Tag Archives: dividend stocks

Your First Investment Should Be Fun And Exciting!

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You’ll read a lot in the personal finance community about the perfect ordering of how you should invest your money in investments.

Such investing strategies typically goes like the following:

  1. If your employer has a 401(k), invest in that first.
  2. Next, put you money in either a Roth or Traditional IRA.
  3. Finally, open a regular brokerage account and put any money left over in it.

The strategy above is a sound strategy, no disputing that, but it also makes investing kind of boring and a bit like a self retirement tax, especially for those very young and still in college. It’s hard to build passion for an activity when you know that its main purpose is for when you are very old and less active.  To me, this seems boring and lackluster.

 

My Young Investment Strategy:

In the past, I have followed a different path when it came to my investing strategy, and it looked like the following:

  1. Buy stocks in a regular brokerage.
  2. Buy stocks in a Roth IRAs.
  3. Participate in a 401(k) when available.

That’s right, my investing strategy was basically opposite the common wisdom of today!  Back when I first started working, the companies I worked at didn’t have a 401(k), so that made it easy to move 401(k)s to position number three, and while a Roth IRAs were interesting, for a teenager it seemed to distant of a goal (although my viewpoint of Roth IRAs has dramatically improved since then).

Another advantage of the above teenage/college age investing strategy sequence is that it made investing fun.  It was fascinating watching stocks that I owned appreciate in value!  I still remember the first stock that I owned that doubled (EBAY) and how excited I was when it did so!  I had an uncle that would buy a few shares of dividend stocks for me as a child, and receiving “free money” from the dividend stocks was exciting for a kid.

Okay, it wasn’t free money, but back when I was a young child, dividends checks that would come by mail seemed like free money!

Rich Kid

Every quarter I was very happy to take all of the checks to the bank and have them deposited.  Even though the dividend amounts wouldn’t be considered a lot of money to adults, to a kid it was!  I actually felt like a big deal going to the bank with my parents to make my deposits.  This strategy (that I really grew into, thanks to my uncle) helped make me a more financial focus individual today.

 

How Does My Investing Strategy Look Today?

Today, my investment strategy looks much more closely to the typical model:

  1. 401(k)
  2. Regular brokerage account
  3. Roth IRA.

Yes, a Roth IRA is still my third choice, although I’ve been thinking hard and long about moving that up to position number two.  A Roth IRA has too many benefits for it to stay at my third option.  In fact, the structure of a Roth IRA is so flexible that I use it as both a dividend tax shield and a stealth emergency fund.

So while I agree with the common knowledge of the best way to invest your money, I, myself do not follow it to 100%.  I especially think that young people should dabble a small percentage of their money in a stock to two, but to teeth on the process.  Investing in stocks is complicated, but if done with a small amounts (perhaps a thousand dollars), it can be a great learning tool and a lot of fun both at the same time.

Bests,

MR

Dividend Stocks, Free Lunch Experiment #11

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I haven’t followed my Dividend Stocks Experiment for the past few months, and I have to admit, it was a mistake not doing so.

Dividend Experiment

Dividend Experiment Update

My last post on this topic was in May, and instead of using the money to buy lunches at work, I instead  planned on buying food and making it at home once a week for the family.  This however, fell through since I underestimated how busy my family is.  So I decided to channel the money back into free lunches for work.

As I prepared the spreadsheet information below, I notice that the dividend for ANH went up (yay), but unfortunately the dividend for CIM went down…  Now the weekly amount I have for spending on lunches is only $13.64.  While not a bad amount, I would have preferred that it continue to go up.  I may have to re-examine the CIM stock and the inclusion of it in my portfolio.

And the the good news!  I have saved another $1000 for another purchase by eating below my previous level.  For my next update, I’ll identify the new (or old) stock that I decided to purchase for the experiment.

 

Dividend Stock’s Lunch Experiment
Stock Name Anworth EV Energy Chimera
Stock Ticket ANH EVEP CIM
# of Shares 260 45 600
Orig. Price $7.84 $23.25 $4.01
Curr. Price $7.11 $64.21 $3.00
Orig Cost $2,038.14 $1,046.25 $2,404.80
Curr Value $1,848.60 $2,889.45 $1,800.00
Annual Yield 14.06% 4.74% 17.33%
Act. Div/Qtr $65.00 $34.25 $78.00
Total Dividends $708.98
52 weeks 52
Dividend / week $13.63
Total Gain in
Stock Apprec. $1,048.86
% Change 19.11%
Amt Loaned to myself: $0
Amt paid back to date: $0
Amt Still Owned: $0
Totals
Cumulativie Stock Value: $6,538.05
Dividend Payout / Yr.: $708.98
Dividend Payout / Qtr: $177.25
Dividend Payout / Wk. $13.63

 

Hopefully next month will be better!

MR

Dividend Stocks, Free Lunch Experiment #10

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I thought my experiment would have a setback with the downturn in the market, but surprisingly, since my last update, it’s still up.

Dividend Experiment

Dividend Experiment Update

It’s been two months since my last update, and I after some passive thinking, I’ve come to the realization that my goal for the experiment has change on me.  I no longer want to spend much on lunch, and going out once a week would be just fine with me.  My lunches are now a production time where I work on blogging.

So the question is, should I continue to use the dividends on spending?

I’ve decided yes I should, but instead of lunches, I’m going to spend the money better foods for my family.  I will use the money to make more nutritional food at home.  I’ve been wanting to expand into this area for a long time, and this money will help both me and my family (at least at a nutritional level).

 

Dividend Stats.:

Dividend Stock’s Lunch Experiment
Stock Name Anworth EV Energy Chimera
Stock Ticket ANH EVEP CIM
# of Shares 260 45 600
Orig. Price $7.84 $23.25 $4.01
Curr. Price $7.20 $54.04 $3.94
Orig Cost $2,038.14 $1,046.25 $2,404.80
Curr Value $1,872.00 $2,431.80 $2,364.00
Annual Yield 12.22% 5.63% 17.26%
Act. Div/Qtr $57.20 $34.20 $102.00
Total Dividends $773.60
52 weeks 52
Dividend / week $14.88
Total Gain in
Stock Apprec. $1,178.61
% Change 21.47%
Amt Loaned to myself: $1,726
Amt paid back to date: $1,726
Amt Still Owned: $0
Totals
Cumulativie Stock Value: $6,667.80
Dividend Payout / Yr.: $773.60
Dividend Payout / Qtr: $193.40
Dividend Payout / Wk. $14.88

 

On with the Update:

  • Overall, the “Total Return” of my investments since investing in 2009 is up 21.47%.  Note, the change is not per year, but simply the percentage gain of what was originally invested vs the current value.
  • The ”Cumulative Value” of my investments equal $6,667.80!  This is money that would have went to the restaurant owner and to the waiter in tips.  But now it’s sitting in my brokerage account earning me a dividend!
  • With a dividend of $14.88 a week, it appears nice, but it’s based on dividends that may not be sustainable.

 

Since I’ve change the goal of this experiment, I don’t think I will need as much as I use to need on a weekly basis.  So, I’m thinking about shifting some (if not all) of my investments into less risky (from a dividend perspective) stocks.  I’ve had a great ride, so I’m not in a rush to do this, but since the goal is more serious, I think that my investments should be too.

As far as the experiment goes, it’s been a great success and exceeded my expectations.  The change in my lunch rituals was an unexpected surprise and one that will get me one step closer to a purer state of frugality.

Cheers,

MR

Using Dividend Stocks For Extra Spending Money

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I would like to buy some dividend paying stocks so I can use the dividend for Extra Spending Money instead of using money from earned income.

First let me say that each month I thought I only spent $250 as my personal Extra Spending Money, but I was wrong!  I spend well over $300.  While I’m going to use $300 as my basis for the calculations below, I want to go back to the $200 to $250 that I use to consume someday.

My current formula for using money for my “Extra Spending Money” is a more of a consumption based model.  This is where once the money is gone, it’s gone!  Here are my simplified steps:

  • The money I have allocated for spending, all gets spent
  • I have zero dollars left at the end of the month.

My future formula for using my “Extra Spending Money” will be a investing-spending hybrid model.  I envision it as the following steps:

  • I save $200 of the $300 that I have allocated.
  • $100 of the $300 is for spending.
  • Invest the savings into a stock that provides a 5% dividend.
  • After year 1use the dividends to help supplement the $100…
  • Eventually as the dividend become big enough, stop spending the $100 and have it go into the dividend stock.

This process will be similar to my Free Lunch Experiment, but this experiment require much more money invested and time than the Lunch experiment.  So I’ll have to do it gradually over years, unless I come up with a way to speed up the investment contribution.

For example, just to generate a monthly $50 from the stock, I’d have to have $12,000 lump sum at an interest rate of at least 5%.  So that would mean some far off future day, to get up to the minimum $200 level, I would need to save at least $48,000 to $50,000 at a similar 5% interest rate.  and this isn’t even taking into account taxes and inflation!  I could envision the true amount that I would need for the month $200 payout being more in the range between $80,000 to $100,000.

I will provide more details in the future, thanks!

-MR

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