Dear DTA,
I am excited to subscribe to your services. I have just begun to enter the trading and investment arena, and I’m eager to learn how to make successful trades. My plan is to raise capital to fund an early retirement via investment income generation. I’d like to then invest in further ventures.
-Ricky D.
Thanks so much for writing in, Ricky. Your subscription is very much appreciated. And we want to take the time to show our appreciation by responding to you directly.
First, congratulations.
The arena you’re entering is very exciting.
That’s because the stock market is one of the greatest wealth and passive income generators ever created in the history of mankind.
You’re potentially on a path to completely positively change your life.
I say that as someone who was in your shoes just seven years ago.
In early 2010, I found myself poor, overworked, and unhappy.
But I was determined to put the me of the future in a much better position than the me of that day was.
So I started living well below my means and investing my excess capital into high-quality dividend growth stocks like those you’ll find on David Fish’s Dividend Champions, Contenders, and Challengers list – a compilation of more than 800 US-listed stocks that have all increased their dividends for at least the last five consecutive years.
The result turned out to be phenomenal.
I went from below broke in early 2010 to financially free in early 2016.
In just six years I was able to completely turn my life around.
And I’m basically retired in my early 30s here.
That’s the power of frugality and high-quality dividend growth stocks.
The former is pretty straightforward: one decides to live more simply, spending much less in the process.
Examples of my own frugality include moving across the country, then moving in a cheaper apartment, selling my car (in favor of riding the bus), and eating a lot of PB&J sandwiches.
The latter part – dividend growth investing – is a bit more complicated, but it’s also pretty straightforward in terms of all the available investment strategies one can pick from.
Dividend growth investing involves buying shares in high-quality businesses that pay increasing dividends.
It’s essentially blue-chip stock investing.
These businesses are high quality because they have great fundamentals and strong competitive advantages.
And they eventually put themselves in a position to pay increasing dividends because of those aspects.
See, a company that’s able to continually increase its profit because it’s selling more and more ubiquitous products and/or services eventually runs out of ways to intelligently reinvest all of its capital, which then leads to paying shareholders their rightful share of that profit.
As profit continues to grow, so should those dividend payments.
Not only that, these growing dividends make for a fantastic source of growing passive income.
One doesn’t need to call a 1-800 number for their dividends. You don’t need to hunt down your money.
I simply log into my brokerage account – and, bam, the money is there when it’s supposed to be.
High-quality dividend growth stocks include the likes of Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and United Parcel Service, Inc. (UPS).
You almost can’t go a day without seeing products or services from these companies.
And because of their dominance within their respective industries, they’re able to keep piling up profit. That leads to a steady flow of increasing cash coming shareholders’ way.
But I’m not speaking in a hypothetical way here.
I built a real-money dividend growth stock portfolio that’s valued at well into the six figures by implementing these principles in my life.
That’s real life. Real money.
And I’m reminded of just how real the money is whenever I collect a dividend from one of the more than 100 companies I’m invested in.
Indeed, my annual passive growing dividend income is in the five figures now.
I have a very easy job: I just let these businesses do what they do best, get out of the way, and collect my growing passive income.
It’s pretty much the easiest “job” I’ve ever had.
You say you want to make successful trades.
Well, you may want to think about making successful “investments”.
Trading in and out of the market successfully over any longer stretch of time is incredibly difficult. I don’t know of anyone who’s done it really well over the long haul.
But I can name you many investors who’ve made vast fortunes by buying high-quality stocks and sitting on them for the long haul.
Moreover, you indicate you want to generate income to fund an early retirement.
Well, you and I definitely have that in common.
But why worry about stock prices, macroeconomics, and emotional roller coasters? Why let any of that affect your early retirement income?
If you’re relying on stock trading to fund your early retirement, you’re going to be affected by all of that – and then some!
I instead just rely on Johnson & Johnson selling medical products, Pepsi selling food products, and UPS delivering various products (as examples).
All of that is highly likely to continue happening for as far as the eye can see.
As such, my income is pretty stable – and growing.
I more or less do not care what stock prices are when my income is rolling in regularly and reliably.
And once the passive income is sizable enough to cover your lifestyle, you can then start to look into funding other ventures.
I can tell you that I’ve already started doing just that, which tells you we have still more in common.
For example, I used dividend income to fund a personal training course a few months back.
This allowed prior work to fund new and exciting opportunities. It’s like work I did a long time ago continues to pay me residual income for the rest of my life, which allows me to open new doors as I go.
So the dividend income that rolls in from high-quality dividend growth stocks can cover your personal expenses and fund an early retirement, but this passive income can also fund new ventures as ideas and opportunities pop up.
But the key is to make sure you’re investing in the right dividend growth stocks at the right prices.
As such, I’d recommend perusing the series of lessons on dividend growth investing that was put together by fellow contributor Dave Van Knapp.
It covers what dividend growth investing is, why it’s so appealing, and how to successfully go about using it to your advantage.
And one of the lessons focuses specifically on valuation, which can help you make sure you’re not paying too much when the time comes to put capital to work.
When that time does come, though, I also publish a regular series here on the site which highlights an undervalued dividend growth stock every Sunday.
You can accomplish all that you’re setting out for.
But I’d strongly think about what I’m writing here, because I’m real-life proof that the system can and does work.
Whether or not it works for you is largely up to you, Ricky.
But I think if you start the saving and investing right away, you’ll be shocked at just what’s possible.
I wish you luck and success.
Jason Fieber
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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.