What if I were investing $10,000 dollars in the stock market? What if I were investing ten thousand dollars for the first time? Today's video is all about that hypothetical situation, from a dividend income, cash flow, and passive income perspective. Topics covered include:
(1) I would divide my $10,000 dollars into four stocks (equal amounts in each). I would choose my stocks from the four following industries: consumer non-cyclical food and beverage, consumer non-cyclical basic needs, medical and pharmaceutical, and industrials. These are the industries that will be around forever, which is essential for dividend investing and compound interest.
(2) I would leverage DRIPs for my ten thousand dollars, or dividend reinvestment plans. These plans would allow my dividends to buy fractional shares of stock (via reinvestment) for low (or even no) fees. Dividend reinvestment plans would be critical for my compound interest strategy. Eventually, I would want to live off the dividends, but in the short and medium term, I would reinvest the dividends. (Where dividend reinvestment plans did not exist, or carried higher fees, I would leverage a low cost stock broker.)
(3) I would stagger four $2,500 lump sum investments over the course of 3 or 4 months. After 3 or 4 months, my $10,000 dollars would be fully invested.
(4) While my immediate dividend income would be around $300 per year (a nice amount of dividends), I would avoid the temptation to spend that money. Rather, I would reinvest.
(5) I would build up a cash buffer (or emergency fund) so that I didn't have the temptation to tap into my stock portfolio when times got rough and I was short on cash. Ten thousand dollars is a lot of money, and the temptation will be there to cash out when money gets tight.
(6) I would periodically add money to my positions. I would add as much as possible to my stock portfolio over time, investing in those positions that had the greatest value at the time.
(7) I would buy blue chip companies with my $10,000 investment, although I would diversify market capitalizations (market caps) from $10 billion up to several hundred billion. With this size of a portfolio, I like to start diversifying by market cap.
(8) I would target companies that provide 5-7% dividend growth each year.
(9) Last, I would target starting yields in the 2-3% range.
When one invests $10,000 dollars for the first time, that is a big deal. We're talking about a lot of money here. This video highlights the main things that I would do differently with ten thousand than smaller amounts. This video builds on my other videos in the same series.
My One Thousand Dollar Video:
My Five Thousand Dollar Video:
Thirty years out, assuming a starting yield of 3% and a 7% rate of dividend growth over time, my initial $10,000 dollar investment would yield $2,300 a year in dividends. And, that's a conservative model since i don't look at capital appreciation nor reinvested dividends. On a conservative basis, I'm yielding a large amount that can pay some serious bills after 30 years. That's the power of starting with a larger amount of money and going the dividend growth route.
Disclaimer: I'm not a licensed investment advisor, and today's video is just for entertainment and fun. This video is NOT investment advice. Please talk to your licensed investment advisor before making any financial decisions.