How Much $ Invested To Live Off Dividends

hi my name is andre chick welcome back where you come for the magic and stay for the finance i don't have an intro tag line to my videos but that sounds good so i'm sticking with it anyway let's talk about how much money you need invested to live off of dividends so to figure that out step one pull out your phone i can't be the only one that takes my phone out like that if you're wondering how many takes that took to shoot actually enough to crack my phone and destroy it completely that's pretty sad but instead of throwing it away i repurposed it and framed it into this work of art where each and every part on this iphone is taken apart and labeled independently so cool i love that totally unrelated to the video but i just wanted to share that also that was a complete lie i just bought that online i never dropped my phone because i don't make mistakes no i'm just kidding my entire youtube channel is one giant mistake that i keep making over and over again and then sharing it with you so let's get started so today i wanted to talk about investing and how much money you need to live off of dividends and passive income so just the other day i had a good friend of mine ask me some really basic questions about investing and that told me two things number one she never watches my youtube videos so thank you anna thank you so much for being such a supportive great friend and number two it tells me that most people are probably not sure or not aware of exactly how investing works especially as it relates to dividend investing passive income and the tax implications of all that stuff so i wanted to make this video to hopefully help her out by taking you behind the scenes and showing you how much money i made as well as how i think about all this stuff to begin with and at the very least hopefully it inspires you to start your very own journey or help out a friend who you think could use it and share it with them so anyway let's go over exactly how much money i made in dividends last month so november crazy month let me open up robin and show you that in the last month i made twenty six thousand one hundred sixty eight dollars that is an insane amount of money to make in just one month and you've heard of compound interest right we invest money that money grows into even more money and so on and so forth well this is happening for me in real time and it's pretty cool to see it grow and at some point your stock portfolio will reach a point where it will make you more money than you do from your nine to five day job now the reason that i was able to make 26 000 in one month or almost 11 is because we had a really good month in november and that's really why that happened because energy financials and utilities or boring blue chip stocks really led the way so i'm not going to sit here and tell you that i'm super smart you should subscribe to me and buy my 5 000 investing program because i've got nothing to sell you it's just the stock market doing its thing and it will inevitably happen to you as well over a long period of time but what i'm leaving out is that i made over 700 in passive income this month plus an effective 933 in dividend raises so let me show you the breakdown for that so if i open up my robinhood account summary you can see for this period i was paid 743.57 that's an amazing amount of money right there by itself enough to cover my rent this month but what's more interesting is if i showed you how much i was paid in november of last year so let's jump into my spreadsheet and i'll show you exactly how much that was 409.58 so that represents a growth of 81.5 percent year over year which is amazing you can see that every month i've been investing this way compared to the same time last year i've consistently made more just by reinvesting and buying more stocks but on top of the dividend income the second source is from dividend increases now you can think of dividend increases as sort of like when a company makes a profit it has two choices it can either reinvest that money to make more products or it can reward its shareholders by giving them essentially a pay raise and not every company does this but the ones i try to find and invest in always follow that trend the downside though is two things the first is i have to pay taxes on this dividend income now this doesn't even matter if i don't even touch this dividend income if i use it to reinvest and buy more stocks it doesn't matter the irs still wants their money the second downside is that every time a dividend stock pays us dividend income it will fall by the same amount so for example if apple pays us 80 cents per share then its stock price will drop by those same 80 cents now this doesn't always happen sometimes a stock will stay the same in price other times it's so hyped up that it will even increase in price and people try to do this dividend capture strategy by buying a dividend stock right before it pays they'll collect the income and then they'll try to get rid of it right before it falls now that's a lot of work and i don't do this because i know that eventually the stock price will recover and even exceed its original price without me doing anything so anyway for the past month i got eight dividend increases from eight companies for the sake of completion and transparency i'll share with you what those stocks are in case you want to know they were shell oil abv emerson bti national grid aflac sphd and hormel foods now i imagine that most people have never even heard of those companies those are just stable blue chip stocks but even though i was paid a grand total of an extra 37.32 cents per year doesn't sound like a lot to make just 37 extra per year but that is way more money than you could ever imagine check this out it's going to blow your mind for starters 37 pays for netflix spotify disney and my 20 cent diced coffees so let me show you an example of why it's so much money if i open up robinhood and i go to apple and if i scroll down to the div yield you'll see how it's 0.66 percent what does that mean that's how much money the company will pay me an interest per year for every dollar that i invest with them so for example how much money do i need to invest with apple to get 37 per year that i just made so here's how we do that we take the 37 how much money i made and divide it by the dividend yield 0.66 percent remember to move the decimal over twice to the left we get .0066 and we get the total to be five thousand six hundred six dollars what does that mean that's how much money i need invested with apple five thousand six hundred six dollars just to make thirty seven dollars extra per year except that's five thousand six hundred six dollars i didn't need to invest at all because i organically got it from my own portfolio just by itself so let me show you another example now a company called avi you've probably never heard of them but they're a great biopharmaceutical company that i own quite a bit of great blue chip stock so if i scroll down it shows me a div yield of 4.4 percent so we can do the same math 37 which is the amount that i made divided by 0.044 that's moving the decimal over twice to the left and we get eight hundred forty dollars which is way lower than apple's five thousand six hundred six dollars what does that mean that means that i need to invest a lot less money with avv than i do with apple to make the same 37 dollars per year now does that make avi a better choice and a better stock to invest in no not really it just means that abby is more concentrated on rewarding shareholders through paying dividends whereas apple is more concentrated on taking its profits and making the company grow therefore the stock price grows alongside so the reason that i bring that up is because the amount of money that you need to live off dividends really highly depends on what your returns are and how much money you want to make so for example if i want to make forty thousand dollars per year then that would depend on what my dividend yield for the companies that i invest in is so if that sounds way too complicated and way too confusing which i realize for some maybe it is let me show you a better specific example using my portfolio alright so this is my little spreadsheet that's available on my patreon in case you want to go get it links down below but first let me enter my dividend income so you can see 743.57 enter and it's gonna show me some pretty cool stuff first in the sector section it'll show me all of my different income streams from the different sectors in the stock market then it'll show me my diversification as far as all the different stocks and where that income is coming from and it's going to show me a summary of how much money it's predicting me to make this year so around 8 000 now here's what's really interesting robinhood doesn't have this feature for whatever reason i don't know so i've included it which is the average dividend yield across all of my different stocks of which you can see i have many so it shows me a dividend yield of 3.79 percent what does that mean that's a really interesting number because let me hypothetically ask you how much money do you want in retirement for me it's let's say 40 000 per year that's an average solid income to make without a job so forty thousand dollars i'm going to enter into my calculator and i'm gonna divide it by my dividend yield so really simple remember to move it over to the left twice we get point zero three seven nine and we hit equals and that'll show me the amount that i need invested one million fifty five thousand four hundred eight dollars to get to my hypothetical forty thousand dollars per year now i know that sounds and looks like a really big number that you'll never get to but i promise as soon as you start taking this stuff seriously and you invest consistently and you start tracking it like you would any other goal you'd ever have then this number will creep up on you way faster than you could ever imagine so anyway if you add up the dividend income and the increases which is an effective 933 dollars following that same four percent rule that brings up my monthly income total to 1676 dollars and 57 cents not bad for not actually doing any work at all but wait there's more because on top of dividend income i also received interest in the form of digital currencies that i'm holding on blockfy so i earned .04 btc last month which currently at the time of recording this video is roughly valued at 770 and that brings my total monthly income to 2446 dollars now unfortunately that is not dividend related nor is it fdic insured so it's always at a risk so i'll leave that out but i just wanted to share it with you in case you wanted to do the same thing you can use my promo code right here and get up to 250 worth for free of digital currencies but the point is not to just invest in dividends by themselves i'm not saying i know everything with dividends i'm not the be-all end-all source of authority on this the point is to diversify across many different sources like dividends like real estate and even digital currencies if you wanted to so back to the original question of how much money you need to live off dividends it depends on how much money you want to make so for example for most people that's going to be between 40 to 50 000 per year where it guarantees that you could live virtually anywhere in the world very comfortably but if you want to do that way earlier you could do something called geographical arbitrage where instead of using their native currency you're using the dollar's purchasing power to be able to afford yourself as much as four times the amount of stuff just by spending the dollar instead of their native currency for example in my city of ostracon their monthly net salary after taxes is 240 dollars that's per month that's three thousand dollars per year and knowing what you know now you take that three thousand divide it by a dividend yield that's average let's say four percent that means seventy five thousand dollars is how much i need invested to live a pretty average lifestyle in the city of astrakhan where i'm from which i do not recommend but as far as the amount of profits i've made in november of 26 000 that's money that i'm not really very happy with and here's why because i didn't really make that money because i didn't sell it or realize my profit i just made 26 000 extra on paper and as a dividend investor it's interesting because when my stocks grow in value i'm not very happy with that because it takes me farther away from my goal because i need to use more of my money to buy less stock instead i'm really happy with my stocks are in the red and they're doing worse because that's when i'm actually buying more stocks and that's when i'm building more passive income which gets me closer to my goal i could do one of three things i could for example sell this entire portfolio just yellow swipe up and sell everything in that case i would take my profit pay the taxes only to write off into the sunset and then three years later realize that i'm completely broke so i don't want to do this first method and instead i might want to consider doing method number two now the second thing i can do with all this money is just continue investing and then letting compound interest grow and take over for the next 20 years so time lapse 20 years later and now we're here 1.37 million dollars later and all i had to do was reinvest my dividends month over month at my average 700 a month and i'd be here that's pretty cool and this is where the confusion comes in because people think to live off of dividends they would sell the entire thing retire a millionaire buy a car buy a house and just be a baller but that's not very tax efficient because you have to pay capital gains taxes which is really simple it's taxes on the gains on your capital which makes sense you don't have to pay taxes on that entire amount just the taxes on the difference between what this amount is and what you personally contributed to it which is the principal amount so in this case i would pay zero dollars in taxes for my first 40 000 then i'd pay 15 tax rate for the first forty thousand one dollars to the next four hundred forty one thousand four hundred fifty dollars and then anything above that i would pay twenty percent on so that's not the strategy i would go with either because there's a better more tax efficient way of going about it because the third way is to live off the interest of your portfolio so let's say i hypothetically got to my million dollar portfolio i'm living off of forty thousand dollars a year that's amazing because if i can keep it at 40k or under then my tax rate for my capital gains is actually zero percent now that's what the rule is today but it could change in the future which is pretty cool now this is for qualified dividend income only and it takes into account your adjusted gross income so it's not just like dividends are exclusive it takes all of your income sources into account but the point is the reason why i love this is because i don't have to plan for my future by selling my stocks at a perfect time during a good economy when i'm old and wrinkly instead i can plan for my future based on my cash flow today and based on my debt today and that's way easier and makes way more sense to me now if you want to pay less in taxes you can create a roth ira account where dividend stocks you buy in that account in the income you receive is going to be 100 tax free the downside though is you're limited to putting in only six thousand dollars per year which is why i have a brokerage account that is taxable outside of my roth and the second downside is that you have to wait until you're 59 and a half to withdraw your gains you can withdraw your contributions at any time but you will be penalized if you try to withdraw what profits you made in that account so the final answer with regards to how much money you need to live off of dividends depends on how much money you want to make per year divided by the dividend yield so for most people that's going to be about 40 000 that they'd need or roughly 1 million dollars invested in the stock market with dividend stocks earning seven percent or a dividend yield of roughly four percent so that's really the answer now for me i want to make closer to a hundred thousand dollars per year and that's a 2.5 million dollar portfolio but i'd love to hear what you ultimately want to make and how much money you need having said that if you want to get started with investing put in 100 with weeble you can withdraw it a month later but you can get four free stocks two of which could be valued up to sixteen hundred dollars it's a limited time promotion you can get a fifth free stock from robinhood and you can also follow me on instagram where i post from time to time join my free discord group or reach out to me and write to my p.o box down below love you thank you so much for watching my video i will see you back here on monday and friday sometimes a wednesday and i'll see you soon bye

Channel: Andrei Jikh

Views: 972,466

Rating: 4.9124804 out of 5

Keywords: passive income, dividends, dividend stocks, investing, investing for beginners, investing in your 20s, how to invest, how to invest in real estate, how to invest in stocks, stock market investing, stock options, robinhood, robinhood app, best stock trading app, how to be a millionaire, credit score, credit score explained, credit cards for beginners, how to build wealth, real estate 101, andrei jikh, best investments, best investment, save money, live off dividends

Id: UCj3Pqq0qnk

Length: 16min 56sec (1016 seconds)

Published: Mon Dec 07 2020