Sunday, January 21, 2018

Why I Chose Dividend Growth Investing?

When I graduated from College in 2013 I didn't really know what I wanted to do in life. To be honest, I still really don't know what I want to do in life. I had a degree in computer information systems and I landed a job with a small IT consulting company. 

The job isn't terrible and it pays well, but I just can't see myself doing it until I'm 65. I think the idea of working until you are 65+ is ridiculous. Why should we spend so much of our life working? I would say a majority of people don't even like their jobs so this makes it even worse. 

When I came to this realization that I didn't want to work this job for another 40 years, I tried to find a way out. I quickly realized that there were no get rich quick schemes. I briefly tried my hand at penny stocks and quickly realized they are not a viable investment strategy. After losing some money on them I stumbled upon a dividend growth investing blog called "Dividend Mantra"

I knew what a dividend was and it all seemed nice, but I didn't realize the full power of dividend growth investing. I guess I didn't think it could really turn into a huge snowball and allow me to retire early. After seeing someone else do this and have so much success, I decided to give it a shot. 

I started trying to cut my expenses and invest as much as I can and as often as I can in dividend growth stocks. Fast forward four years and I'm looking to make over $4,000 in dividends this year. In only a short amount of time I've come to this number. Even if I don't invest another penny this number would continue to grow thanks to the dividend increases that the stocks issue year after year.

The things I really love about dividend growth stocks are the following:

1. They almost guarantee returns through the form of their dividend payments
2. They almost always increase their payments year over year (I've had 0 companies cut their dividend completely and only two or three decrease their dividend in the past 4 years)
3. You can decide if you want to reinvest that money into more stocks of the company or keep the money to pay bills or buy stock in another company
4. You minimize the potential loss through dividends. If a company goes bankrupt in 15 years you wouldn't have lost all your money. The dividend payments would offset the loss
5. You don't have to sell the principal in retirement. I always hear of the 4% withdrawal rule as a rule of thumb in retirement. Why do I need to sell any of my stock at all? If properly invested in dividend growth stocks I can just live on the dividend payments alone and never have to sell the stock. 
6. I don't really have to worry about how the overall market is doing. Most of these companies I own continued to pay dividends throughout the recession. As long as the company isn't going bankrupt and they are still paying dividends I don't really care about the price of the stock. You just have to ignore the short term noise and be confident in the stock you bought. 

I understand dividend growth investing may not be for everyone. It does require some patience. It is not a get rich quick scheme, but rather a strategy that will set you on a path to retirement much earlier than normal. Even if you could retire 10 years earlier wouldn't it be worth it?


Let me know what you guys think! I would love to talk more about why or why you didn't choose dividend growth investing! 

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