyrations in their stocks. 

I invest for income. This means that capital gains are a secondary benefit of my investing habits. Yes, I love to see my portfolio in the green; however, I love to see my dividend paychecks even more. 

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The three types of dividend investing. I use three different styles when investing for dividends. They each have their place in my portfolio; however, I favor one. 

1. Passive Index Fund Investing- You use index funds to generate high capital appreciation and low dividend yields. It is a safe, passive way to build a nest egg. You’ll need a lot of money to live on the dividends from index funds.
2. Dividend Growth Investing- DGI investing is a hybrid of building a nest egg and a paycheck. It is also safe and relatively passive once you choose your initial stocks. You can achieve good capital appreciation while building a paycheck to tap in the future. 
3. Income Investing- Income investing takes the most knowledge and can seem risky. You sacrifice capital gains for pure income. Most of your profits come from dividends you receive TODAY. You’ll need to understand interest rates, bonds, mortgage rates, and commodities. 

And the winner is… You probably know that I heavily favor Income Investing. I love the art of buying something today that will pay me a high return tomorrow. 

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I still utilize index funds and DGI stocks across my broad portfolio. However, when I get my paychecks, I love the moment of buying more income-producing stocks. My dividend paychecks get bigger every month, and my income increases yearly. 

Getting started with dividends. Okay, you know that you should create an infinite cash flow generator outside of the markets first. I taught you my three types of dividend investing. So, what’s next? 

The hardest part is depositing your cash into a brokerage account. I use five brokerage houses: Cash App, STASH, Wells Fargo, Charles Schwab, and M1 Finance. I wrote about the differences in “Investing for Dividends 105: How Do You Want Your Dividends Served.”

It will be tough to invest for the first couple of months. You’ll fear losing money in the markets. It will be okay. As I always say, start small. 

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A quick story. Last week a buddy of mine dropped his trailer off at my house for storage. I have three acres of land, and he lives in the suburbs. He paid me $240 for a year of storage on my lot.

I took this $240 and invested it in a closed-end fund named PIMCO Dynamic Income (PDO) which yields 10% currently. This means I will receive $24/year or $2/month for the rest of my life. 

This story is about how dividend investing should work. You take infinite cash flow and turn it into more endless cash flow. This is the best way to ensure you don’t get wrapped up in the day-to-day operations of the stock market. 

Dividends for your future. Where do you see yourself in 10-20 years? How can creating an income stream today help you achieve this future?

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Many people start investing without a clear goal of where they are heading. They grab their money and run when things get tough on the market—usually at a loss. 

I dream about being on a boat in 10-20 years with my wife, kids, and grandkids. We enjoy the white sand beaches of Florida or the Mediterranean Sea in Turkey.

Either way, we are all together, and we have not one care in the world. We have the financial resources never to have to worry about anything. 

This dream requires work—starting today! That’s why I am writing this article at 11:52 PM in the middle of a hotel in Fort Stockton. If you aren’t going to be extreme towards your dream, who will?

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Conclusion. Dividends are just one part of your overall passive income strategy. Do not overload your portfolio with stocks and bonds. Forces can heavily manipulate these paper assets.

As much as I love dividends (and boy, do I love them), I keep them as a portion of my Happy Cash Flow Retirement system.

I mix dividends with rental income, cryptocurrencies, blogs, books, and my military pension to create a heavily reinforced portfolio that excels in all economic conditions.

If you are 100% in dividends for passive income, you will stress yourself out during recessions and downturns. You can diversify your passive income by starting a garden or consulting business. You can find more of my investing articles in my Signature Series.

1. How We Plan to Retire on Dividends 1 (Amazon)
2. How We Plan to Retire on Dividends 2 (Free PDF)
3. How We Plan to Retire on Dividends 3 (Amazon)

As you can see in my children’s book, dividends are best when they have their buddies. I love dividends but love them more when I don’t need them. 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. All Right Reserved Military Family Investing