Dividend Stocks: A Powerful Wealth Building Tool

| January 21, 2011 | 0 Comments

Are you pulled aside by friends and family?  Do they pepper you with questions about your investment portfolio and thoughts?  Are they quizzing you about what you recently bought, recommended, or traded?

I don’t know about you, but it happens to me all the time.

Just a few days ago I was having coffee with my brother.  He was looking for advice on his retirement accounts.

With three kids and a mortgage, he’s not ready to take on any big risks. He wants a set-it and forget-it type of investing strategy.  I talked with him about his other goals, how much time he wanted to spend managing his accounts… and how much research he wanted to do.

Then I told him about one of the most powerful wealth building tools I know.

Before I get to that, let me clear something up.  I’m not a financial advisor.  I don’t have any fancy government issued certifications (not anymore).  And I don’t do this for just anyone.  I’ll help out family and friends.

But I can’t help everyone.

The problem is you can spend hours understanding a “Friend’s” situation. You take a lot of time teaching them the keys to investing.  You lay it all out for them… and nobody follows through.

I had a friend (who will remain nameless to protect the guilty).

She asked for my help and I gladly spent hours teaching her about the markets and how to invest.  But she didn’t listen to a thing I said.  A few years later I asked about her retirement investing.  Her response sent me into a state of shock.

She said “I followed your advice and found a great stock.  I bought a little.  But it went down in price a few days later.  So I sold it and gave up saving for retirement.”

I was sad for two reasons.

One, I knew she’d never save enough money to reach her dreams and goals.  She’d muddle through life like the masses and she’d end up barely scraping by in retirement.

I also felt sorry for myself… mad actually.  I’d spent hours of time and effort to help her out.  I took my valuable time to educate her… and for what… so she could quit.  So she could fold up tent at the first sign of adversity.

This is just one of a hundred reasons why I don’t deal with individuals. It’s not my job.

I’m happy to share my thoughts on the markets and investing… but I refuse to give advice to people one-on-one.  As a reader you can follow my advice… or throw it in the trash.  I know when I retire I’m going to be living in comfort.  What you decide to do is your own business.

But when it comes to my brothers, all bets are off.

When he asked for help, I stepped up and shared just one secret with him.  It was the secret of the most powerful wealth building tool I know.

And today I’ll share that secret with you.

Put simply its dividend investing.

Now you can roll your eyes and shrug off this advice… or you can listen-up.  Dividends are the cash sent to a company’s shareholders.  It’s your share of the profits.  And I love dividends… because you can take them to the bank… use the cash to pay your bills… or even spend them at the grocery store.

It’s proof positive your investment is working hard for you.

But there’s a twist.  I like to use my dividends a little differently… and this is the real secret I told my brother.

I always reinvest my dividends into other dividend paying investments.  I don’t take the money out.  I don’t spend it.  I reinvest it… always!  I make my money work for me.

I took a few minutes to walk my brother though the ideas behind dividend investing.  I gave him a few options on how to split-up his investments.  I showed him how to invest aggressively… and conservatively.  I showed him how to do his own research on stocks.

Now it’s up to him to take the next step.

My suggestions were simple.  Take your retirement account and break it into bite sized portions.  Invest each portion into a different dividend yielding stock, REIT, MLP, or ETF.  I told him to do a bit of research and find industry leaders with strong dividend payouts.

And to focus on dividends that grow year after year.

When I find good companies with nice fat payouts that are growing, I swoop in and buy them up.  I spread my picks around a handful of big industry players… then I sit back and let them do all the work for me!

It’s a great feeling to hold a stock that pays you!  Eventually… years from now, the amount of money being paid out in dividends might exceed the price you paid for the stock!  And when it comes time to retire, these dividends will provide a nice stream of income to live off of.

Dividend investing is so simple, anyone can do it… but you have to have patience.  Years from now you’ll see what a powerful wealth building tool they can be.

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Category: Dividend Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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