When we hear about being a millionaire, it’s generally meant in terms of net worth but that certainly brings a new dynamic to those of us that have a significant part of their net worth in their house. It’s something I can worry about at some point down the road but it’s safe to say that I’ll reach the $1M in net worth a few years before getting $1M in investable assets.
I’ve often received emails and comments on this blog over the years relating to the sacrifice involved in aggressively pursuing financial independence. While often not criticizing in nature, I think people have this preconceived notion in their mind about what sacrifice really is.
I’m taking a quick pause in my new investing series about how to build an investment strategy (read part 1 and part2) to publish my stock pick returns as at March 31st and the usual TSX60 dividend yield and ex-dividend date chart. After a full quarter, I’m already taking a step ahead of both US and CDN benchmarks. Let’s check how I beat both benchmarks by more than 1%. PSST! If you are curious to know how I keep beating the market with dividend stocks for the past 3 years, check out my new website!
Last week, I started a new investment series called “Build an Investment Strategy”. All my readers have made at least one trade in their broker account, but it doesn’t mean they have a solid investment strategy. It goes far beyond a simple set of ratios and metrics that you enter into a stock filter. An investment strategy is your philosophy; it describes the way you intend to manage your portfolio. The investment strategy is useful when you are about to make a tough decision: to buy or to sell.
Dividend investors should not view every stock they purchase as a price that fluctuates on a computer screen however. On the contrary, they should view each stock purchased as a share in a business. Therefore, the most important thing to focus on is the underlying strength of the business you are investing in, and not day to day fluctuations in security prices. Once an investor has a list of quality businesses, he needs to be able to decide at what prices to purchase them.
The world is changing at a rapid pace. Some technologies such as the internet and smartphone apps have redefined the way we work and live. Despite all the change, I keep focusing my efforts on companies which have managed to keep their status quo for years, and have a high chance of continuing their quest for higher profits in the future.
They say earning the first million dollars is by far the most difficult. That doesn’t seem very difficult to believe does it? When you’re starting out, most of your assets are held in real estate which isn’t very liquid and doesn’t work as well in terms of generating compound interests:) However, it does look like it’s easier than ever to make that first million, just take a look at this chart: That being said, being a millionaire clearly does not mean what it used to, especially in this era of ultra-low interest rates. Someone earning 4% on $1,000,000 (which would be fairly good) would only generate $40,000 before taxes. And that is for a portfolio of 100K. It’s unlikely that someone with a net worth of $1M would have all of his money in the market.
I think that I don’t have to convince anyone on this blog that dividend investing rocks. That it’s among the best investing strategies there are over the long term. It produces income and reasonable growth potential. It basically brings to the table what any investor is looking for: a source of both revenue and growth. There is one thing however, amongst all the arguments that we can discuss, what is more attractive about dividend investing than any other investing strategy. This is what I call the best thing about dividend investing. Since 2010, I’ve worked to convert my portfolio into a 100% dividend stock account. I’ve successfully made the move and am now cashing in the dividends (literally) of my *new* investing strategy.
I love dividend growth stocks. I love reading about dividend growth investing. So I decided to combine the two by reaching out to some of my favorite dividend growth bloggers and asking them about their favorite dividend growth stocks. And be sure to stick around because at the end I will discuss both my current and my all-time favorites!
Index funds are perfect for most people who don’t want to bother about managing their finances and retirement. If your goal is to accumulate a certain amount of net worth in the future, and do not want to spend any time learning about investing, index funds could be your best solution. Therefore, index funds are great for 80% – 90% of the population out there, particularly if coupled with the tax advantages of 401 (k), Roth and Regular IRA’s etc. I own index funds in my 401 (K), because I cannot buy anything else there.