Wow, the fourth time’s a charm. There has never been a more critical time to understand who you are as an investor. The bond and stock markets are in turmoil, and your only saving grace is your knowledge and education.
We don’t know what the future holds for our economy, but we must still allocate our resources towards investing.
Hiding in cash is not the best use of ALL of our money. Cash has its place in our portfolio, alongside bonds and dividends.
Welcome to part four of the How We Plan to Retire on Dividends series (Part 1, Part 2, Part 3). If you read the previous articles, you can start to piece together where you stand as an investor. With that, let’s dive into the mix.
INVESTING BASICS
The market is heading downwards, which could signal a buying opportunity. It is a great time to average down if you have confidence in your stocks.
With interest rates increasing, there are more ways to obtain a good yield than ever. Some ways to invest are high-yield savings accounts, CD Ladders, and series “I” bonds. Which one is right for you?
Fall is the perfect time of the year to start investing. If you plant the right dividend plants, they will bloom into the new year.
As an investor, you should always look at tax strategies to keep more of your money. Two ways to save tax-free are Roth IRAs and health savings accounts. However, only one of them gives you a triple-tax advantage.
Investors use the term “leverage” all the time. It means using other people’s money to juice your returns. You can borrow against your brokerage account to invest at a higher percentage than the loan. We call this “margin,” and you should avoid using it.
If you turn to the stock market to make you rich, you’ll fail miserably. The idea is to make your money away from the stock market and use the stock market to keep that money growing. The stock market is NOT a wealth generator.
INVESTING IN DIVIDENDS
Now is the perfect time to invest in dividends. The yields on dividend-paying stocks are high, and there is a level of uncertainty. If you didn’t know, you make the best return while investing during a market downturn.
We can use s dividend growth investing portfolio as a nest egg that our family can continue to grow forever. The fruits of a DGI tree can help build for many generations if we teach our offspring how to keep it alive.
Can you make $500/month in dividends? It is not as hard as you may believe. All it takes is your dedication to the principles of saving and investing.
There is a massive difference between income investing and index fund investing. Income investors want their money now, while index fund investors want a huge pile of money for retirement.
Inflation is coming for the entire world, and we must find a way to beat it. If you can out-earn inflation with dividends, you can continue to grow your wealth. The best way to exceed 8% inflation is to earn 9% with an income portfolio.
Quality preferred shares and treasury bonds have an inverse relationship. Where can I earn the safest 4% return on my cash? Sometimes it is treasuries, and sometimes it is with a high-quality preferred share.
My dividend debit card has become my best friend. It continues to feed me money, no matter the situation. Sometimes I look at my phone to find cash waiting to spend. It’s nice to have someone who continues to replenish my checking account. Thanks, dividend debit card!
The hardest part of investing is getting the money from your standard checking account into your brokerage account. You can become an automated income investor by having the bank transfer money into your brokerage account as soon as you receive a paycheck.
INVESTING IN BONDS
Bond yields haven’t been this attractive in 10-15 years. Now is the perfect time to build a bond growth investing portfolio and leverage multiple types of bonds for income, growth, and capital gains.
I love 30-Year Treasury Bonds, but I haven’t bought one in two years. That’s about to change because they are starting to yield over 4%.
Bonds are an essential part of your retirement planning. Start building a solid portfolio of bonds that can help you supplement your retirement income.
Series “I” Bonds and Roth IRAs both grow tax-free. You can liquidate Roth IRAs without paying taxes; however, you must wait until age 59 ½. You have to pay taxes on your gains with Series “I” bonds, but you have access to them at any time.
A considerable part of bond investing is reinvesting at the same or higher interest rate. What if you decide to reinvest your bond income into high-yielding products? Would that change your investing thesis on bonds?
DIVIDEND INVESTING AT ANY AGE
No matter when you start dividend investing, it will benefit you (or your family) in the long run. Don’t let age keep you from investing. Whatever your age, read this series in its entirety.
- Dividend Investing in Your 20s
- Dividend Investing in Your 30s
- Dividend Investing in Your 40s
- Dividend Investing in Your 50s
- Dividend Investing in Your 60s
- Dividend Investing in Your 70s
INVESTING FOR INTEREST 101
Series “I” Bonds became the talk of the town when their yields were above 9%. I have been investing in these bonds since 1999. However, I have to admit that they are a fantastic investment opportunity.
Certificates of Deposit (CDs) are making a comeback because yields are moving above 4%. Since we don’t know how yields will shift in the future, we can build CD ladders to lock in gains while keeping our options open.
Series I” Bonds use the power of compounding to grow a safe nest egg. However, they don’t pay you coupon payments during their 30-year run. 30-Year Treasury Bonds will pay you twice a year. You can use these coupon payments to reinvest in higher-yielding products. Which is right for you, Series “I” Bonds or 30-Year Treasury bonds?
BOOK TAKEAWAYS
If you are good at reading charts, Elliot Waves may be useful. It takes a different analysis technique to see these movements, but people use them to great effect.
Health Savings Accounts are triple-tax-advantaged accounts that can help you with medical expenses throughout life. The problem is that they are challenging to find and harder to join.
This book on bonds is the bible for anyone looking to understand bond markets. I used all the resources from this book immediately after reading the words. The bond market is much larger than the stock market, so understanding bonds is vital to your survival as an investor.
I forgot to get this article in my earlier writing. But I cannot forget my seven-day road trip, where I reflected on my passive income journey. On day three, I thought about how far I have come in my dividend journey. Dividends have changed my life, and they can change yours as well.
CONCLUSION
The investing world is more extensive than you can imagine. You have HSAs, HYSAs, preferred shares, treasury bonds, closed-end funds, and CDs.
Don’t let these terms scare you; just start by reading. You’ll eventually learn the words and the words behind the words.
- How We Plan to Retire on Dividends (Kindle)
- How We Plan to Retire on Dividends 2 (Free PDF)
- How We Plan to Retire on Dividends 3 (Kindle)
My How We Plan to Retire on Dividends series is a great place to start—Good Luck in your investing endeavors.
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