Dear DTA,
I’m already retired, but only because of my health. I’m trying to increase my portfolio value so that I don’t have to worry about money. The government is not going to help me, so I need to do this myself. Do you have any advice for me?
-Ray D.
Hi, Ray. Thanks for writing in. It’s great to hear from you.
We want to help and empower whenever and wherever possible.
That’s not something you wish upon anyone.
Health is certainly far more important than health in this world, so I do hope that your health concerns aren’t negatively impacting your quality of life too much.
As for the topic at hand, I do have some really helpful information.
And I only share this information because it genuinely helped dramatically change my life for the better – and I think this information is germane to just about anyone’s desire to become more financially secure in life.
I say this as someone who used what I’m about to share to become financially independent at 33 years old.
So when I say that I have firsthand experience with this stuff, I’m not kidding around.
What I did was simple but hard.
It’s simple because just about anyone can do this; the steps one must follow aren’t difficult to understand.
But it’s hard because it’s not at all easy to undertake the kind of lifestyle changes that can lead to dramatic wealth and income.
However, if you’re ready to truly improve your financial future, amazing things can happen when the path is followed.
The proof is in the pudding: I used these steps to build a real-life six-figure portfolio that generates five-figure passive dividend income on my behalf.
Although it’s more nuanced than I can possibly lay out in a brief response to you, there are really just two steps to follow…
The first is to live below your means.
The second is to invest your excess capital into high-quality dividend growth stocks.
No secrets here. Just some hard work, a little sacrifice for the greater good of your financial security, and regular investments into some of the best businesses in the world.
I don’t know what your monthly income is, nor do I know how much you spend per month.
But the odds are pretty good that there’s some fat that can be trimmed. If so, it would behoove you to trim. This will free up capital that can grow that portfolio and make you more independent – which is great, as (per your statement) the government isn’t helping you.
There are usually multiple levers one can pull in order to generate excess capital for investment. But one – working longer hours or, say, a second job – isn’t available to you, so your focus will have to be on the expense side of your budget.
Once you generate some excess capital, you have an opportunity to intelligently invest that money in order to grow your portfolio.
The investment strategy I espouse (and personally use) is dividend growth investing.
This involves buying and holding shares in wonderful businesses that send some of their growing profit back to the shareholders.
See, shareholders are the collective owners of any publicly traded business.
As such, the profit that any publicly traded business generates is technically the shareholders’ money.
It’s a shareholder’s right to receive some of that profit.
That’s where a dividend comes into play.
And as profit grows, so should a dividend payment.
It thus follows that any business that’s good enough to regularly and routinely grow profit enough to send out increasing dividend payments to shareholders for decades on end is a high-quality business.
A lengthy dividend growth track record is a pretty good litmus test for the quality of a business.
To see what I mean, take a look at David Fish’s Dividend Champions, Contenders, and Challengers list, which is a collection of more than 800 US-listed stocks that have paid increasing dividends for at least the last five consecutive years.
Scanning this list even quickly will reveal a “who’s who” of some of the biggest and best businesses in the world.
Johnson & Johnson (JNJ). PepsiCo, Inc. (PEP). CVS Health Corp. (CVS). McDonald’s Corporation (MCD). Microsoft Corporation (MSFT).
So on and so forth.
As you might expect (because we’re talking about investing in some of the best companies around), dividend payers and growers (like those we’re talking about) tend to outperform the broader market over the long run.
Meanwhile, you’re also getting paid increasing passive income (through those rising dividend payments, which are funded by growing corporate profit).
More wealth and more passive income?
This means that you could possibly grow your portfolio at a rate greater than what the broader stock market is growing at.
And you could simultaneously get paid a fantastic source of passive income that’s growing totally organically.
But while these are great companies, and while this strategy has more than proven itself out for countless investors (including myself), you shouldn’t go into it without fully educating yourself.
However, educating yourself about dividend growth investing is fairly straightforward – and we have plenty of resources to help you in this pursuit.
One fantastic resource is fellow contributor Dave Van Knapp’s comprehensive guide to dividend growth investing, which serves to tackle the investment strategy from A to Z, discussing how the strategy works, why it’s so great, and how to successfully implement it.
In addition, I personally select and discuss an undervalued dividend growth stock every Sunday.
This is my weekly opportunity to present what I believe is a compelling long-term investment opportunity to the dividend growth investing community.
As you can see, Ray, you’re not alone here. I can’t speak for the government. But we here at the site are doing our best to help.
But it’s ultimately up to you to take action.
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.