Isn’t that the whole goal of life? To set yourself up to enjoy and love as much of life as possible?
Money doesn’t buy happiness. But financial security means you can devote your time and energy to things you actually want to be doing. I don’t know about you, but if I’m worried about money, I’m not much fun to be around. It will literally consume me.
This is why I don’t have a lot of my money in speculative investments. Yes, I’ll admit that dividends don’t make up 100% of my personal portfolio. I’ll also admit that part of my portfolio tends to lose more money than it makes.
My two-prong system is designed so you don’t stress about your money. If you need more money now, invest in Current Yield positions. If you’re saving for retirement or another future milestone, buy Bedrock income positions.
Boring is better, because your money works for you.
Unfortunately, I’ve met a lot of people stressed about what their retirement will look like—or if they will ever be able to retire. I’ve also met people with young children stressed about other milestones like sending them to college or paying for a wedding. Today, I’m talking to anyone that’s looking to build wealth for the future.
Keep It Simple
There are many stories about average people who have done just that. Ronald Read, Grace Groner, and Anne Scheiber grew their portfolios to $8 million, $7 million, and $22 million, respectively.
Read worked as a gas station attendant and mechanic for 25 years in Brattleboro, Vermont. When he retired, he took a part-time job as a janitor at JCPenney. Groner was a secretary at Abbott Labs in Lake Forest, Illinois. Scheiber was an IRS auditor.
These were average people with typical jobs. They invested what they could and reinvested the dividends. Instead of spending their dividend checks, they bought more shares of the same company. This creates a compounding effect, and by years 7-12 the growth turns exponential.
Here’s a hypothetical example of buying $5,000 of McDonalds (MCD) at the beginning of 1990 (just before I was born).
The investment would be worth $363,738.99 today with the dividends reinvested versus just $181,677.08 without. The dividends collected and spent over that time would have been $43,943.94, nowhere near to closing that gap.
And these numbers assume no extra money was added to the initial $5,000. Buying more shares when you can will help you reach your financial goals even quicker.
You Don’t Have to Start Big…
… but you do have to start to build wealth. No more excuses.
A brokerage account is easy to open online. Most don’t require a minimum amount to open. You can begin your journey to financial freedom as soon as your initial deposit clears. When you place your buy order simply check the “Reinvest Dividends” box and you’re off to the races.
Find a stock that you like and buy a few shares. Then, regularly add more shares when you can and let your dividends work for you.
I wrote about compounding back on August 2, 2023. In that article, I mentioned one of my favorite stocks, Enterprise Products Partners (EPD). I have quite a large position in EPD due to reinvesting my dividends for many years.
I ran the numbers on how much money you could have “saved” for the future had you bought just one share of EPD a week starting in 2012. In just 11 years, you’d have 935.4 shares worth $24,798. And you would have parted with only $20-$35 per week!
Whatever your long-term financial goal is, start building a financial nest egg with these simple steps:
- Pick a big, boring dividend company, preferably one with a long track record of increasing its dividend.
- Commit to buy at least one share every week or pay period. Make it a reasonable goal so you don’t get discouraged. You can always buy more shares when you have extra money laying around.
- Stick with it, and watch your money grow!
If you want more info on how I use dividends to both grow wealth and generate passive income, make sure to mark your calendar for my free live event on Thursday, July 10, at 2pm ET. It’s titled Building Reliable Income and Wealth with Dividends and will take place in the Dividend Digest online community.
For more income, now and in the future,
Kelly Green
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
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