money tree

Just laying back and making money.

Dividends, in short, represent money that is given to you by companies when you own some of their stocks.

These will not make you rich fast unless you already are rich, in which case, you’re probably not here reading about them. They are a form of investment that will grow over time (and you need to grow it).

For a more in detail description of how this works, bear with me. You buy some stocks at some company. Let’s say CocaCola (I have there a bit too, so it’s a real example of a company that pays dividends because not all of them pay). The company, on a monthly/trimestrial/semestrial/annual basis, pays you a percentage based on how many stocks you have. The percentages usually range from 1 to even 14 or more. This is better than a savings account at the bank. It’s not safer, of course, because that money will always be at risk, but you need to take into account everything and make an informed decision.

Usually, those that offer lower percentages are safer. But people that know most about this stuff recommend that, if you do decide to invest, it is best to invest in a variety of stocks, both with low and high yielding. Which makes sense, of course.

In a quick search on the web, you’ll find stocks of all varieties. What is important if you are going to build a portfolio is to plan your income. There are dividends that are paid monthly, or once every 2-3-4-etc months. In time, as you invest, you’ll probably want to have some money coming in each month.

At first, if you do this and start with small amounts, the dividends should go back to your portfolio, because you’ll want to grow it.

I’m not an expert on this, far from it. But I did do some research since it is one of my long-term plans of retiring early. For starters I am adding very small amounts, like $2 a week, just to feel safe. I started with more, but for a while, I didn’t add any and thought that this was better than nothing. Growth is growth, no matter how small.

This type of investment is really passive. You are doing nothing to grow it. You buy some stocks, and they do the rest. It’s not a get-rich-quick scheme. It is an investment that has the potential to have great returns over time.

Hope to have sparked your interest, because I for one love this idea.

Good luck!

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