The Easiest Passive Income Strategy You Can Start 2020 - Dividend Investing

The easiest way to make passive income is investing in Dividend Stock ETFs. Lets dive into what they are and what that means.

► ROBINHOOD Invite Code (grab your other free stock): https://join.robinhood.com/nolanvd

Anyways, not everyone has the time or energy to devote to researching the market, keeping watch of individual stocks everyday, and keeping up with news and newsletters about what is going to affect your investments. That is why this video is going to be devoted to buying dividend stock indexes or ETFs. I can't say buy this one, because that would be illegal, but I can say, consider investing in these, SPHD, VYM.

SPHD is an exchange traded fund or ETF that tracks the top 50 least volatile companies out of the S&P 500. It also tracks the top 50 dividend paying stocks out of the top 75 top dividend paying stocks in the S&P 500. So let me break that down, right now it is worth only ….. Which of course will be different whenever you buy it. Now it takes that …. And spreads it out across all of the stocks that are included in the index. I know there are a lot of ETFs out there but SPHD tracks dividend paying companies and pays out dividends every single month. Meaning every month you will get passive income for as long as you own this stock.

VYM is Vangaurd’s high dividend Yield ETF. This Index selects high dividend paying US companies, excluding REITS, and weighs them by market cap. Its payout works like all other dividend paying ETFs and that is by passing on the dividend income that it collects from all of it’s holdings and giving them to you, the shareholder. Now VYM pays out dividends at the end of each quarter so that means every three month’s you will be getting a dividend payout from them.

One of the beautiful things about dividends is as you keep investing into dividend paying stocks or ETFs you can build up your passive income and reinvest those dividend payouts back into more stocks or ETFs that will begin to bring in more and more passive income over time. It is literally having your money make more money for you so you can invest that money to make even more money. It’s like planting a money tree and getting to plant the seeds that it grows to make more money trees.

What's even better is that not only when you invest in these ETFs do they give you passive income, but they also grow in value! The S%P 500 has had an average return of 9.8% from 1928 to 2016. Now yes, every year its rate of return has varied,sometimes it's up more and sometimes it even returns negative, but over the long term it has always continued to grow at a rate of about 9.8%. So as long as you hold your ETFs for the long term and Dollar Cost average or continue to invest on a regular basis no matter if the ETF is down in price or up in price, over the long term you are almost guaranteed to net positive returns unless there is complete economic collapse that would render everyone’s investments worthless at which point we would all end up using gold or crypto or something that is not the USD.

If you wanted to take this dividend passive income strategy even further. You could be frugal and invest all of your excess income after savings into dividend paying stocks or ETFs and build up a portfolio large enough for you to literally live off of the dividend payouts.

Let's do an example. If you had a portfolio that averaged a dividend yield of 4% every year and you had built up that portfolio to be, say $250,000. Every year you would be getting $10,000 a year in passive income just for owning stocks. So if you were able to live off of $20,000 a year you would need $500,000 invested in dividend stocks or ETFs that have an average dividend yield of 4%

Some of you might be worried about putting that much money on a brokerage. You might be wonderign what if Robinhood or whatever brokerage I use goes bankrupt? What happens to all of my stocks then. Well, that's where SIPC insurance comes into play.

Robinhood is SIPC insured up to 500k that is 250k in cash and 250k in your investment. That means your money will be returned to you in the situation where robinhood goes under. This is only if the brokerage goes out of business and not if your investment goes down to zero.

That is why you only want to invest in brokerages that are SIPC insured.