Stocks are how people get rich and stay rich. When building an investment portfolio, you have to define how you want to grow your money. The two methods of thinking are not very similar, so you need to understand the difference. You have growth investing and dividend investing.
Growth investing basically has a person investing in fast-moving companies that will grow their money at exponential rates. For example, Amazon. I first used Amazon back in 2001. If I had bought stock then, around $20, it would be worth $3000 now. As a growth investor gets older and retires, they would sell their investments slowly and use the cash for day to day operations or convert the stocks into bonds. Bonds being more stable than stocks.
Dividend investing is when investors buy stocks of companies that pay dividends. Dividends are a portion of the companies profits. The dividend payout can be anywhere from 1-12%, based on what the individual pays in order to entice investors to their stocks. In order to live off of dividends, you will need a lot more cash invested in the stock market, in order to not sell the underlying stocks.
My issue with growth investing is that the goal is to sell stocks in order to live off of. I want to be able to leave all of my investments to my children. That’s the only reason I invest. So this model doesn’t fit into my particular investment strategy.
Dividend investing also has issues. If the company you believe in and invest in goes under, then your dividend payout will be at risk. You have to constantly follow the stock market news, in order to make informed decisions.
I am mainly a dividend investor. However, I do buy growth stocks from time to time. Growth stocks may start to pay dividends over the course of the years. Right now my two growth stocks I am buying are Uber and Draftkings. My goal is to build a dividend portfolio that pays $3,000 a month. I am currently around $80 a month. So I have a ways to go. I will need roughly $1.2 million dollars invested in order to achieve my goal, at a 3% dividend payout ratio.
The plan is to leave the whole investment portfolio to the kids. This will allow them to have freedom of movement and focus on things they want to do, and not be forced to work in environments that are toxic. Investing=Options.
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. 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.
Leave a Reply