Why I’m a dividend Investor

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In this article I will be telling you my investing story so far and what has led me to be (mostly) a dividend investor. 

Photo by Daniel Bernard on Unsplash

To really dumb it down…

passive income 

As I’ve stated in other article, blog and podcast posts… I love passive income. My first taste of it was through dividends. 

I’ll try not spending too much time on this but doing a little work to check out the companies fundamentals, cash flow and so on. Figuring out the company/ETF or whatever is paying dividend is a good investment, including that it can keep up with the dividend. (there is a lot in deciding if a company is a good one to invest in and you have to keep checking every couple months. I could do another article on this. leave a comment if your interested)!  

You put a bit of work in and get a consistent payoff over time, if you make the positive choice. 

Compound Interest 

One of the few positives of time. It’s the interest an investor earns on his initial investment… 
Plus the interest earned on the interest that has accumulated over time. 

If I lost you think of it as Interest on Interest. 

Let give a quick example here 

We will start of with simple interest. (simple interest is the interest you earn on the original investment only) YOu put £10,000 into a savings account with 5% simple interest rate(Well done for finding anything near 5% in this current market) So the interest you earn is 5% for 3 years. 

Each year you earn £500. So at the end of the 3 years You have £1,500 interest… MEH… 

But lets say you invest that into an account which has 5% interest compounded annually. The first year is the same as the last… You get £500 so your total is £10,500. Nothing special compared to the other account but here is where the magic happens. Your next year is £10,500 with an interest of 5% Which means you get £525. Which brings your total to £11,025. With your new total )£11,025 you add, you guessed it 5%. Which means that year you get £551.25 which brings your new total. At the end of your 3 years… 11,576.25. I know I’d prefer that 76.25 in my pocket. 

Photo by Viacheslav Bublyk on Unsplash

But where this gets really interesting is when you consider the years. I’m 19 at the moment that leaves at least another 20 to 30 years before retirement (which isn’t my plan but well use it as an example) within 3 years your making a bigger profit… what will 20/30/40/50 years do? 

Yes at the moment my dividends are in the pennies but what about a year from now? 

(Here is a video which better describes my example and point when it comes to compound interest). https://inv3sthome.wordpress.com/media/ba7e388cfb73d4d36093dc667fc9b0bb

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Proven way

Look at Warren buffet or Charlie. They wouldn’t be where they are today without compound interest. 

Yes they choose good investments and that’s a skill within itself… but it’s not this outstanding thing that none of us can follow. Of course none of us are going to be as rich as them (unless we dedicate the time and research they did but even then it’s not promised). But if we lived in fear we would do nothing. 

Photo by K. Mitch Hodge on Unsplash

Dividends have out grown the S&P 500 

The S&P 500 is one of the top 4 major ETFs within the stock market. 

A study (by DR Ian Mortimer and Mathew page) called why dividends matter. They found, with long term investing, when looking at the S&P 500, reinvested dividends counted for 90% of the growth in the entire S&P (since 1940). 

If you put in £100 into the S&P you’d get 174,000 by 2011 if you invested your divies, vs only getting 12,000 if you decided you wanted the dividends. 

I know what you saying. I’m just using data which supports my point and using unrealistic time periods. I would suggest you finish looking at Andrei Jikh video on this. https://inv3sthome.wordpress.com/media/ec2058fbcb59b97d16a77abfc1873da3

Dividend companies tend to fall less hard during recession and come back quicker after than those who don’t. Tesco’s slogan really does have merit (every little help). 

Think of it like this. If you save £1 a month. £1? That’s nothing. You can’t really get much with £1 but your saving £12 a year. if you can do that for 5 years you £60… not looking so small now is it? (I get it it’s a long time to wait but 60£ is… 60£ XD

I’ve done a lot… 

Although you can get money from forex trading, day trading and all the other forms of trading. There’s a huge amount of learning, time and probably money you have to lose before you start properly gaining that cash.

Don’t get me wrong, they can be veryyyyyy lucrative and if you enjoy looking at graphs or that buss from making a good decision and watch that green, profit, and don’t get too down (there’s a lot to it and I can make a whole article on it but we will skip to it)… If you enjoy all that than good. Trading might be for you but for consistency, a long term plan and for the average person. Dividend and growth stocks are the way to go! 

I’ve done a lot… 

Although you can get money from forex trading, day trading and all the other forms of trading. There’s a huge amount of learning, time and probably money you have to lose before you start properly gaining that cash.

Don’t get me wrong, they can be veryyyyyy lucrative and if you enjoy looking at graphs or that buss from making a good decision and watch that green, profit, and don’t get too down (there’s a lot to it and I can make a whole article on it but we will skip to it)… If you enjoy all that than good. Trading might be for you but for consistency, a long term plan and for the average person. Dividend and growth stocks are the way to go! 

Photo by Edward Howell on Unsplash

Yes saving is great (check out my podcast on ‘what you need before you start investing here. I’ll be doing a blog post about it later on my website too so stay tuned)! But to get and create wealth Investing is a great way, and faster way, at achieving that. 

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I tried a new way of writing up my articles and blog posts in the past couple weeks. Let me know if you like it or you prefer the old way. 

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peace