It is easy to set goals and plan how you want to build your dividend income portfolio. For example, I have set a goal for this year to invest $6,000 of new money into buying quality dividend paying stocks. I also would like to add two new stocks to my portfolio and continue to build positions in existing holdings. An investment like this should generate over $200 in additional annual dividend income.
Automated Investment Plans
Setting up automated investment plans to buy stocks can be a great way to fund your dividend portfolio. Investors who sign up for an AIP can have funds deducted from a checking or savings account once a month, which is used to purchase fractional shares of stock. These plans eliminate a lot of the hassle of investing and often help to reduce the commissions and fees charged by brokers.
I currently use automated investment plans to buy two of my holdings that are also members of the dividend aristocrat index. Starting this month, I will have $100 deducted from my checking account to purchase shares of Clorox (CLX). Another $100 will be deducted each month from my checking account to purchase shares of Cincinnati Financial (CINF). Both of these plans were opened up through the respective company’s direct stock purchase plan.
My Total Annual Funding from AIP’s – $2,400
Automated investment plans can be a great tool for investors looking to fund their portfolio. However, remember that they are useless if you don’t have the savings to invest.
Note – Based on high commission costs, I have recently terminated my LOW automated investment plan through my ING ShareBuilder account.
High Yield Investments (other than stocks)
If you are on a fixed budget, there are probably few places you can look to find extra cash to invest. Instead of focusing on your monthly check coming in, look at other high yield investments you may own other than stocks. With interest rates at such low levels, it may not be beneficial to keep your money in accounts like certificates of deposit and savings accounts.
If you are not ready to pull your money out of a no-risk investment like a CD to buy dividend stocks, what about using the interest to invest? My wife and I have a nice emergency fund built up in a variety of CD ladders earning decent interest. Instead of pulling all of our money out of these accounts, we plan on reinvesting the interest back into the stock market instead.
My Total Annual High Yield Investments – $1,000
Our CD ladders were built several years ago when interest rates were a bit higher so they still earn a decent return on investment. However, all of the interest earned from these investments is earning well under 1%. Instead of earning a lousy return on this money, we plan to invest these funds into dividend stocks.
Obsolete Checking, Savings, or Investment Accounts
If you are like me, you have probably been tempted at some point to open a checking or savings account to get a great offer. There always seems to be an offer from a bank giving you money to open a new account with them. I have been guilty of jumping at these opportunities in the past, resulting in several obsolete accounts with small amounts of money.
Guess What? These small accounts can actually add up. Instead of letting these accounts sit inactive earning no interest, why not combine the money and invest it into dividend stocks.
One example of money I personally forgot about for the last couple of years is my Prosper Lending. I use to invest money into peer to peer loans, which had its ups and downs. The state in which I live no longer allows me to lend any new money, so I have had $329.49 is cash just sitting in this account for years. I plan to withdraw these funds, close the account, and put it to use elsewhere.
I also recently found $350.17 in cash just sitting in one of my old brokerage accounts. This money has been sitting there for a while, earning very little interest. I plan to pull this money out and consolidate it with my other new investment dollars.
Have any accounts that you forgot about? I suggest going to check them to see if you have extra cash you can put to good use. I found almost $700 just from looking at two accounts and have a few more to check!
My Total Annual High Yield Investments – $679.66+
Before you think about closing any kind of account, make sure you understand the impacts it may have on your credit score.
Do you have credit card bills you are working to pay off? What about that vehicle you have working so hard to pay off? Eliminating a recurring debt can be a huge help when it comes to funding your stock investments.
For example, let’s assume you have been paying $400 per month for your car. As soon as it is paid off, that money can be used to invest in the market. Now that you have eliminated debt, use the extra cash to buy assets that can work for you instead of against.
My family has paid off most of our debt, except for our mortgage. We do however have an monthly expense that will be eliminated starting this June. Our son will be finished with pre-school this spring, which is costing us $150.00 per month. Instead of using that money for something else, we will immediately use that money to help fund our portfolio.
My Total Annual High Yield Investments – $1,050.00
Reduce Monthly Bills
Are you planning to cut back your cable this year? Thinking of dropping your cell phone plan to save money? Unless you absolutely need the cash, why not use this extra savings towards buying stocks? Instead of using the extra money on another expense, try using it to buy assets in the form of dividend stocks.
My wife and I are in the process of changing our cable, internet, and phone service at our home. The end result is a $25.33 monthly savings from switching providers, which will start next month. The end result is 11 months’ worth of savings, which we plan to use to help fund our dividend portfolio.
My Total Annual High Yield Investments – $278.63
Are you getting back any tax return this year? This lump sum of money can provide a great opportunity to start investing in stocks. Even a couple thousand dollars can jump-start your portfolio and provide the momentum to continue to build a dividend income portfolio.
My wife and I generally get back a couple thousand dollars on our income taxes each year. We generally use this money to help fund our children’s college savings accounts, so we won’t be using any of our return to fund our investments. However, those starting out may want to consider this option.
My Total Annual High Yield Investments – $0.00
Funding Our Dividend Income Portfolio
I set a goal this year to invest $6,000 in new money to our dividend portfolio of stocks. Instead of purchasing more liabilities with it (i.e. debt) or letting it sit earning very little return on investment, we are using it to purchase assets. These assets (stocks) will pay us back in the form of dividends, which will be reinvested which will generate more and more income.
After spending about 2 hours of my time, I was able to find $5,408.29 in cash we can use to fund our portfolio. This will account for 90% of the new money we plan to invest which gives us a head start on our goal for this year. I should be able to find the remaining funds if I spend a little more time researching our finances.
How do you plan to fund your portfolio this year? What other suggestions can you provide?