If we started investing in our 20s, 30s, or 40s, our 50s should be a time to focus on setting up our children. There are many ways to set up our children, but one of the best is building them a dividend growth investing portfolio.
We used income investing in our early years because we needed the money now. However, our kids will have years to grow their income nest egg. But why is DGI the best option for our kids’ dividends?
DGI vs. Income investing. I wrote an article titled “DGI vs. Income Investing” that covers the fundamental differences between the two styles. Today I want to focus on DGI for our kids’ benefit.
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The main difference will be capital appreciation, dividend growth, stock splits, mergers, and spin-offs. Investing in blue chip dividend companies opens you to significant business opportunities.
Capital appreciation is the increase in stock price over the years. When income investing, capital appreciation is a secondary benefit. For DGI, the stock price will hopefully increase over the years.
Dividend growth is when companies raise their dividend payments. Sometimes, these hikes out-pace inflation, making for a nice pay raise.
Stock splits are a great way to gain more shares of the company. I have already participated in stock splits from Apple, Google, and Amazon. You don’t make any money from the split, but sometimes there is a FOMO price increase after the split.
Mergers and spin-offs combine or create new companies. The best time to get into a company is at the very beginning. These events will happen randomly inside your brokerage account and are perhaps the biggest wealth generators of them all.
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Do your kids need their own separate accounts? If you’d like, you can open a small brokerage account under your kids’ names.
However, you can do most of the investing under your name with the intent of transferring everything to your children later.
I have five custodian brokerage accounts for each of the children in my extended family. The older ones have DGI accounts, while I focus on index fund investing for the younger ones.
Index funds vs. DGI portfolios. I like DGI more than index funds for kids using the accounts in 20-30 years because of the events I mentioned earlier.
Yes, index funds are the safer bet and will perform better than 95% of the stocks. But if you catch an excellent stock split or spin-off, that can create massive wealth.
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Consider something like the recent AT&T (T) and Warner Bros Discovery (WBD) spin-off. I believe that WBD will do very well over the next 20-30 years, and I am an owner on their first day of business.
So having a DGI portfolio of 20 companies will produce a few events that may lead to massive wealth creation. Conversely, index funds are the best way for grandchildren to accumulate wealth in the stock market.
Pitfalls of investing in your 50s. Your 50s are a great time. You are considering retiring and perhaps moving overseas. The main threat to your investing success is complacency.
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Remember to do the things that got you here in the first place. I always annotate the dividends I receive. I want to keep doing this to stay on top of these companies and brokerage accounts.
I will continue to say living below your means is the most crucial part of accumulating wealth.
Reinvest your dividends as well. If you earn $3,000/month in dividends, you should consider reinvesting 25% or $750/month. Reinvesting ensures that your dividend payments will continue to grow indefinitely.
Enjoy your dividends. You worked hard to get here, so you should enjoy your dividends. Hopefully, you have a Happy Cash Flow Retirement system that generates passive income from various sources.
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You built this system so you could enjoy your later years, pass on assets to your children, and reduce stress while aging.
So, do these things. Collect your dividends for a few months and go on a vacation. Search for beautiful cities overseas, and live on dividends for a year or so.
Only your imagination can hold you back. What is your dream life? Where do you want to be in your 50s, and who is with you?
Piggybacking dividends. A new concept I have used recently is piggybacking my dividends. Here I use my wealth generators to create income.
I invest this income in high-yield products in my income portfolio. When I receive these dividends, I then invest those into DGI stocks. You can take it one step further and invest DGI dividends into index funds.
It may sound confusing, but I am getting the highest yields first, then building out additional nest eggs from there.
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I am doing it for fun, which is a great way to stay on top of my dividend portfolio. You can always turn on dividend reinvestment and ”set it and forget it.”
Conclusion. During your 50s is when you can start enjoying your dividends. You can also pay it forward to your children by investing in DGI stocks.
Investing in DGI stocks opens the door to random events that can create significant wealth. It doesn’t take much to generate wealth over 20-30 years, so setting up your kids will be a massive transfer of wealth.
Don’t forget to enjoy your dividends, but to be responsible. Dividends are free money, but you always have to be a good steward of your resources.
You can add additional income streams like royalties and rents to make your dividends that much sweeter. Whatever your plan, start implementing it today. 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
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