 DISCLAIMER - I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice. These are my findings and can hopefully help you make informed decisions on investing. Consult a Broker or Lawyer before making any investment.
Why I Love Passive Income What is greater than Passive Income? Perhaps in this 105-degree weather this week, a bowl of ice cream with some fruit might be better. But as far as money growth, there are few things better than Passive Income. What Is Passive Income? Day in and day out, here are a few things greater in life in regards to bringing in steady money than passive income. If you are like me, you were taught to go to school and get a great education, find a steady high-paying job, and exchange your time for money. So the only way you receive a paycheck is by trading your time for the pay. The problem is you only have so many hours a day, and then tomorrow, you must start over to get more money. You only have so many hours in life, so we need to find a better way to bring in money. Rich people do not trade time for money, but they buy assets. Robert Kiyosaki has written many books on this topic beginning with his best-selling book “Rich Dad, Poor Dad”. In his books, he teaches that we all need to find ways to make Passive Income. He says we need to create assets that will make us money. So passive income can come in so many ways. You could write a book and sell it, and that would be passive income. Written once, but it sells over and over. One of my favorite methods of passive income is to buy an asset. That could be a rental property, but my choice is to buy stocks and ETFs (Exchange Traded Funds) that make me money via dividends. Investing with ETFs There are so many good dividend-paying stocks. I like to use my Schwab IRA to buy ‘stock slices’ in companies I feel are good dividend payers and also are potential growth companies. This is called DGI / Dividend Growth Investing. These are companies that will make you steady dividend income, but due to growth may also gain in value as their stock prices go up. What is Dividend Growth Investing There are many ways to invest and to find high-paying dividend growth companies. Two of my favorites are those on the Dividend Aristocrats list and those on the Dividend Kings list. Dividend Aristocrats are companies that have raised their quarterly dividends for 25 years or longer. Dividend Kings are those who have done that for over 50 years. Requirements to meet the lists are different, but there are some companies on both lists which certainly are worthy of consideration. Read about those two lists at: Dividend Aristocrats Dividend Kings This past year I have come upon 3 other classes of investments that are making me the most in dividends. I will discuss only my favorite of the 3 today. Those high-paying dividend stocks are called Preferred Stocks. Briefly, the advantage of Preferred Stocks over normal stock is they sell at a fixed par value which is normally either $25 a share or $10 a share. And because the stock market is liquid, these vary in price a lot. So, if you buy a company’s preferred stock that is out of market favor, it will sell at a discount to par. I try to buy all of mine on those with 14 to 70% discount to par. The dividends are still paid on the par value. So if you buy a stock that pays 8% dividends and you buy it at a 50% discount to Net Asset Value, the real return is 16%. And if purchased at a discount, normally these move back to closer to par value over time. You make a lot more in dividends and the percentage of dividends is great. When you combine that with my plan of stop loss orders at 92% of the value I paid for it, your chances of much loss are greatly minimized. I find most of my Preferred Shares on the PreferredStockChannel.com. If you sign up for their weekly newsletter, they will send you a complete list weekly of the top 10 highest-paying Preferred Stocks. Be careful of following that list as some companies are in trouble and may wind up in bankruptcy. Also, some have declared dividends but have not paid them. So being on the list simply gives you a stock to review. Due diligence is required to purchase those that are good buys and not in a serious financial state. Understanding Preferred Stocks I will discuss my other two high-paying dividend categories in the next few weeks and also discuss REITs (Real Estate Investment Trusts) which are another great method to earn passive income. Have a great week. Study and find some methods to start earning passive income. A year ago I had almost no dividend income, and this month we are now up to $175 per month. Not a lot of money, but we are increasing it by $25 to $33 each month and should be at over $1,000 in a few years. What is great is they pay you while you sleep. No effort is required on your part but to maintain and monitor your investments and stop loss orders. I update mine at least once per month. List of All Investment Articles List of All Investment Articles on the New Blog List of all Minimalism Articles List of All Minimalism Articles on New Blog Facebook Internet Direct Store Internet Direct Laptops
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 Lessons from a Box of Rocks
It is crucial in life to work with a plan. Some folks think they can just start each day and things will just work out. Your day will come and go, but without a clear plan of action, you will not accomplish as much as you could with an organized plan. In college, I had a great professor who encouraged his students to think outside of the box. He constantly used unconventional methods to teach. One day he came to class with a few boxes of rocks. He said today we are going to use this large box and these rocks to teach some lessons. He poured the boxes of rocks out on his desk and set one large box on top of the desk. He asked us what we should put in the box first. The little rocks or the big ones? Several students said the small ones, but the majority said to go with the big rocks first. He put those in first and then proceeded to put in the next largest rocks. The box was almost full. He asked, “Is the box full yet?” Some agreed, and some disagreed. “What should go in next?” he asked. We had 2 more sizes of rocks, some gravel, and some dirt on the desk. Since the larger ones had been the right answer before, we went with the larger ones. He then filled in the smallest rocks and shook it. Is it full? We all agreed it was full now. He then proved us wrong by adding the gravel and shaking the box. Is it full yet? We said yes, it is full. He shook the box and then poured in the sand. All 5 boxes of rocks, gravel, and sand fit in that one big box. He then asked, “What did we learn from this?” One forward-thinking student volunteered “No matter how busy your schedule is, you can always squeeze in a few more things.” He said “No. That is not the lesson.” He asked the question again “What did we learn from this?” Many guesses were offered, but no one had the right answer. He said what this box of rocks teaches you is that you must put the largest things in life first. In life, the important large things have to take precedence over the smaller stuff, or you will not have the room and time to do all the things you want to accomplish. Think about that. If you put in the dirt first, then all the room around the rocks would not have been filled in, and most likely all of the rocks would not have fit. As you shake a box of rocks, the big ones come to the top and the little ones go to the bottom. Another lesson he pointed out is how no matter where you are in life, life is shaking and if you are a big ‘rock’ at the bottom, life will eventually force you to the top if you keep on and don’t quit trying. And if you are a little rock sitting on the top, the shaking will send you back to your correct position at the bottom. We need to grow and keep on keeping on to move to the top. Life has a way of moving us to our level. This validates the old Peter Principle about how we all fall back down to our level of incompetence. The Peter Principle is an observation that the tendency in most organizational hierarchies, such as that of a corporation, is for every employee to rise in the hierarchy through promotion until they reach a level of respective incompetence. It is amazing how we can learn from something as simple as box of rocks. This past week, I read a book called Rich Habits, Poor Habits by Michael Yardney. In the book he told about a plan he picked up to deal with issues. I also read this same plan from a Marine Sergeant in regards to battlefield preparation. Both men said to prepare the right battle plan, you need to do 3 simple things.
It is crucial to take the time to think. We need to understand the situation whether dealing with a battle zone or some trial of life. By thinking we can now evaluate the situation and determine our best course of action. After giving yourself time to think and evaluate, you then respond with action. Reaction is not the same as responding and rarely the appropriate action. We need to not get in a hurry but think things out and take adequate time to evaluate. A response is good most of the time, but reactions can cause us more trouble than they correct. In life, to be effective, we have to be intentional with our actions. It is so easy to react to a situation without thinking and evaluating. Quick reactions are never good. Think things out and then RESPOND. I am sure you remember times when your mouth was engaged before getting the brain in gear. It is easier to take the quicker method of ready, fire, and then aim. This is never good and the results are mostly bad. Before considering opening fire (even about life’s situations), we need to always follow a logical plan of action. Get ready, aim, and then fire. To be successful, we need to control our tongues and words. So when you are faced with any situation, remember the 3 methods Michael Yardney uses:
List of All Investment Articles List of All Investment Articles on the New Blog List of all Minimalism Articles List of All Minimalism Articles on New Blog Facebook Internet Direct Store Internet Direct Laptops  DISCLAIMER - I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice. These are my findings and can hopefully help you make informed decisions on investing. Consult a Broker or Lawyer before making any investment.
Back to Basics of Investing – Part 2 We began our study on getting back to the basics of Investing last week. If you did not read that article, I suggest you read it first. It is the first article on our new blog site: LifeCanBesimple.blog Back to Basics in Investing Part 1 We have dozens of articles on our old site which is LifeCanBeSimple.net I mentioned last week it is important to know HOW TO INVEST, and also what platform to use to invest. Anyone can open a standard brokerage account, but you have so many things to consider concerning your taxes. If possible, always do your investing in either a 401-K plan or a Roth IRA, or a Traditional IRA. If your employer offers a 401-K, you probably want to start investing there. Most companies will match your first 3 to 5% of your contributions. That means you will immediately have a 100% gain on the money the company matches into your account. An example of a 3% company match would be if you put in 3% of your $20,000 salary. Your contribution for the year would be $20,000 * .03 percent which would be $600. The company would also contribute $600 making your total year-end balance equal to $1200 plus any dividends or gains you might have had. Not all companies have a match, but if they do, you sure want to contribute up to that matching amount if possible. Also, realize that companies may not pay their portion of the earnings until you are fully vested. Talk with your HR department or a lawyer or tax planner to fully understand vesting. If no matching is available on a 401-K, consider investing in an Individual Retirement Account (IRA). There are two types, the Traditional IRA and the ROTH IRA. I am using ROTH IRAs on all 5 of the ones my wife and I currently have, but you may be better off taking the tax deduction on the traditional IRA if you expect to have a lower tax bracket at retirement. DIFFERENCES in IRAs Investing requires patience. Warren Buffet, one of the world's most well-known investors, said: “Wealth is a transition of money from the impatient to the patient.” Unless you have patience, you most likely will not do well in investing. You need to look at the ‘big long-haul picture.” Some people spend all their time looking for a fast dollar. The best way to make money is to study and be slow and methodical. Not losing money should be your number one goal. When making investments, it is crucial to invest using a Retirement Account. If you don’t invest in a retirement account, you will have to pay taxes on both your dividends and your capital gains or losses. A capital gain or loss happens when you sell an investment for more or less than what you originally paid for it. If you held that investment for over a year, you have a long-term capital gain or loss. If less than a year, it is a short-term capital gain or loss. There is a substantial difference in the amount of taxes you have to pay. Long-term gains are taxed at your current tax rate. Short-term gains are at a higher rate. When you own an asset or investment for one year or less before you sell it for a profit, that’s considered a short-term capital gain. In the U.S., short-term capital gains are taxed as ordinary income. That means you could pay up to 37% income tax, depending on your federal income tax bracket. You must study tax laws to determine the exact price. When investing with a retirement account, you don’t have to concern yourself with capital gains. If invested in a ROTH IRA, you will never pay taxes on your profits. On Traditional IRAs and 401Ks, when taking a distribution, you pay income tax as you take the withdrawals. It is up to you to make good decisions and study to make wise investments. I loved what Jim Rohn, a motivational speaker said. “If you don’t like the way things are, CHANGE. You are not a tree” Be smart. If you are not pleased with where you are in life, CHANGE. Change your habits and get on a steady, consistent path. What is a good investment plan? If you read 20 different investment blogs or books, I dare say all will be different. Who is right? There are many voices crying out for our attention. The Bible says that none of those voices are without signification, meaning they are either good or bad. I listened and tried dozens of them over the past 30 years. Last year I got really serious and started reading, and I mean a lot. Last year I read 90 books, and this year by June I have read 52 books. Every book has been about investments, mindset, or habits. And all have helped me to get a better idea on how to invest. Is my plan best for you? I can not guarantee you it is the best. However it is a combination of about 20 different plans that I have put together. Here are 4 common methods to invest. Plan 1 – Use a certified financial planner (CFP) to make your decisions and put together a logical plan. There is a charge for this service. It can be a fixed amount but normally is tied to the total investment value which ranges from 1 to 5%, sometimes even higher. One thing to be on the lookout for is that the person making the decisions is not making a profit on the funds or stocks they have you invest in. This is my least favorite plan as I am a hands-on person and want control over what I invest in. Plan 2 – Manage yourself and buy mutual funds that have done well over the years. Magazines like Kiplingers have lists of good quality mutual funds with ratings and percentages they have averaged over 1, 3, 5, and 10 years. Pay more attention to 3 and 5-year averages than just recently, as the market may have been down and all funds dropped during that period. Mutual funds are categorized into many groupings. Some are total bonds, some are Large Growth funds, and some are balanced funds with both types. There are small-cap mutual funds, medium-cap, etc etc. Plan 3 – Control it yourself, and invest mainly with ETFS. (Exchange Traded Funds) Investing with ETFs. You do not have to pay high management fees and can get every flavor of investments in the various ETFs. On these, always put a large number of your investments in the total stock market using ETFs like ITOT, SCHB, or VTI. You can mix in specific industries, bonds, Real Estate Investment Trusts (REITs), and dividend growth stocks. Reits and M-Reits There are so many flavors of ETFs that I need to write an article on the many types available. This is one of my best ways to invest. Plan 4 – Purchase a mix of them all. Buy Mutual Funds and Bonds for stability, Then buy a lot of ETFs, and then get into the deeper methods of investing in Preferred Stocks, Block Development Companies, Closed-End Funds, and REITs. And you always want to invest in Dividend Growth Stocks. Understanding Preferred Stocks Using the Preferred Stock Channel. Explanation of Block Development Companies Investing with Dividend Growth Stocks My current investment portfolio is tied mainly to this method with a heavy dose of Preferred Stocks and CEFs purchased at large discounts to Net Asset Value. Many of these are paying 12 to 30% in dividends. I have used all four of these methods and what works best for you may be any one of them or a combination of the others. The reason for my success in late 2022 and 2023 has been the limiting of loss of down markets using Stop Loss orders. Protecting Your Investments from Huge Losses Another method many use is to buy the same amount of a specific investment continuously. (Like weekly or monthly). This allows you to have dollar cost averaging. In high markets you buy fewer shares but more in low markets. A person using this concept is Rachel Richards, the author of Money Honey. She says she has four rules on investing, which can not always be taken into account when doing dollar cost averaging. Rule #1 – Don’t Sell when the Market is Down. Rule #2 – Don’t buy when the Market is High. Rule #3 – Hold investments for over one year before selling. Preferably for over 5 to 20 years. Rule #4 – Don’t be a control fanatic. She has followed her rules and has done very well. She only reallocates her investments twice a year. She invests using auto-pilot and lets it run itself. She uses just 4 ETFs and puts 25% of her monthly investment into each of these categories. 25% to Small Growth Stocks 25% to Mid Cap Growth Stocks 25% to Large Cap Growth Stocks 25% to Global/International funds. The 4 ETFS she mentioned that she has used were: IJR VO VV VEA The last 3 are Vanguard ETFs. You might make it 20% and put 20% in VTI to make an even more diverse portfolio. VTI is the total stock market index. So I guess we will close the second article on getting back to the investments. What you do is really up to you. There is no perfect investment plan, but there are many, many ways. What I advise you to do is this. Study, and then study some more. Try things. Don’t be afraid to have a few failures. I learned that from several of Robert Kiyosaki’s books. RICH DAD POOR DAD book review on Unfair Advantage. I have not given up when I have had failures. I kept at it and learned. You can too. Is it easy? No. But you can be successful. You are not defeated until you fail to get back up. Stick to it. Be determined. List of All Investment Articles List of All Investment Articles on New Blog List of all Minimalism Articles List of All Minimalism Articles on New Blog Facebook Internet Direct Store Internet Direct Laptops |
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