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Beginner's Dividend Portfolio Building Masterclass: How To Build A $40K Dividend-Paying Portfolio
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hey everyone it's Steve again and in today's video I'm going to do a stepbystep tutorial on how to build a $40,000 dividend paying portfolio by the time you retire now I want to preface by saying that this $440,000 worth of dividends it's going to be relative right it's going to depend on how much money you invest or contribute on a monthly basis and what kind of dividend paying assets you buy every month I also want to say that this is going to be a complete beginners tutorial it's going to cover the three steps of what when and where so what we're going to buy when we buy these shares and where we're going to place these dividends back into maybe our portfolio or maybe we can take it out as income I'm also going to talk about the number one mistake that I believe that most beginners make when they start building their dividend paying portfolio and something that I did too so this way you guys don't have to make the same mistake all right so without further Ado let's get started I also want to say thank you for everyone who voted on me making this video on Instagram I actually put this poll up today asking you guys what kind of video you wanted me to make so I guess all of you voted for a and this is why I'm making this video okay so just real quick for those of you who may not want to watch this video until the very end I'll just kind of tell you what the three steps are to build this dividend paying portfolio and it's basically what you you see on the screen number one you're going to buy dividend paying assets I'm going to talk about the different assets like ETFs versus companies and what I usually like to do I like to do a combination of both number two it's to use the DCA method or the dollar cost averaging method again I like to keep things as simple as possible I I don't like to time the markets or anything I like to just kind of slowly scale my positions slowly build my portfolio over time and step number three we're going to talk about about where to put this money and there's really three different options drip versus self reinvestments versus us taking out the money as our income and of course lastly I'm going to talk about that number one beginner's mistake that pretty much everyone really makes okay including myself I made this mistake too all right so let's just talk about the basics here um what are dividends and why does it really matter so for those of you who just got started in the investing world you just started investing in you open up your Roth IRA basically when you invest in companies or some companies that pay some sort of dividend essentially when you have these shares in your portfolio every quarter or so these companies will give you a couple of cents or a couple of dollars uh depending on how many shares you hold so I know there are some companies out there that will pay you maybe 50 cents per share that you own or maybe a dollar per share or $2 per share and then this is a really cool Strate strategy that a lot of investors like to do where they build this dividend paying portfolio and income just comes in every quarter or every month depending on what it is that you buy and this is very analogous to us owning property like a house because if you take a look on the left hand side you can say that you buy a house for $500,000 and you collect rental income for $11,500 a month same thing with dividend paying stocks when you buy shares that pay some sort of dividend you can say buy $500,000 worth of shares and every month or so or every quarter right you get paid $1,500 a month so it's very very similar right now let's talk about the steps of buying dividend paying assets so there are two different assets that you can really buy and the ones that I usually like to buy are ETFs and individual companies and again you want to see which one fits your portfolio and whatever you're comfortable with doing okay so number one you can buy ETFs or exchange traded funds on this channel I talked about ETFs or I talk about ETFs all the time so basically it's like a basket of stocks whenever you buy one share of an ETF you're buying a whole bunch of companies all at once so you buy one share of an ETF you might own a little bit of Walmart Costco Visa Apple go Google right so these are what ETFs are so if you want to buy ETFs there are some pros and cons right it is going to be more on the stable side because you're basically buying an amalgam an average of all of these companies and you collect the dividends or the average of all of these dividend payouts and you're able to diversify yourself but with ETFs it's more on the boring side because of the averages that you are kind of buying into there's not going to be that much growth right if one company really explodes up within the basket of stocks it's not like your entire portfolio is going to go up right because you're buying the entire average only one part of the entire basket is really going up hopefully that makes sense now if you want to say buy individual companies you're very bullish on one particular company like maybe Costco or Walmart or Visa or McDonald's or Coca-Cola then yeah you can buy these individual companies it is going to be more on the volatile side so you want to see what your risk tolerance is but there is higher potential growth here and also if you do these research you do research on these companies on a quarterly basis you take a look at the earnings call you look at the earnings report and you go oh I really like this one specific company because not only are they growing in value they're also increasing their dividend payout too so I'm going to talk a little bit more about this in a little bit so let's take a look at one of my favorite ETFs dividend paying ETFs SD so this is from Charles Schwab and this is the ticker symbol S CHD and currently one share of this ETF is around $79 80 and my whole goal for this video and really this whole channel is to promote autonomy I want you guys to learn how to invest yourself so that one day you don't need me anymore you don't need a financial adviser you can kind of do this by yourself and your own research so right now I'm on Yahoo finance which you can totally go onto yourself right you can type in the ticker symbol of whatever company that you want to research and you can take a look at the summary and you can see kind of like the chart on how well the ETF or stock has done over the past several years if you take a look at the leftand side here you can see what this particular ETF holds right like the companies that are within this ETF so if you click on Holdings you can see the top 10 companies that make up this ETF so you can see that there's Texas instrument Chevron Lo Martin Pepsi Coca-Cola Verizon right fizer Cisco and again when you buy these ETFs you want to see hey are you comfortable with these companies do you believe in these companies and if the answer is yes then this ETF is most likely going to be for you right now if you go down a little bit more to the performance section you can see some of the data some of the returns that the ETF has made over the past several years so if I zoom in you can see that over the last month or so the ETF didn't do so well because we did have a little bit of a pullback it was NE 4.64% but remember folks when we are investing we're not going to focus on the short term we're looking at that long-term view right 5 10 20 30 years or so we take a look at a 3 months 1.68 but if you look all the way down to the 10year average you can see that SCD gave around a 10.9% average annual return which is slightly less than the S&P 500 which is currently around 12% right now and on the right hand side you can see how well it's done on a year-to-year basis now whenever I talk about average annual returns and I say okay it's around 10% people will assume that every year the stock or the ETF will grow 10% this is not true okay everyone so it's an average of all the last 10 20 30 years right so you're adding all of the increases right and dividing it by however many years there are we're finding the average so you can see that in 2023 we had a growth of 4.57% 2022 we had a bare Market we went down 3.23% and just to kind of plug this in here with dividend paying companies they are typically not always a little bit more on the safer side compared to other companies that don't pay a dividend usually when there is uncertainty in the markets maybe there's some sort of geopolitical Events maybe there's an election coming up just any uncertainty at all the stock market will sometimes get a little bit shaky and a lot of these institutions Wall Street investors they will sell their shares to kind of protect themselves and their clients and guess what the stocks that they usually sell the fastest or the most are the companies that don't pay a dividend usually not always okay and the companies that they still keep within their portfolio are the ones that pay a dividend why is this it's because even if there is a selloff the stock market goes down they still get paid dividends from these companies that pay a dividend these other companies that don't pay a dividend well a lot of these institutions don't have a high incentive of holding on to them in their portfolios right so this is why back in 20122 when we had our bare Market it only dropped around 3.23% compared to the S&P 500 which it dropped way way more right and if you compare it to technology companies it dropped even further so I like to keep a balance of S&P 500 funds a little bit of technology companies and these dividend paying companies in particular from the Dow 30 right in my portfolio to keep a well balanced portfolio in 2021 we had a 29 30% return and you can see the rest here all the way to 2016 all right so let's go back to the summary on Yahoo finance when you click on that you're going to see this thing called the yield or the dividend yield and this is going to tell us how much money we get per share so you can do this by yourself when you go research on Yahoo finance currently Ford you can get a 3.47% dividend yield so what does that translate to you can get this number right here and then you can multiply it by the price of a share of shd which is around $79 80 3.47% times $79 or $80 that's going to be around $2.75 per share I know some of you guys are going to be like $2.75 that's such little money I buy one share and I only get2 $3 I understand because from a beginner's investor perspective we think a lot of times that we just need to buy one or two or three shares or just contribute and invest $500 once and we think that that money is going to turn into a million dollars later on this is very far from the truth folks remember with wealth building it takes time for our portfolios to compound over time time and it takes a lot of discipline a lot of consistency we need to make sure that we contribute money and we buy shares in our portfolio every two weeks every month or so even though I'm A Millionaire right now and I have a $1 million portfolio I'm still buying shares right I'm still in that wealth building mode and I'm still doing this I'm still practicing these wealth habits here this is a wealth habit that every wealthy person has they still invest and they still want to grow their wealth right they want to compound their portfolio and I'm going to talk about compounding growth in a little bit so thinking long term one share is $2.75 right I know but what if we had 10 shares that's going to be around $27.50 worth of dividend 100 shares is going to be $275 and if you go all the way to 10,000 shares that's going to be around $20,000 worth of dividends right it makes sense and again I know that some of you guys are are going to go oh like is it really possible for me to grow my portfolio to 10,000 shares yes because again I'm going to show you the compound interest growth in a little bit here okay folks so keep an open mind here keep it positive mindset because I know a lot of this we weren't taught this in school or from our parents so this investing World buying things that are going to grow over a time it sounds strange it sounds scary but just keep an open mind all right okay so here's the thing I know when you think about oh $20,000 worth of dividends is that a lot of money well remember this is a beginner's video I'm trying to keep a lot of these variables static I'm not talking about stock splits or maybe dividend growth but I'm going to kind of touch upon dividend growth right now all right so let's take a look at this this is Coca-Cola right now one share of Coca-Cola is around 6263 and it currently pays around4 849 per share if you want to take a look at the dividend history of any stock or ETF you can go on to this website called nasdaq.com and type in the ticker symbol right for Coca-Cola it's KO if you want to type in SD you can also do that too and it's going to show you all the dividend payouts over the last several years so again right now it pays around 49 cents per share but if you look all the way down to 2023 all the way back to 2022 the dividend was 46 cents per share 44 cents per share let's go back in history even more back in 2022 it was 44 cents per share in 2021 2020 it was 4241 cents if you keep going back you'll see that Coca-Cola used to pay like 15 cents per share 12 cents per share right so you can see that dividends can increase over time which means that what well this $20,000 worth of dividends may not be $20,000 later on it's most likely going to be more maybe $30,000 or $40,000 right and just to kind of keep things simple not to talk about stock splits or ETF splits or anything like that right this is around an $800,000 investment right because 80 per share right $80 per share times 10,000 shares that's $800,000 and again I know some of you are going to say is it really possible to have an $800,000 portfolio yes it is we're going to do the math in a little bit okay so hang on tight okay so I'm going to go to this compound interest calculator that you mostly like most likely have seen in a lot of my shorts I use this calculator all the time it's from investor.gov you can write this down right now and go check it out yourself later on and let's plug in some numbers okay we're going to make some numbers nice and round so we can make the math a little bit simpler so let's say that we have an initial investment of $0 because we're all beginners here we're just starting out our journey to Financial Freedom and then we're going to contribute $500 a month and then we're going to make sure that we have a long time period so this way we are able to compound our portfolios and I'll talk about why in a little bit we're going to say that we're going to invest for the next 40 years and we're going to get an estimated interest rate of 10% because that's what SCD gave us for the last 10 years or so all right and again we're keeping numbers very simple here well guess what in 40 years or so with Average stock market return returns you're going to have a portfolio of around $2.6 million $2.6 million so some of you who ask me right now hey is it possible to have an $800,000 portfolio yeah you can totally grow your portfolio to $2.6 million right of course you have to have a lot of discipline and you need to make sure that you're contributing money into your accounts on a regular basis and investing your dollar cost averaging which again I'll also talk about in a little bit but take a look at this box right here and let's zoom in because this is really cool because if you take a look at the total contributions that you actually put in yourself you really just put in $240,000 of your own money and that money grew to $2.6 million that basically just 10x your initial investment 10x pretty crazy right so when we invest in these dividend paying company dividend paying ETFs we want to take a look at really two things one we want to make sure that the asset itself is growing in value right so the $240,000 here grew to $2.6 Million number two we want to make sure that the Dividends are also growing too so instead of us getting paid like 15 cents per share it slowly grows to 20 cents per share 25 cents 30 cents per share we want to make sure that both variables are growing over time and this is going to kind of lead into the number one beginner's mistake that a lot of people make which I'll talk about in a little bit so let's kind of think about real estate terms here okay so remember if you were to say buy a home for $500,000 you're getting that rental income of $1,500 a month and we're going to say that this is 2024 later on in 40 years that home I know this sounds kind of outrageous to think about to believe but that home can be around $2.6 million like in California you see home prices skyrocketing really fast right so this is this is basically the investing World folks you can look at homes from 10 20 30 40 years ago take a look at the home prices you're going to be amazed at how much all of this all of these assets have grown over time which again goes down to the point of becoming wealthy is not us saving money we need to make sure that we buy assets that grow over time we need to collect assets stocks real estates right and if you take a look at that rental income instead of just getting paid $1,500 a month it's going to grow folks okay rent is going to go up no matter if we like it or not it's going to be around like $7,500 a month maybe even $10,000 a month all right as unfortunate as it is all right okay so hopefully everyone's getting a lot of value here if if you're taking in notes right now good job give yourself a pat on the back let's talk about step number two this is going to be the when when do we buy shares well we're going to use the DCA method or the dollar cost averaging method so basically you need to First make sure that you set up recurring deposits right you can say put in $800 a month right $500 a month whatever you are comfortable with okay and if you're someone who says Steve I don't have money to invest right now it's okay let's go back to wealth pillars numbers one and two we're going to make sure that we have a budget we really make a budgeting sheet right on Excel or you can use my budgeting sheet I'll put a link down below if you want to download that or you can download a budgeting app whatever works for you and then wealth pillar number two you need to make sure that you're constantly increasing your skills so this way you can increase your income right you want to make sure that you're getting that pay raise that promotion makes sense so this way then you can increase your contributions when you start investing all right number two you want to buy shares each month no matter what the price is we're going to buy shares no matter where it is okay even if we have a stock market crash we're going to still buy a little bit of shares every month at the beginning of every month right even when the stock market goes up we're still going and buy some shares all right we need to make sure that we are disciplined in contributing money and we're just slowly building our position over time because again this is what all wealthy people do and it's okay for you guys to start off slow right start off small even with you just maybe putting $20 a month or $80 a month that's okay because you want to get your feet wet right and if you're doing that like you should be very proud of yourselves and even if you're just putting $20 a month we're going to slowly baby step our way upwards right take baby steps we can then maybe deposit $100 a month or maybe U $200 a month or maybe $300 a month all the way to $0000 a month but you want to do something that you can do consistently and that is very attainable for you all right okay so how do we actually do this because I like to show you guys actionable steps right so I'm on Fidelity right now this is just a screenshot when you sign in and yes you can do this with other brokerages like Vanguard Schwab or eade whatever you're comfortable with but I use Fidelity and Schwab you can go to the transfer button right here we're going to set up recurring deposits right we need to put in money so remember we're not just going to put in money once this is not a casino here where we put money and we think it's going to grow to a million dollars no we are going to make sure that we put we set up recurring deposits so we're going to click on the recurring deposit toggle set the frequency to monthly if you're someone who likes to do it bi-weekly you can totally do that too whatever you like and then you're going to put an amount that you feel you're most comfortable with by setting this up this recurring deposit I promise you it's going to hurt less you don't want to think about it folks if you automate things it will make your life easier it will make your investing Journey much much easier there's going to be less friction okay I promise you this this is what all my members do this is what a lot of my followers do all right okay once you set up your recurring deposits you're then going to go back to the original dashboard and then you're going to click on this magnifying glass this is going to be the quote button and then you can type in your ticker symbol I'm going to say I'm going to type in SD right which is a ticker symbol for the Charles Schwab dividend paying ETF I'm going to then set my action to buy I'm going to buy however many shares I am allowed to with the money that I contribute inside so I put in $800 right I'm going to buy say 10 shares and then I'm going to make sure that the order type is Market I know some of you in here are going to say Market order shouldn't you use limit order or maybe trailing stop order or you know we're going to keep things simple here okay this is a beginner's video time and day this is going to time and for this is going to be day click on preview order and then you can submit you have basically 10 shares and you're going to repeat this pattern every single month okay every month all right so let's talk about step number three you're almost there hang on tight folks you guys are doing great step number three let's talk about the where where where do we put this money once we collect the dividends right every quarter or so we're going to collect these dividends they're going to come into our accounts automatically we don't need to do anything at all this is what all wealthy people do remember they just collect dividends there are three things that you can do first you can use drip which is a dividend reinvestment plan you can turn this on within your brokerage there's a little check mark and then something that you can like read right you can accept it once you turn it on basically you're going to automatically reinvest back into the same thing so for example if you invest in SD you turn on drip that dividend that comes in every quarter or so maybe you get like $2 or $300 or $500 from these dividends that money will automatically be reinvested back into SCD same thing with Coca-Cola that dividend that you get from Coca-Cola will be reinvested back into Coca-Cola the same thing so you can turn this on so this way you can automate things now if you say I don't want to do this it's okay you can do self- reinvestments when that money dividends go goes into your brokerage account you can let it sit there as cash and then you can choose yourself where you want to reallocate your money into so for me personally I like to collect these dividends from Costco from Walmart SCD and then I'll use those dividends to reinvest back into S&P 500 funds me for example I like to reinvest into spy but I know a lot of you a lot of my members they invest in FX vo any of these S&P 500 index funds all right step number three you can also consider taking out your dividends and using it as income and this is something that even Warren Buffett does right he doesn't work he basically has a huge portfolio and dividends just come in and he just lives off of his dividends right it makes sense it's because he planted all his acorns in the beginning of his life and grew it to huge Oak trees later on now that he's just just sitting there on a lawn chair on the beach or something sipping on his Coca-Cola just collecting dividends right so I hope everyone is able to do that one day by the time you guys retire so yes you can take out your money as income too because this is real money it's very similar to the interest that you get from a high yield savings account and by the way if you don't have a high yield savings account you should totally open one up right now because of the high interest environment we're in I'll leave some links down below if you want to use my links so this way you can help support my channel and you will probably get some sort of signup bonus too so just putting it out there all right okay so these are the three steps on how to build a dividend paying portfolio here is the number one mistake and I really hope you guys are paying attention here please do not just invest in something just because of the high dividend yield this is a mistake that I made a lot of my followers a lot of my friends also made this mistake in the in their beginning journey of investing so I'm going to talk about why in a little bit we're going to do some math here all right and it's very important that you consider the overall growth of the company right don't just focus on the high dividend yields and of course like what I said before invest in whatever you are comfortable with right don't just invest in something because I invest in it right someone else invest in it invest in something that you kind of did your research on that you believe in with you know what whatever the company is doing okay so let's talk about an example here this is AT&T this company AT&T it's around $17 per share right now and if you look at AT&T like it looks like a pretty good stock because if you look at the dividend yield it's 6.49% that's really high because a lot of ETFs like the S&P 500 it only gives you like 1.4 1.5% currently right now shd gives you around 3 something per. but if you take a look at AT&T it's 6.49% that's really high relative to these other companies and ETFs right so you might think as a beginner like oh I should totally invest in AT&T right no don't do this why is this because if you take a look at the long-term trend of AT&T maybe the five-year Trend take look at where the stock was 5 years ago it was around $30 per share where is it now it's almost around like half right like 176 $15 right now it lost a lot of value so what is the lesson here yes you will get this higher dividend payout every quarter or so but you need to make sure that the company that you're buying is also growing too it doesn't make sense for you to buy a home for $500,000 and you're getting that maybe $2,000 of rental income but the home itself is really bad right like the foundation isn't good the windows are are breaking it's in a bad U City right it doesn't make sense for you to buy a home that is not very good and is going to depreciate in value it goes from $500,000 to maybe $400,000 to $250,000 no this is why I say when you buy these dividend paying companies ETFs you want to make sure that you focus on two things the overall growth of the actual asset itself right the house or the stock it's going upwards and you want to make sure that the dividend is also going up too both should go up okay folks all right so let's do a recap because this is the teacher and me okay how do we build a dividend paying portfolio Three Steps step number one we need to buy dividend paying assets right this is the what you can buy ETFs and companies right buy whatever you're most comfortable with number two you need to make sure that you use the DCA method set up your recurring deposits and you're going to buy a couple of shares every month right this is a good wealth habit that every wealthy person has step number three you can then talk about the think about the where where do I want to put this money after I get my dividends so you can use a drip method you can self- reinvest or you can just take it out as income especially if if you have a taxable brokerage account right and please do not just focus on the dividend yield okay so you want to make sure that both the asset itself and the Dividends are growing all right okay and yeah that's pretty much it for this video hopefully you guys found a lot of value I worked really hard for this entire presentation so I really hope that you guys learned something if you found value you can help support me by just giving me a like or maybe giving me a follow and also let me know in the comments if you have any questions at all because yeah I know as a beginner it's very scary to start buying things in your portfolio it's kind of scary to get into the stock market so there are no stupid questions or anything like that I'm going to try my best to answer all your questions down below and also again if you want to help support me you can also use any of my affiliate links down below it doesn't cost you anything extra it just gives me a little bit of a commission so this way I can keep my channel running and in particular if you're someone who wants to open up a high checking High savings account or if you want to get a credit card I list all of my favorite ones down below so you can totally check those out all right okay and that's pretty much it folks um I hope you guys learned a lot and hopefully I will see you guys all in the next video bye everyone
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