How To Never Go Broke | Using Dividends

all right so people ask me all the time actually no one ever asks me anything Andre how much money should you invest and the answer is as much as it takes to get you your own money this is a real dollar bill believe it or not and if you look real close now you see me now but for real this is a real dollar bill that I can go to the grocery store and actually spend right now this is a real genuine authentic bill and if you want one you can go to your bank right now and if you smash the like button on this video and you show them that you've subscribed to my channel and you ask for the Andre dollar they will give you a look like you're a crazy person because I just made that up this was done by a friend of mine it is a real dollar but I also think it's a federal offense I won't tell if you won't tell I'm sorry Papa pal you are the only one that has the power to print an infinite amount of monies alright so I probably titled this video something crazy like dividend investing has made me Rich and the truth is it kind of has but not in the way you see 18 year olds on YouTube wearing Rolex Sky dwellers instead dividend investing has given me the gift of time making just fifty thousand dollars a year over the last ten years I was able to grow a stock portfolio that's now approaching close to eight hundred thousand dollars and it's also on track to pay me about fifteen hundred dollars a month this year and that's all done automatically without buying and selling stocks and becoming a stock trading expert and that's pretty incredible when you consider the fact that 10 years is a relatively short amount of time and I know it sounds like I'm gonna try to sell you on some courses which is why the link is down below to my secret stock trading courses just kidding there are no courses there are no secrets and there are no shortcuts to investing it's all about consistently investing money over a long period of time plus the eighth one of the world the magic of compound interest So speaking of magic I want to show you how I've been able to turn my dividend portfolio into a magical money printing machine so let's get into it hi my name is Andre dick hope you're doing well come for the finance and stay for the Magic The Magic of dividends a dividend is a cash payment that a company will pay their sharehold builders for just holding on to a stock and you don't actually have to even sell the stock you just hold on to it and it'll pay you money throughout the year at that point you can transfer the money out from your brokerage account into your bank account where you can spend it on whatever you want like the new Pokemon set that just came out sick artwork I've spent way too much money on it or you can just use the money to reinvest it back into the portfolio itself for compound interest that's what I've actually been doing since 2014 and the income has been consistently growing and so is my portfolio now Dividends are not a magical solution to all of your investing problems because Dividends are part of the overall return of a stock and in some cases it can lower your overall returns because anytime you get paid a dividend you have to pay taxes on that income but the reason I love dividends so much is because dating back to the 1960s reinvested dividends and compound interest have accounted for 69 percent of the overall Return of the stock market and that means if you invested ten thousand dollars in 1960 today you'd be worth closer to four million dollars as opposed to only six hundred forty one thousand dollars if you didn't and you bought Pokemon cards instead but what's really gonna blow your mind is seeing just how much dividends played a role across every single decade in the 1940s for example during a crazy period during the creation of the atomic bomb the end of World War II India and Pakistan became independent of the United Kingdom and reinvested dividends still accounted for 67 percent of the stock market's growth in that time frame it accounted for 30 percent of the 50s and 44 percent of the 60s a massive 73 percent of the 70s during a period of high inflation and so on and so forth with an exception of the 2000s when the whole stock market was negative but dividends still returned a positive 1.8 percent but another huge reason why investors absolutely love and respect dividends is because no matter what happened to the stock market whether it was going sideways or it was going down historically speaking those dividend paychecks were still being paid even the most recent example last year in 2022 when the stock market went down 20 percent you'd think that dividend stocks would cut back and not pay as much money to their shareholders but 2022 happened to be a record year for dividend stocks payouts increased by 10 percent or 565 billion dollars and this is so cool to see when data that I find matches up with my own personal experience check this out at the beginning of 2022 my stock portfolio was roughly right here at the end of 2022 though my portfolio went down it actually lost 12 percent which I'm proud of by the way because that's better than what the stock market did it lost 20 percent so I lost less money but the point is is that even though the stock market lost me money that year I collected more in passive income than I ever did before in 2021 for example I made a grand total of 9 800 but in 2022 the year my stocks went down I made 13 and a half thousand dollars and the income that dividend stocks pay me is not the only power that dividend stocks have it's also in the psychological effect of how my stock portfolio moves for example research found that stocks that pay their investors dividends had less volatility and that's just a fancy word for measuring how risky something is by a word you've probably heard of before called beta a beta score of one just means that stock will move in the exact same direction by the same amount as the stock market so example vo is an ETF that has a beta score of one that's because it is the stock market so it behaves like the stock market now dividend stocks usually have a beta score that's less than one because they're less risky than the overall Market but tech stocks usually have a beta score that's higher than one because they're more risky other than risk it tells you absolutely nothing but the reason that it's useful is that once you figure out how much risk you're taking you can measure it against the golden standard that is the stock market if your stock has a beta score that's higher than one and your 10 taking on more risk then you should be making more money than the stock market and if you're not and you're losing money you are losing money unnecessarily while taking on more risk which is never a good idea but the ultimate goal for every dividend investor is not to become rich and retire at 100 instead it's to build enough passive income to pay for your expenses without needing a job and without hopefully needing to sell your principal investment AKA your stocks and the way to do that is actually pretty easy you take your spending and you multiply by 25 so if you spend thirty thousand dollars a year on food groceries and travel and multiply by 25 you get 750 000 and that's how much you need invested at a four percent dividend yield or interest rate to make thirty thousand dollars a year and the most famous example of the person that was able to do that and so much more is Warren Buffett in August 1994 Warren Buffett's company Berkshire Hathaway bought 400 million shares of Coca-Cola for 1.3 billion dollars that year they made 75 million dollars in dividends now that's about 5.7 percent of their initial investment which by comparison is not a lot of money but fast forward to last year 2022 that initial investment paid them 704 million dollars in dividends over half of their initial investment in a single year and it continues to grow every single year and the next year they did the same with American Express they spent 1.3 billion dollars and that dividend Grew From 41 million dollars in 1995 to 302 million dollars in 2022. now remember all those dividend payments are just part of the overall return we have to take into account the stock price growth as well last year in 2022 Coca-Cola was worth 25 billion dollars and Amex was worth 22 billion dollars and that's how in 2023 his portfolio is expected to generate 5.7 billion dollars in cash from dividends alone and all you need is a small loan of a million dollars like jokes aside this strategy does work for everyone you just need to stay consistent so let me show you my portfolio so starting from where we last left off in May this year I made 919 dollars which is a 9.6 increase over last year's may but June was the craziest month I ever had because in June alone I made over twenty six hundred dollars that's a 40 increase over last year's June which is incredible and the best part is that on top of paying me more every single year consistently the portfolio itself is also up 11 in fact it's on track to make roughly 17 000 this year alone and now we're getting into some solid income levels now if I assume that I will continue to invest the exact same amount for 20 years by the year 2043 it shows me the portfolio will make roughly 111 000 per year now I do want to be transparent with you and tell you my current rate of investing is 200 per day which I realize is way more than what the average person is probably investing but even if I put that number at zero dollars and I only assume that I'll reinvest what the Dividends are paying me today for 20 years in 2043 it'll also still pay me fifty three thousand dollars which I realize will not be worth as much thanks to inflation but I would rather make fifty three thousand a year 20 years from now than zero dollars now here's the crazy part so far I've been showing you the income part but how much will the stock portfolio be worth 20 years from now if we assume I only reinvest my dividends which right now is about fourteen hundred dollars a month and if I assume the standard eight percent returns in the stock market starting with a current portfolio value of eight hundred thousand dollars in twenty years would be worth closer to four and a half million dollars paying me anywhere from 50 to 100K a year and that just means I won't have to rely on the government for Social Security and and on anyone else to smash the like button but I probably still will now there is an interesting alternative though why would anyone not just buy a bond that's yielding five percent guaranteed instead of risking their money in the stock market with dividends that are paying two to three percent what good is that if the stock itself loses 20 of the market the answer is bonds are actually better right now for fixed income especially if you have wealth to protect but there's three main reasons why I chose dividend investing over bonds first I'd have to pay a lot more in taxes if I sold all my stocks and converted them to bonds and I don't want to have to do that two I think as a country we're addicted to low interest rates we want cheap debt because High interest rates hurt not only consumers and businesses but our government as well which has a ton of debt that it's paying so much interest on right now and three because I'm investing for the next few decades data shows that investing in the stock market will give you a better return than investing in the bond market and four the median dividend payout ratio for the last 96 years was 56.3 percent but at the end of last year it was only 37 and that means there's a lot of room for dividend increases in the future and this theory is also supported by the amount of cash that companies have on their balance sheet right now in fact we're almost at an all-time high for cash on corporate balance sheets so companies are sitting on a lot of money and some of them will use it to reinvest back into themselves some of them will use it to buy back their own stock and some of them will increase their dividend payouts and because we have a massive retiring baby boomer population a lot of those people will be looking for additional fixed income and some of them will invest their money into dividends which is good for those stocks I'll say the real risk to a person in my specific situation is missing out on a lot more money by focusing on dividends instead of something else like Tech and the AI Revolution which could make a lot more money than dividend stocks in the next few decades I don't know but that's why why you diversify before you go I just want to throw this out there there are so many ways to invest in the stock market and doing what I'm doing is one of many ways but so is buying broad market index funds which will probably give you a higher overall return dividend investing is what works for me and I don't encourage anyone to follow in my footsteps all I care about is that you invest as early as you can the rest is really up to you also remember you're watching some random guy on YouTube who looks like this and makes alien faces and magic tricks either way thank you for spending your valuable time with me I hope this was inspiring or helpful or at the very least a complete waste of your time but was slightly entertaining as always focus on your own investment Journey have a wonderful rest of your day smash the like button subscribe if you haven't already don't forget to grab your free stocks links are down below and then go track them automatically with the spreadsheet link Down Below in my patreon love you thank you so much for watching this video I'd love to see you back here on Monday Friday sometimes Wednesday see you soon bye-bye

Channel: Andrei Jikh

Views: 294,739

Keywords: how to invest, bitcoin, million, ethereum, market crash, crypto, stock market, passive income, dividend investing, dividends, dividend stocks, crypto crash, stock market crash, bitcoin crash, NFT, how to buy bitcoin, cryptocurrency, robinhood app, best trading app, stocks, investing, investing for beginners, how to invest in real estate, how to invest in stocks, best stock trading app, credit score, andrei jikh, best investment, dogecoin, robinhood, portfolio, millionaire, recession

Id: rcBntNCD4ZY

Length: 12min 59sec (779 seconds)

Published: Fri Jul 07 2023