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Starting My Dividend Investing Portfolio

by Mike

I’ve been such a fool.  For years I have been telling myself that I need to start investing more and really build up a strong portfolio of assets.  And then I would just keep putting it off…I found one excuse after another…

We need to save for a house first, then we can start investing more.

We need to pay down our debt before we can even think about investing.

I don’t know enough about investing yet, what if I lose all my money?

You get the idea.  I was breaking one of the cardinal rules of personal finance:  Pay Yourself First.

Like many people with debt problems, I was always trying to save with whatever was left at the end of the month.  And all too often there wouldn’t be anything left at all!

Well no more.  It’s time to start making myself the top priority and start accumulating some serious wealth.

I’m currently reading The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, and one of the first things that jumped out at me was the realization that the wealthy “allocate their time, energy, and money efficiently, in ways conducive to building wealth.”

In other words, you’ll never get rich playing the lottery or wasting all your time on Facebook.  You need to take deliberate action to move yourself closer to your financial goals.  So that’s exactly what I’m doing.

Part of my plan is to start investing in dividend-paying stocks through a Sharebuilder account.  Generally, I think index funds are the best option for the average investor but part of me likes the potential of individual stocks so I’m going to funnel part of my savings into a handful of stocks through automatic investing.  Automating the process makes it that much easier.

I’m starting very small…only about $100/month for now.

I’m looking pretty much exclusively at dividend-paying stocks, especially the Dividend Aristocrats and some other of the highest yielding Dow stocks. I like dividends because they take advantage of the principal of compounding and provide income even when the stock price remains stagnant.

I chose 4 stocks to start with:  Coca Cola (KO), Johnson and Johnson (JNJ), 3M (MMM), and GE (GE).  All but GE are Aristocrats (GE does pay dividends though and for some reason I just think it has growth potential).

I’ll reevaluate regularly but if I decide to invest in different stocks I will probably just hold onto the dropped stock and start investing in something new.  I don’t want to get in the habit of actively trading too much, I want this to be a largely passive revenue stream where I just funnel more and more money over time.

What do you think about dividend investing?  If you invest, how do you choose which stocks to invest in?

PS – I’m not qualified to give investment advice so please don’t take any of this as such.  I’m just sharing my own experiences and I’m not responsible if you copy me.

 

 

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{ 7 comments… read them below or add one }

No Debt MBA

If I were starting a dividend portfolio your picks would be pretty much what I’d go with. Sounds like fun. Let us know how it goes.

Reply

Mike

Thanks nodebtmba, I’ll be sure to post updates every once in awhile.

Reply

Evan

You may want to check out my category/history with dividend investing and love of sharebuilder…you can work your way back through my archives on the topic but here is my latest post on the topic:

http://www.myjourneytomillions.com/articles/dividend-investment-portfolio-july-2011-update/

I started the EXACT same way of, “it is about freaking time I do something.”

Reply

Mike

Hey Evan,
I’ve already read most of those ‘perpetual income machine’ posts on your blog, and seeing your steady progress is one of the things that pushed me to get started myself. Can’t just sit around waiting for someone to drop a million bucks in my lap!

Reply

Evan

I can’t believe I inspired someone to take action…That’s Awesome!

To me it becomes a game of how much can I stuff into this account while balancing my need for liquidity and debt repayment.

Reply

cashflowmantra

It seems like you are off to a good start with your plan. Just follow through and add to that total investment as you are able. Before long, you will be making more than $100 monthly with dividends alone.

Reply

Crystal @ Wallet Watcher

You sound like we did a couple of years ago. We did lose about $2000 over a year or so while we learned, but now we invest $5000 or more a year in high dividend yield stocks like Johnson & Johnson. Yay for lessons learned!

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