Good evening all of you readers! I’m Ken the owner of this site and in this blog post, I will be sharing the various passive income ideas I have (or currently doing) for financial freedom. The first one would be investing in REITs and dividend paying stocks. Without further ado, let’s get started!
Investing for dividend income
This tried-and-tested method of generating passive income is one of the first ways I did for my financial freedom. I am a frugal saver and hence make a point to save a certain percentage of my income per month so I can invest my savings in the stock market to give me passive income. I started when I was 23 and this year is my 5th year into investing. That’s right folks. I am 28 this year and aim to work so I can pay off whatever liabilities I incur on a monthly basis and compound my dividend earnings slowly but steadily. I can hear some of you already saying in your mind, ” Well, Ken’s got a well-paying job, he can afford to invest in the markets. I am not as well-off as he is!”
With regard to that point, I can say that the jobs I had were low-paying ones, with some even minimum wage jobs. I didn’t get to choose what kind of salary I get from my jobs. I just made the best use of my situation to better my future finances. Right now, I am working as a customer service agent in a call centre, and my pay just got cut due to poor business climate. Despite this, I am still able to survive and save some money for investing. It may not be a lot, but I know the earlier I start, the lesser money I need for retirement and financial freedom due to compounding interest. I am not afraid to lead a simple and spartan lifestyle if it means bettering my future finances. I am willing to take that sacrifice because I am willing to delay gratification. I am not asking all of you to follow my footsteps as different people have different circumstances. What I am saying is that if you had a dream, and you are willing to make it a reality, you will go to great lengths to achieve it. I may not be dealt with a good set of cards, but its the choices that I make that determine the ending. Hope my life situation and my choices inspire you guys there!
So problems of life aside, many of you are asking, ” What did I invest in?” Well, I invest in REITs and more recently, dividend paying stocks. I plan to invest my dividends in bonds to diversify from my heavy weightage in REITs. I also hope to choose my counters such that there is a dividend payout every month. It would be nice to receive money every month! Of course, the fundamentals of the company is very important too.
What is the main benefit of investing in REITs and dividend paying stocks?
After you have done your homework, the process is quite passive.
Other than monitoring the price of your counter 1-2 mins a day after the market open or close, REITs or dividend paying stocks are passive vehicles. You don’t have to spend so much time in the business doing sales, or negotiating with suppliers and all the problems associated with the business. All that is delegated to qualified people who work for the business.
As with every passive income investments, there are risks involved. What are the risks involved in ownership of REITs or stocks?
There is price fluctuation in the counter you invest in.
Also known as market risk, the counter that you put your hard-earned money into can change in value during a trading day. You must be able to tolerate price fluctuations even when it is against your position (aka unrealized paper loss). There is risk of financial loss in the event the company doesn’t do very well, or in the worse case scenario, becomes bankrupt.
The dividends you receive on a quarterly basis may be cut due to poor fundamentals.
When the business isn’t doing very well financially, the board of directors may reduce the distribution per unit (DPU) of the counter you invested in. If the business experiences a loss, there may be no dividend declared at all.
These are some of the risks involved in investing in REITs and stocks. As a disclaimer, the above information is only intended for educational purposes and one should seek the advice of a financial adviser before putting one’s hard-earned money into investment instruments. I am not responsible for any poor decision(s) or financial loss resulting from investment of such vehicles. Always do your homework before investing. Never invest purely based on a hot tip from a broker or friend.
That’s all for now folks! Hope you enjoyed the post! Share, like, comment or subscribe to this post for your family and friends.