The Wonders of Dividend Investing
Why do you need to get started with it?
Divided investing is probably the most passive form of income which I am sure most people can agree with. After all, which income stream offers you income as passively as dividends?
Other income streams require you to actively work at them to generate income.
Dividend income on the other hand is the most passive income stream because you get money for just owning an asset. There isn’t any active effort required on your part.
It is a safety net for you
Everyone has their own reason for maintaining an investment portfolio. For most people, it is a safety net to build wealth and hopefully live off your investment portfolio one day
What can you consider doing?
Start small, if you are new to investing. If you already have an investment portfolio, continue setting aside money to invest and grow your portfolio. Let the saving effect compound and snowball over time.
Makes you financially aware
It is really hard to stay ignorant and be financially illiterate when you have investments. You begin to naturally stay up to date with the financial ongoings of your investments. This may include reading the financial times, understanding the ratios, or just having an interest to stay up to date with current business news.
It creates an awareness for you to make money work harder for you than to just work hard blindly for the money.
Compound interest
Albert Einstein considered compounding interest as one of the 8 wonders of the world. The effects of compounding interest are astronomical. With compounding interest, you can earn interest on your interest. This means your interest earns more interest for you.
For dividend stocks, reinvested dividends are utilized to buy more dividend-paying stocks.
You can either have compound interest work for you (eg reinvested dividends) or you can have it work against you (eg loan interest payments), so choose wisely.
Final thoughts
Dividend investing should form part of your investment portfolio in your wealth-building journey. It doesn’t have to be the be-all and end-all of your wealth-building journey. However, it should be the foundation to get you started with investing and kickstarting your wealth portfolio.
