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How I Would Start Dividend Investing If I Had To Start Over Again

Step 1 - Answer the Following

 

 

  • How much can you comfortably invest every month without it affecting your lifestyle?

  • Your risk tolerance - are you conservative, moderate or do you like to take risks?

  • The end goal - are you trying to live off this income? Will you pass it down to your kids? Etc.

 

 

Once you know those three things, you’re ready to start investing. The mistake I made was I dove right into investing and forgot the above questions. That’s why I started trading penny stocks and lost a decent chunk of money doing so. I wanted a "get-rich-quick" scheme, not a "get-rich-for-sure" scheme. I didn’t want to wait for results, I wanted them right away. This hurt me in the beginning, but you won’t make the same mistake after reading this.

 

Write down the answers to the 3 questions above. These might change over time but make sure you have it in writing somewhere. Once you’ve done that, you’re ready to start investing.

 

Step 2 - Find a Broker

 

For Canadians, your best choices are:

 

 

  • Wealthsimple (my favorite)

  • Questrade (my second favorite)

  • Interactive Brokers 

  • Your bank's platform 

    • BMO InvestorLine

    • TD Direct Investing

    • CIBC Investors Edge

 

 

For Americans, your best choices are:

 

 

  • Robinhood

  • ETrade

  • Fidelity

  • EToro

  • TD Ameritrade

  • Charles Schwab

 

 

The important thing to remember when choosing a broker is that you want to minimize the amount of trading fees you pay, if at all. Many brokers offer zero-commission trading, so you can buy and sell as you please without it cutting into your profits.

 

Step 3 - Start Investing

 

Where do you start? You start with dividend ETFs. This is your foundation and will allow you to branch off into individual stocks. The reason you start with Dividend ETFs is because they’re easy. You don’t have to do individual stock analysis, in fact, you don’t have to do much analysis at all. 

 

The 3 things you have to figure out are:

 

 

  • What is the fund's management expense ratio (MER)?

  • What are the fund's top 10 holdings and how much of the fund do they make up?

  • What is the goal of the fund?

 

 

You can figure out these 3 with just a simple google search. For example, if I want to buy Vanguard’s Dividend Appreciation Index Fund ETF (VIG), here are the answers to the above questions:

 

 

  • MER: 0.06% (low) 

  • Top 10 holdings (see screenshot below)

  • To invest in stocks of companies that have a record of increasing dividends over time

 

 

 

 

Step 4 - Learn How to Analyze a Dividend Stock

 

The next thing I’d do is learn how to analyze individual dividend stocks. This is a skill that will serve you for the rest of your life. You know the saying, give a man a fish and he’ll eat for a day, but teach a man to fish and he’ll eat for a lifetime. If you want to learn how to fish, click here to get access to my beginner course on analyzing dividend stocks.

 

Step 5 - Focus on Share Accumulation and Reinvestment

 

This step is when you really start to see the power of compounding. I’d suggest building your dividend ETF positions first as a foundation for your entire dividend portfolio, then branching off into individual stocks. That way you can sleep well at night knowing the majority of your money is safe inside a fund.

 

Also, as a beginner investor, the goal is not to make quick money. The goal is to build good habits that will serve you for the rest of your investing journey. As they say, if you can’t manage $1,000 what makes you think you can manage $100,000? Start small and build your way up over time.

 

As your dividend income starts growing on itself every year, I promise you’ll become addicted to dividend investing and passive income. There’s nothing like earning money for doing zero work, but you have to start somewhere. And the earlier you start, the better off you’ll be. 

 

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Top Holdings of Vanguard's Dividend Appreciation Index Fund ETF
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