We rarely compare Dividends and Royalties together. One requires money to produce, and one usually requires time to create. But are they equal? Do you need both? I will get into these questions throughout this series.
This topic came about because I started to get my first royalties from my Kindle Magazine that I have been publishing. In my second month, I will bring in about $20. I was telling my wife how much money this is. It is hard to imagine that $20 is a large sum of money.
But I am here today to show you just how much money this is. To truly comprehend how much money this is, you will need to compare it to a dividend portfolio producing $20 a month. Then you can get a true handle of how much money this $20 is.
Taxes 101: Understand the 3 Types of Income
I will compare this $20 versus three distinct dividend portfolios. Each portfolio will have different dividend yields, but the higher the yield, the higher the risk.
3% dividend yield portfolio. For this portfolio, I will use my favorite safe 30-year bond fund, BLV. BLV yields about 3%. $20/month equals $240/year. To produce this $240 annual amount, we would need $8,000 (240/0.03) invested in BLV. I repeat $8,000. The question now presents itself, how long would it take you to invest $8,000 into this bond fund?
5% dividend yield portfolio. We will use a more risky High Yield Bond fund, JNK. This fund invests in high yield bonds (overwise known as junk bonds). Junk bonds are bonds from companies that may be at risk. It pays roughly 5%. To produce this $240 annual amount, we would need $4,800.
10% dividend yield portfolio. AGNC, a mortgage REIT, will be our security for this portfolio. It pays roughly 10% yield. I wouldn’t consider this risky, but there are various times to invest in REITs. You need to get into the right REITs at the correct times. It does require some knowledge. Please read my Introduction to REITs series for more. We will need $2,400 invested in AGNC to receive $20 a month.
Royalties. To produce this $20 a month, I didn’t need to pay for anything. The blog is optional. I could have done without the blog and still created my Kindlezine (kindle magazine). The only actual expense is my subscription to a stock photo site, Pixlr.com. You can even negate that if you did your own photo work.
How to Build Passive Income from Royalties
You do need some kind of knowledge to produce royalties. You can’t just talk about your cat all day. You will need to provide value. I am going to start a series on how to create a Kindlezine. I think many people can leverage this method to step into the world of royalties, gently. Most people will not be able to create a book all at once. But by dividing it down into smaller sections, it is achievable for almost anyone.
Which passive income is best for you? Well, I am sorry to say that you will need both. Why choose? Dividends are passive. You can automate investments to be taken directly from your paycheck and deposited straight into your brokerage account. Since stock market investing does not take that much time, this leaves you time to produce content for your royalties.
I will go into more detail throughout this series. This article was an introduction to the world of royalties. It is a fantastic world that is unknown and underutilized. It also builds a sense of thrill in your life. You never know how your content will perform throughout the day. You can wake up and have excellent results from the night before. You are making money in your sleep.
Keep an eye out for more additions to this series. And the Kindlezine series is starting today because I am about to write it now. Get started on your dividends and royalties today.
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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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