Earning passive income allows you to earn a little extra, regardless of how you utilize that amount. The extra income puts you on a path to achieve your long-term financial goals. While you could use dividends for any purpose, reinvesting dividends helps in growing your future earnings.
What is a Monthly Dividend Portfolio?
A monthly dividend portfolio of carefully curated selected stocks, mutual funds, and other predictable investments that pay dividends. Once you begin curating your investments, you should look back to check when will you start receiving the dividends each month of the year.
Some people might feel creating a monthly dividend portfolio is risky and might not fit in with your financial goals, so when you are selecting stocks and investments, you need to remember that no dividend is 100% guaranteed to pay based on its past history, especially when there is a high probability of the payment pattern to continue in the future.
5 Steps to Make $500 a Month in Dividends
Here are a few steps you need to follow in order to yield dividends from your investments.
1# Open a Brokerage Account
If you do not have a brokerage account already, firstly you need to open one. Make sure you check the trade commission fees and minimum requirements in order to be eligible for the brokerage company. The trade commissions might be as small as $0 per trade. Shifting to $0 trade commissions allows you to build your dividend portfolio even with smaller purchases without any kind of fees.
You strategy before opening the account should focus on either opening up a regular brokerage account or a tax-deferred retirement account. Last, you need to understand how to deposit money into your new account directly and how to setup a transfer.
If you do not wish to send direct funds from your transfer account or checking account, you can add cash to your portfolio just by transferring cash into your new account as soon as it opens. Then figure out the amount you will invest every month into the account.
2# Determine Savings & Investments Each Month
If you wish to get dividends of at least $500, you need to invest approximately $200,000 in dividend stocks. The exact amount to invest can only be determined after you buy the dividend stocks for your portfolio. If you wish to make at least $500 a month, you need to regularly invest in your portfolio.
The investible amount per month will determine how long it will take you to reach your goal. On a set budget, you can begin investing a small amount and next you need to take a closer look at your budget in order to reduce your expenses so you can use that money for investment purposes later.
3# Set Up Direct Deposit
You need to update your paycheck instructions by getting all the information on direct deposit by your brokerage account. Your employer might split your paycheck a few different ways in order to receive money into your regular checking account.
In case you run out of paycheck instructions or if your brokerage company does not have clear direct deposit instructions, you are free to set up account transfer instruction withing your brokerage account. Always keep a reminder on your phone or calendar of each payday to manually transfer the money you wish to invest. Always keep a backup plan.
4# Stock Selection As Per Dividend Strategy
Selecting stocks is a personal decision and requires a lot of research into every company you wish to invest in. Creating a dividend portfolio requires you to consider several points, such as:
- Company’s health
- Period of time they have been paying a dividend along with their payment increase history
- Earnings that are covering dividend payments
- Company’s industry
The company’s earnings and health will determine the safety of your future dividend payments. You need to perform proper research and read commentary in order to make decision about which stocks to buy. The dividend history and payment increase trends gives you an idea about the company’s payout and the stocks help in reaching your dividend goals.
Knowing about the industry in which you decide to invest your money helps you in creating a balanced and diverse portfolio. Do not put all the eggs in one basket as it spreads the risk of your future dividend earnings by diversifying the companies you wish to buy stock in.
In order to earn dividends monthly, you need to focus on companies with payout schedules as it also adds to your decision-making process. Also, create a watchlist of the companies you think you will want to invest in so when you have cash to invest, you can start buying stocks to grow your dividend income.
5# Buy Shares of Dividend Stocks
Finally, in order to reach your monthly dividend goal, you should start buying shares of stock in the companies you wish to focus on. With direct deposit from each paycheck, you will have cash ready and waiting when its time to make a purchase.
After buying your shares, double check your watchlist to evaluate the best value for that moment. It is not about timing the market, but you have to be sure that your decision of buying stocks is efficient.
As most of brokerage companies have reduced their trade commissions to $0, it enables you to buy stock in smaller numbers of shares without fees on your investment value. Keeping a check on your watchlist helps you to avoid research and decision fatigue. If you wish to purchase shares in blue-chip stocks, you need to keep a check on your calendar to see if you qualify for the next dividend payment or not.
What are waiting for? Follow these 5 effective steps to reap guaranteed $500 dividends every month, just by building your dividend portfolio. Let us know if these steps helped you earn some extra bucks every month!