It felt like another slow week for me, but not for a lack of work available. I was busy and missed some decent surveys, but that’s okay. I’m doing this on the side for extra income as an incentivized game. I still surpassed my bare minimum goal of $50 dollars at just over $70 dollars. I also signed up for a site called UserTesting this week.
I want to delve into when I think dividend investing is appropriate. Again, this is not financial advice, but rather a dialogue with myself.
Without a doubt, hands down, the best way to build wealth is to invest in the total stock market and aim for growth rather than dividends. Choose an index fund or an ETF with a low fee like VT, dollar cost average into it your entire working career, and retire. Then, sell off shares when money is needed. Sure, there are a few additional steps, but this gets us 90% there. In my case I am doing just that. So when is a dividend portfolio appropriate? I think investing in a dividend portfolio is appropriate when you get older, you have extra money to invest after you’ve maxed out your retirement accounts, and you have a goal of creating an income portfolio.
I feel that by doing this I’m hedging against my own intelligence or lack thereof. With a dividend income portfolio I can smooth over any bumps in the road because I will have cash flow, liquidity, and even greater peace of mind. I don’t want to touch any of my retirement accounts until I actually retire, especially in a downturn. I really don’t want to think about how much I need to sell and when I need to sell until I get to retirement. I am fortunate enough to meet all of these conditions at the moment. And so while I have the opportunity, I want to build a portfolio that is highly speculative initially, but will grow into a solid, steady stream of income with 20 to 25 dividend paying stocks at a 2% to 4% yield. I still want to hit $100 a month in dividends as quickly as possible, but then I want to maintain and grow that over time.
The other reason I think dividend investing can be appropriate is because at a certain point, we don’t actually need more. I am satisfied with my growth and retirement portfolios and will continue to contribute to them. So, while I have the extra income coming in, I don’t mind that I won’t get as good of a return from this dividend portfolio. I also just want to see if I can do it. Can I sit on my couch, in my spare time, earn extra money, and build this portfolio?
I don’t think many dividend investors would agree with my conditions as to when it’s acceptable to create a dividend portfolio, but they would agree that there are a lot of psychological benefits. And I think they may even agree that it is unlikely they will beat the total stock market, but they don’t need to beat the total stock market to retire comfortably. Like exercising, the best investment plan is one that you will stick with.