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  • How much stocks do you need to buy to make 1K a month

  • When you think of the stock market, the first thing that comes into mind is this complicated

  • world of the stock market.

  • With so many confusing charts, its easy to get lost.

  • But what everyone knows for sure is that you can buy stocks and sell them whenever their

  • rise but there is another way that professional investors use to make a fortune.

  • In 2018, warren Buffett received 3.8 billion dollars in cash from his 5 major investments.

  • Don't get me wrong, he didn't sell his shares to earn that much.

  • bUt instead, these 5 companies earned a ton of money during the year.

  • Since warren buffet is an investor in these companies, they had to share their profits

  • with Buffett.

  • That's called dividends.

  • Simply put it, there are two types of companies in the stock market, companies that have already

  • matured and have profitable and sustainable business models so whenever they make a profit,

  • they don't know what to do with that money, therefore they end up sending it to their

  • shareholders, on the other side you have companies who are still trying to turn a profit like

  • Tesla.

  • They might report a profit, but the company needs that money to grow further, so here

  • is a question we will try to answer in this video, how many stocks you have to buy or

  • how much you have to invest in the stock market so that you receive a thousand dollars from

  • your investments every month without selling your stocks?

  • But before we do that, we have to understand a few key concepts.

  • How dividends work?

  • What are the best dividend stocks?

  • And how to avoid the dividend trap that might lead you to lose your entire investment?

  • Dividends - The Real Passive Income Since the dot com bubble, the nature of investing

  • has changed.

  • Before that, investors' main concern was to invest in companies that would turn a profit

  • and share these profits with them since, as shareholders, they are entitled to the company's

  • profits.

  • But entrepreneurs such as Jeff Bezos stepped in and completely changed the game.

  • The goal was no longer to maximize profits but rather to grow the company even if that

  • means not paying a dime in dividends to shareholders.

  • A company that only burns cash and isn't profitable looks like a bad business, but the strategy

  • is to keep operating at a loss until you dominate the entire industry and then generate profit

  • since you will be the only player in the market.

  • And that's what Amazon did for the last 25 years.

  • Despite its 1.6 trillion dollar valuation, it never paid a dime in dividends to its shareholders.

  • In fact, it avoided taxes for 2 decades since it was reporting a loss.

  • In 2019, it turned 11.5 billion dollars in net income while its competitor Walmart generated

  • 15.2 billion dollars and paid 2.16 dollars in dividends per share, but at the end of

  • the day, Walmart was valued at 1/3 of an amazon.

  • Amazon might seem like a more promising stock in the future, but if you want passive income,

  • Walmart looks like a better option.

  • And the stock market is filled with such examples.

  • There are just a handful of tech companies that pay dividends.

  • The rest, especially the big ones, would rather re-invest what they earn instead of paying

  • you.

  • 2.

  • High Dividends -The Perfect Scam To Attract Investors

  • While stocks that pay high dividends are extremely seductive, they aren't always the best choice.

  • In fact, dividends sometimes are used to mislead investors and rip them off.

  • The company might be on the verge of bankruptcy, or it might be barely surviving.

  • Its stock is falling year after year, so one way to make it's stock attractive to investors

  • is by offering high dividends.

  • Take Universal corporation or UVV.

  • If you take a look at its dividend rate, you will see a ratio of 7.16 percent.

  • That is unimaginable high.

  • You probably won't find anything like that in the entire market.

  • Even the world's largest company, apple, pays around 2 percent in dividends.

  • But I personally would not buy this stock and wouldn't advise anyone else to do that.

  • The stock price was around 50 dollars 5 years ago, and you might imagine that it might have

  • grown slightly since then at least, but it didn't, the price fell to 43 dollars, and

  • the company does seem to have a future, so it pays high dividends to keep its stock attractive

  • to investors because who knows where else the stock price might be a few years from

  • now.

  • Compare that to apple that pays only 2 percent in dividends but the stock price rose by 337

  • percent in the same period.

  • Cashflow is great, but losing your principle is bad.

  • And the stock market is filled with such stocks.

  • So, don't choose to buy a stock solely because it has the highest dividend yield.

  • 3.

  • Best Dividend Stocks Ever

  • You might be wondering by now that are there any good companies that are both growing and

  • paying high enough dividends?

  • The answer is Yeah, there are!

  • Take Coca Cola, for example, the company exists since 1886, and it began paying dividend before

  • you probably were born, it has quite a good dividend rate of 3.2 percent.

  • Of course, the stock price hasn't been growing as some of the tech companies because many

  • believe that there aren't much left for coca-cola to grow, but it is definitely not going to

  • fall the next day.

  • The home depot is another example.

  • They have been paying a dividend yield of 2.5 percent consistently.

  • The stock price doubled in the last 5 years.

  • Johnson & Johnson has been around since 1886 and is regarded as the king of dividends.

  • It's a big name in the pharmaceutical industry.

  • It also plays a key role in developing the vaccine for the current pandemic.

  • Its stock price might just boom once the vaccine is ready.

  • The companies that don't usually pay dividends are tech companies since the idea behind it

  • is that, the company would be far better if it re-invests that money back and grows faster.

  • Companies such as Google, Facebook, and Tesla don't pay a dime in dividends, which is why

  • investors love Apple.

  • It's a tech company that both excels in hardware and software.

  • It has a built-in ecosystem that provides it with consistent cash flow.

  • Its stock price rises as much as other tech companies, but it also pays a dividend yield

  • of around 2 percent.

  • So let's try to answer the question.

  • 4.

  • How Much do you need to invest to make a thousand dollars a month?

  • Well, since dividend yields are different from one stock to another and we don't want

  • to invest in companies that don't seem to do great in the long run.

  • We will take into account companies that aren't only paying great dividends but also would

  • grow over time, such as apple, coca-cola, Johnson & Johnson, the home depot, and so

  • on.

  • It difficult to find an exact dividend yield since stock prices change every year, so does

  • dividend yields.

  • It also depends on the portfolio you build, but let's assume that you are going to get

  • 2.5 percent annually.

  • To receive a thousand dollar of passive income, you need to invest around 500 thousand dollars,

  • that will provide with 12500 dollars a year, or slightly higher than 1 thousand dollars

  • a month.

  • And suppose you want to make enough from dividends to retire complete.

  • In that case, you need to invest at least 2 million dollars to make 50K dollars annually.

  • I guess you aren't impressed because investing half a million dollars in real estate, for

  • example, would provide you a much higher passive income than 12500.

  • And that's why investors are more concerned about the stock price than dividends.

  • Amazon might not have paid a dime in dividends, but its stock rose by 522 percent in the last

  • 5 years.

  • Amazon investors have earned much more than any dividend investors could possibly imagine.

  • Does that mean investing in dividend stocks is nonsense!

  • Not really!

  • If you have a big enough portfolio that's invested in wide variety of stocks, making

  • dividend stocks part of your portfolio is a good decision.

  • But you also have to consider that these stocks are growing as well so if you use these dividends

  • to buy more stocks of the company, you will end up with a pretty good investment.

  • The home depot's stock price increased by 26 percent last year and it paid around 2.5

  • percent in dividends, which makes it a pretty appealing investment.

  • On the other side, if you are just starting out with a small amount such as a few thousand

  • dollars, you can't afford to buy a property to rent it out, so starting with dividend

  • stocks might be an option to consider for some.

How much stocks do you need to buy to make 1K a month

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Passive Income - The EASIEST Way To Make $1000 A Month

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    Summer posted on 2020/10/08
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