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If you start with investing and you read about this topic, then you should have read about Warren Buffett or at least heard about him. He is one of the richest man on earth and all his wealth is made with investing. Today I share you how you can to it as well.
First of all forgot about day trading
Warren Buffet made his billions, not with trading – he made it with finding the right stock and buy it at the right time and HOLD these stocks for years. And this patience helped him to get all of this.
Yes if you are a good daytrader then you can do it as well, but 80% of all daytraders lose money and the median loss is -36%. And with this return, you can never make it.
Let’s talk about how to do it
Think about that Warren Buffet made $ 592,000,000 from the Coca-Cola dividend while CEO compensation was only $ 10,190,104. And dividend will be the main topic in this post.
When you start investing, you realize in a short time that you need to invest regularly, and if you invest $ 200 a month, you can earn your first million in 37 years – with a stock growth rate of 8% and a dividend yield of 3%. In real life, these numbers are different, and you can usually make it faster.
To start with, I only had 10 euros a month to invest, but it seems too low to me and it was usually money in my bank account because I saved something around 50 euros for my next investment. But now I have somewhere between 100-200 EUR that I can invest every month. And it helps me reach my goal much faster.
If you have invested for a few months or years, you realize that you need extra income to invest. I know a person whose goal was 12 years away. When he started, he realized after a while that he needed extra income and achieved his goal in 5 years.
What stocks you have to invest into?
If you want to make money, you can do so with day trading or swing trading. But put only 10% of your portfolio under speculation. This means that if you invest $ 200 each month, use only $ 20 for day trading. If you think that’s not enough, invest all that $ 200. And if you start earning enough with dividends, you can use dividends for day trading. You get extra income from it, but keep in mind that 80% of day traders lose money.
Now how to find your stock
Go to here. I have already inserted my indicators and there you will find some stocks with a higher dividend yield. Let’s look at PSEC, it pays you dividends every month. The dividend yield is over 9%, which is quite high but riskier. But if it continues to pay dividends in the future, you can reach your million goals much faster than I originally expected. In my example, you can achieve this in 27 years – ten years faster than in my first example.
Why I chose the financial sector? One student made an analysis of which sector will achieve a higher return in the growth phase of the economy. He found that the financial and technological sectors are growing best in the growth phase of the economy.
Now let’s adjust my first example
In the beginning, I said that dividend yield is 3% and stock growth rate is 8%. But if you look around then you can find stocks whose dividend yield is over 3% ( for example PSEC ). But keep in mind I chose this stock without doing any analysis.
Now let’s think about that – in 5 years you can start with day trading. If the dividend yield is 9% then you can earn over $ 1500 after five years. This means that you can day trade with $ 150 every year and this is growing in time.
Hope you are a good day trader and you earn money not losing it. In this year I have made with day trading over 40€ and I started with 150€. This means that my return is 27%, but this was made with crypto. But I hope you can earn at least 15% with day trading. Then this million is not far away and you can retire before your friends.
There are many dividends funds/ETF-s. They pay you dividends and you get a diversified portfolio. In my opinion, the best ETF-s are built up by Vanguard.
If you don’t want to invest with higher risk then invest in dividend aristocrats. This means that they are paid a dividend for at least 25-years.
In the bottom line
Investing is easy and making the first million is easy. The only thing you need to do is buy and hold. Dividends are received by holding shares, not by selling them. Yes, there are some points where selling is better than waiting for those dividends, but in general, the best strategy is to buy and hold.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”Warren Buffett