The POWER Of Dividend Investing! (How To QUIT YOUR DAY JOB)

if you love the idea of making cash flow without doing any work then you have to love dividends and in this video i'm going to be going over how you can live the dividend lifestyle meaning how you can live off of your dividends what's up everybody i'm just putting singh from the minoritymindset.com where money minds read the grinch there are five ways for you to generate cash flow you have to use your money to buy one of these five things number one is to generate interest cash flow the way it works is you take your money and now you lend this out to someone else so you take a thousand dollars he lend it out to your cousin bunty now because then bunty goes to his favorite store gucci probably and now he's gonna go buy himself a new wardrobe and he's gonna pay you interest on the thousand dollars that he borrowed from you number two is royalty cash flow royalties are when you go out and you write a book and now if this book gets published and it is kind of being read by a lot of people now you're gonna get royalties every time somebody buys your book profit share is now kind of like shark tank you go out and you find a nice company and you give them some of your money now this company starts to grow and every time this company makes a profit and they distribute it to their owners you get your share of the profit so if you own 10 of a company and they make a hundred thousand dollar profit and they distribute this hundred thousand dollars you get ten thousand dollars as the profit share distribution number four is rent i love talking about real estate investing this is where you buy a property and every single month a tenant that's living in your property is gonna pay you rent for living there and the number five is dividends this is purely passive now you can invest in a company or a fund that is gonna pay you cash flow through dividends usually every quarter these top four are kind of passive they can be passive but they require some sort of work like with interest if you want to lend your money out yeah you don't have to really do any work after you lend your money out but it takes a lot of work to find somebody to lend your money out and you have to qualify them and make sure that you get paid if you don't get paid now it's more work on your end royalties if you want to get the royalties from selling a book you got to write the book first so it requires work profit share now if you want to be a venture capitalist or a shark on shark tank like that it takes a lot of work to analyze the companies and you got to help them grow so it requires work rental income yes real estate can be a passive investment but now you got to put in the work to find the property you got to build the real estate team and you got to do all the work dividend cash flow is purely passive once you find the right company or the fund that you want to invest in this money is going to come in and you don't get to do any work which is why in this video we're going to be focusing here how you can live a dividend lifestyle meaning use the cash flow from dividends to fund your life so that's what we're going to be talking about today but before i get into that i need you to do me a quick favor and smash that thumbs up button below and a quick word from a sponsor m1 finance if you are interested in investing your money m1 finance lets you do it automatically and passively so if you want to learn more and see how you can do it with m1 finance i got the link to how you can do that in the description below so if you want this cash flow from your investments this passive income to cover investments you got to know what it's going to take and let's assume for the sake of this example that you want 40 000 a year to cover your expenses 40 000 a year is just over 3 300 a month so you want to make 3 300 a month in cash flow from your investments now we've got to figure out how to do that through dividends essentially what you got to do is you got to understand the different types of income there are so there's active income and then there is passive income what you're going to do is you go to work every single day and this is the active income that you're earning this is your earned income you go to work you get a paycheck you want to take some of this money and you want to put it towards your passive income towards your passive investments things that are going to pay you with cash flow in this case we're talking about dividends so every time you get paid you want to put a little bit of your paycheck the more the better towards your passive income and now in this video i'm going to be going over how and how much to get this forty thousand dollars a year or thirty three hundred dollars a month that way now your dividend income can fund your actual lifestyle the way dividends work and i'm going to get more into this in just a minute but you can take your money and you can invest into a company like mcdonald's now mcdonald's is a very established company and every year they have a whole bunch of profit a bunch of cash sitting in their bank account now when they have this cash in the bank account there's three things they can do with this cash they can save some of this cash for emergencies they can put this cash back into their business so they can grow faster or they can give this cash back to their investors people like you so what they do in this case is they say well we have so much cash in a bank account that we have no better use for this cash in our own company so we're just gonna give it away to our shareholders in the form of a dividend so every year or actually three times a year mcdonald's sends out a check to all the shareholders people like you people who own their stock and this is what a dividend is so a dividend in this case is every three months you get cash deposited into your bank account because mcdonald's has paid you a dividend it's completely passive you don't have to do any work to flip burgers or any of that if you own the right shares now these companies will pay you with this cash flow the reason why dividend investing can be so attractive to some people is because you don't need a ton of money to start investing in dividend stocks now you can start investing in dividend stocks for as little as a hundred dollars you can compare that to investing in real estate where you're not gonna buy a property for a hundred dollars so if you want to start investing in dividends dogs start generating this cash flow from dividends it's a much lower barrier to entry you can start with 100 a month or whatever money you have and you can slowly let this compound and at the same time if you invest in a strong company hopefully the stock price will go up and as the stock price goes up hopefully the dividends will go up too because as a company makes more money and their profits grow they'll be able to send up bigger checks to you so if you invest in the right companies you can win in a few different ways because you'll get bigger cash flow every single year and the value of your stock your investment is also going up now if you really want to understand what it would take to replace your income in this case assuming 40 000 a year with dividends you got to understand what kind of dividends are out there now i do have to give you a little bit of a disclaimer here because investing has risks you are never guaranteed to make money when you invest you might even lose money so you should always your own due diligence and never blindly listen to a random guy on youtube and everything i'm talking about today are just examples i'm not telling you what to invest in i'm just showing you how the process works so you want to always do your own due diligence okay right now at the time of me recording this video mcdonald's is paying a 2.3 annual dividend yield now this can change with time but this is what it is right now if you wanted to invest money into mcdonald's right now and make 40 000 a year in dividend income based off of this dividend rate you would have to invest 1.7 million dollars in order to get forty thousand dollars a year in passive cash flow through dividends and mcdonald's now i know this is gonna seem like a lot of money but i'm gonna show you how you can accelerate this eix this is edison international the electricity company they pay out right now at the time we were recording this video a four and a half percent dividend yield so if you wanted to get the same 40 000 a year in passive income through eix you would have to invest right around 888 000 into this company today based off of this four and a half percent yield to generate forty thousand dollars a year passively if you wanted to do it through ibm which is right now at the time of recording this video paying a four point eight percent yield it's going to cost you three 833 dollars and eight tnt right now is paying a six point nine percent yield and if you wanted to get the forty thousand dollars a year it will cost you right around five hundred and eighty thousand dollars today now there's a couple things that i want to point out with this one this is not something that you have to just do today if you want to build this cash flow this dividend income it's going to take time and the way you want to do this is by every single month every time you get paid you want to put some money towards your investments and the best way to do that is automatically that way you don't accidentally forget to do it but you want to consistently keep investing your money into these stocks or whatever dividend stocks you're looking at if your gold is cash flow because now what you're doing is every month you're just building up this machine that's paying you maybe right now you're only making five dollars a month but over time that's gonna grow to fifty dollars a month then five hundred dollars a month and so you gotta understand that this dividend cash flow isn't something that just happens overnight it's something that takes time or something got to build up so you got to get into the habit of understanding that every time you get paid some of this money has got to go into your cash flow producing machine your dividend stocks that are going to pay you with income the second thing that i need you to understand is the risk because let's just say for the sake of this example that you look here at etnt and you say at t is paying the highest dividend so i'm going to invest on money only into that company and so now for the next 10 years you keep investing some money into at t but then a t goes bankrupt if that happens now all of this money that you put into it would disappear because companies went down the drain and now this wasn't your fault it was the executives at t that ran the company into the ground because you were just hoping to build this money printing machine but the executives at at t didn't do a good job so now you have to pay the price so you got to understand that there is risk here when you invest in individual stocks you take on all the risk so there are ways for you to mitigate that risk number one is by doing your research if you want to invest in individual stocks you have to keep up to date with the company you have to read the earnings calls you have to read the financial statements you got to see how this company is doing because if you start looking at a company and you see the revenue starting to drop you see the profit starting to drop you see people not liking this company so much then that's a red flag that you want to pay attention to but if you don't want to really do all the work then you shouldn't be investing in individual companies individual stocks then what you want to be doing is investing in funds that give you exposure to dividend paying stocks because there's something called etfs which stands for exchange traded funds which give you exposure to a whole basket of stocks so now instead of you trying to find the best companies to invest in you can invest in an etf which gives you exposure to a whole bunch of dividend-paying stocks that way now if one company goes bankrupt you're okay there's a whole bunch of other companies in there that are still paying you with cash flow with dividends so if one company goes down you don't lose everything so let's take a look at some etfs what you want to understand here is that not all etfs are made equal so when you're looking at etfs the way you do your research here is you can just research any etf you want on google and it's going to pull up kind of like a fact sheet about the etf and it will tell you which stocks are in the etf so you want to kind of just get an idea of which companies are in there because although you're not going to be doing the research on every single company and reading all the earnings statements you want to kind of get an idea or a sense of what types of companies are in there i'm not going to be going over how to actually invest your money in this video so if you do want to learn more about how to do that and how stock market investing works you can read a free pdf on stock market investing it's a great guide that our team wrote that'll walk you through what stock market investing is how it works and how you can start successfully investing your money in the stock market if you want to read that guide it's completely free when you sign up for a newsletter and i'll link it for you in the description below so if you're looking for cash flow and you invest your money into sdiv which is a high dividend etf then this right now at the time we record in this video is a 7.25 annual yield which means you would have to invest right around five hundred and thirty thousand dollars today in order to get this forty thousand dollars a year passively if you invest your money into vym which is a vanguard etf for dividend stocks this repays right now at the time we're recording this video at 30 yield which means you would have to invest right around 1.3 million dollars today in order to get the 40 000 a year the same concept applies here to etfs as it does stocks this is not something where you're just going to write a one-time check today if you really want to do this the right way this is where you're going to want to have your money going into your investments every single month or every time you get paid that way you can build this machine over time that is constantly paying you and if you invest your money into a good machine good stocks good etfs then not only is your machine going to become more valuable but your machine is going to be printing more money because the companies in your machine are making more profits so they're paying out bigger dividends a third very common way to invest your money for this passive cash flow dividends is by investing your money in reits a reit is a real estate investment trust and technically a reit is a stock but people look at stocks and reads a little bit differently just because stocks give you exposure to companies like mcdonald's and a t and ibm rates give you exposure to real estate so a real estate investment trust is a company that invests in real estate and they kind of get their own kind of special classification within the stock market because when you invest in a reit you are pretty much investing just for cash flow because the way reits work is they have a 90 rule which says that reads are required by law to pay out 90 of their profits to their shareholders people like you through dividends and so reits make money through rent and they have to pay 90 percent of the profits out back to you through dividends so reits pay out a whole lot higher dividends just because the whole point is to get this income through rent and paid out to you the advantage for you to invest in reits is that you don't have to deal with all the headache uh trying to find the right properties dealing with contractors dealing with tenants dealing with property managers you're just investing your money into the company that manages and owns the real estate a couple example of reit etfs that give you exposure to a basket full of different reits again i'm not telling you what to invest in just examples are sch this is the schwab reit etf and then vnq this is the vanguard etf when i say schwab and vanguard these are just different companies that create and manage these etfs if you're not sure what i'm talking about i already made a video where i explained what vanguard is and what vanguard funds are that video will explain all that if you want to watch that i'll link that video for you in the description below but sdhh right now at the time recording this video is paying 2.8 a year which means you'd have to pay right around point four million dollars today in order to get this 40 000 a year and with vnq you would have to invest right around one million dollars today in order to get this 40 000 a year passively if your goal is purely just cash flow at this point you might be thinking all right well if i'm just trying to make as much cash flow as possible i should be looking for funds and stocks that pay off the highest yields and you might be thinking okay stocks are a little bit risky because i don't know or don't want to do all their research then i'll just put more money into an etf that's paying the highest yield the thing that you want to pay attention to is that you never you never want to make an investment decision solely based off of this yield right here because this yield can be deceiving this yield is based off of the current share price the current stock price that a stock is trading it and so if a stock is tanking then artificially a yield a dividend yield can look so much higher because the stock price is down and the dividend might not have changed yet and so you might buy into a stock or etf thinking that you're getting this amazing yield but what could happen is this etf or the stock is on the verge of failure which is why your yield looks so high so you never want to look and make your decision just based off of what the yield is that's one factor that you can pay attention to but you really want to look at the underlying fundamentals what companies are in the etf how strong are these companies what sectors are they in are these strong companies that will be around in the future same as stocks you're going to have to do a lot more research and kind of upkeep here because if you're investing in one stock or a couple stocks for the long term you want to make sure that these stocks are continuing to perform and continuing to grow with an etf you really just want to kind of get an idea of the company that is managing this etf like vanguard is one of the most reputable companies out there when it comes to etfs because they were like the pioneers of index funds and so you just kind of got to get an understanding of who is managing your money or what companies are you investing in because you want to make sure that this company or this fund that you're investing in is going to be around for a long time and it's going to continue to pay you for a long time in the future now when you're investing for cash flow you got to understand the drawbacks because we're investing in one of these companies these are big established companies and the reason why they're paying out a dividend to you is because they have so much money in their account that they don't know what to do with it so the best use of this money is just to pay it out to you the shareholder you can compare that to a startup company where this company a startup company might be using all of their money and more to grow as big as possible as fast as possible like you might have heard that uber was losing money for so many years they were not profitable why because they were spending every penny that they had to grow quickly and so not only were they spending all of their money they were also losing money because they kept raising more money getting into more debt that way they can use this money to grow bigger that way their company would become more valuable so a company like uber could see the stock price grow very quickly i mean they could see a 20 percent of 50 percent 100 growth in revenue and it really wouldn't be too surprising because they're a startup company and they're trying to grow very quickly and so they're trying to see the stock price explode you can compare that to something like mcdonald's where you're not going to see a hundred percent growth in the revenue like that because this company is not in that same ballpark mcdonald's is very big they're very established they're just trying to slowly keep growing the straws and keep growing their income slowly that way they can just kind of maintain their dividends and maintain their growth so this is where you kind of really got to understand what your goals are because dividend companies are not going to give you that massive growth versus a startup company could but at the flip side a startup company also has more risk a startup company could fail it could go bankrupt i mean there's a lot of risks with investing in a startup company with these companies you have less risk i mean they can still fail there's less risk but you're not going to see the massive boom in the stock price that you could see with a startup company i mean over the long term yes you want to see the stock price go up but your goal here is just that consistent cash flow so you want to keep that in mind the second thing that you want to make sure you understand are taxes because now when you make this dividend income it's taxable the irs is always going to want to get their cut when you make money the way i want you to think of it is like a machine printing money and the way that you can get more machines printed money is by using more money to buy more machines so you have this one machine that's printing you money and anytime it prints you money you take this money and use it to buy another money printing machine now you have this machine printing your money and when it makes you money you use this money to buy another money printing machine and now this money machine is also making you money so now the first money printing machine is making you money the stacking money machine is making money and you take all this cash and use it to buy a third money printing machine and on and on and on this is what compounding is and this is what they call drip drip and a lot of stock brokerages where you're now reinvesting your dividends automatically the thing that you have to understand here is yeah you can take all your dividends and reinvest it which is good it's a way for you to grow and accelerate your cash flow because now not only are you putting more money into your investments every single month but you're also using your profits from your investments every time you get paid to buy more shares that will be really just kind of building a big machine that's going to keep producing you more money year after year after year but the thing that you have to remember here is even if you don't take any of these dividends out and put them into your bank account or use them you're still going to have to pay taxes on these dividends so even if you reinvest all of your dividends you're still going to have to pay taxes on the dividends that you received even if you never use that dividends in your own personal account now this is assuming that you're investing in dividends in your own personal account if you're investing in dividend stocks throwing 401k or an ira or one of those tax deferred accounts then you don't necessarily have to pay taxes on those dividends depending on what your account is but if you're investing in your own personal account then you're going to have to pay taxes on your dividends even if you reinvest all your dividends now that's not a bad thing i don't want you to stop investing your money or reinvesting your money because you're going to have to pay taxes on your profits this is something i want you to be aware of so if your goal is to build up this machine that's paying you with cash flow that way you can live off your dividend income what you got to do is first figure out what you want to invest in stocks or etfs or which kind of basket of stocks and etfs second anytime you get paid now you're going to take a portion of your paycheck and automatically invest it into the stock or etf that you want third now when you get paid through your dividends you want to reinvest these dividends back in to your stock or etfs that way your dividends are building you more machines that are producing you more cash flow now not only are you investing more money every single month but your money that you're making is also going back into your machines to buy you more stocks and more etfs and fourth you just got to remember that you're going to have to pay taxes on the dividends that you made even if you don't get to put them in your own personal bank account today if you do this you're going to be building up a machine that's going to be building up your cash flow and yeah it's going to start small but over time you're going to start to see this dividend machine grow faster and faster and faster because you'll have more money going into dividend accounts and your dividend accounts are going to keep producing more money which is going to go back into them buying you more shares that are paying you with dividends if you enjoyed this video here's a video on vanguard etfs that i think you love and while you're at it download our free stock market pdf and as always keep hustling instead of having this guy with a mustache manager money how about let me raise the mustache and the person how about we just have a computer manager investments because computers are a whole lot cheaper to manage

Channel: Minority Mindset

Views: 1,186,611

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, rethink rich, financial education, financial literacy, investing, passive income, dividends, dividends explained, passive income investments, passive income lifestyle, stock market, stock market investing, investing in stocks, stocks, stock market dividiends, live off of dividends, build wealth, investing 101, stock market investing 101, how to invest in stocks, dividend income, dividend investing, dividend stocks

Id: Vsgjuc9O6Uk

Length: 21min 30sec (1290 seconds)

Published: Fri Apr 30 2021