As you all know, I am working to build up a large amount of passive income. My plan is that with enough time and dedication, I can replace my low day-job income. This would enable me to stop working, focus on building up other passive or semi-passive streams of income and enjoy life much more without having to be stressed. The main reasons that I think I can accomplish this is that I am not looking to get rich and I’ve had some success already. I don’t need a lot of money to survive.
Part of this has led me to think more and more about diversifying my passive investments. As you know, I have done well with buying blogs. Yet, I have been moving towards starting investing in dividend stocks while I save up money for my first real estate property. Doing so would undoubtedly extend the wait to buy the first rental property unless it generated a lot of cash immediately.
The Benefits of Dividend Investing
Investing in dividend stocks, or other investment tools, would not by any means generate this necessary cash flow right away. In fact, many of the advocates of dividend investing are so because it is a long-term means to an end. By investing in dividend stocks, someone is able to slowly supplement their income with the money from quarterly or yearly dividends. I recently heard a friend who was telling me that he was generating about $25 from dividends each with only $9,000 invested. This may not sound like a lot, but slowly this will increase without having to do anything. More importantly, he also has the value of the stocks, which will most likely increase over time. Not bad. Imagine what it would be like to have $300 or $1,000 in EXTRA cash just from dividend investments. Now we’re talking!
Why I Wont Invest in Dividend Stocks Anytime Soon
You would think that given the potential earnings that someone can slowly accrue, I would jump into investing in dividend stocks right away, right? Not only would it slowly build up another passive income stream, but it would give me something else to write about on this blog. (It’s part of the reason, I am convinced, that PF bloggers start doing P2P lending). As I’ve talked about before, though, the return rate on online real estate is high. It’s not only better than physical real estate, but better than dividends.
A blogging friend of mine, Mike from The Financial Blogger, has also talked about why blogs make better returns than dividends. He and I disagree on some things, but this is not one of them. I actually wrote a guest post about this as well (before Mike – haha) on Money Reasons, giving a clear example how you can build up a blog from nothing and have a better investment than dividends.
As I have gained more experience in the past couple of months, I have realized that it is possible to approach it in several ways. I could follow Mike’s footsteps, grow my business with putting in the time, and see a great return. Or, I could take a relaxed approach, and still see a better return than dividends. Here’s a great example.
For the same $9,000 that I could buy dividend stocks with (which would generate $25 per month -ish), I could buy a new website. I imagine for that kind of price, I could find a site that was generating $200-$500 in adsense alone. It wouldn’t be easy to find a website at this price with that kind of revenue, but I think it’s possible. Even if it were already earning $300 per month, I could hire someone to write 1 post per week and manage commenting, etc for $200 per month. This would generate $100 per month of pure revenue while not requiring any work on my behalf. As you know, I prefer to invest a little bit of my time in order to keep more of the profit at this stage, but if I could constantly expand at this rate, I will probably do so.
If I can buy 2 websites a year with this model, I could have $200 per month in truly passive income in less than a year. This would take years to generate this kind of income. More importantly, this also doesn’t include other forms of advertising like affiliates or CPM ads. If I were to take a more aggressive approach to managing these sites, I imagine I could see some pretty amazing results.
Are you investing in dividend stocks? Are you missing great opportunities in the online world?