Today we have a question from Grace. She doesn’t make much money and she prefers conservative investments. Should she invest in dividend stock? I gave it my best shot, but I’m sure she would appreciate your opinion as well. Let us know what you think.
(BTW, I’m on vacation in Cancun and I will be back next week.)
I’m a single parent and I bring home about $1800/month from my pharmacy tech job. I own a home outright in Hawaii and I rent it out with the help of a property manager since I currently live in WI. All the earnings that I get from that house goes into a savings account that I never touch unless I need to pay for property taxes, etc. There’s $19k in that account.
I’ve managed to save $43k in a totally different account of which I never touch because it’s my emergency fund for a year. You should know that I was able to save that much because I was receiving spousal support until recently. I’m currently applying for a better paying pharmacy tech job so that I will be able to support my children without having to touch the $43K unless it’s absolutely necessary.
I have annuities of which I think I understand, all I know is that it’s safe. But now I’m wondering if I should look into investing into dividend stocks. I’m not a wealthy person and not book smart and don’t want to be stupid and naive with my money. Do you have advice for me? Dumb it down if need be. Mahalo.
I think it’s a good idea to start investing in the stock market. The easiest way to start is to can set aside a small amount every month and invest. For example, if you can comfortably set aside $100 every month, then set up an automatic investment program and just keep doing it.
*My tutorial on How to Start Investing in Dividend Stocks.
The stock market will go up and down, but if you invest consistently, you should come out ahead in the long run (10+ years.) If you think you’ll need the money in 3-5 years, don’t invest it. The stock market is better for a long term investment.
Vanguard is probably your best choice for a brokerage. I believe you can invest without having to pay a transaction fee. Give them a call when you have a chance. They are a trustworthy firm.
As for what to invest in, one of these might work.
- VIG – Dividend appreciation ETF. This fund invests in stocks that have good record of increasing their dividend. The dividend should increase every year.
- VOO – S&P 500 index ETF. This fund invests in the S&P 500, that’s 500 of the largest companies in the US. This fund is good because it is diversified.
Lastly, the stock market is high right now and there is a good chance it will go down. You may lose money in the short term, but you need to keep investing consistently. Just keep buying and you will come out ahead. It took me a long time to learn this very important lesson.
*Grace indicated that she does not have a Roth IRA. This would be a good place to start investing because the withdrawal is somewhat flexible. She can take out the contribution without any penalty. The Roth IRA will also enable her to take the Saver’s Credit tax benefit. She can receive up to 50% tax credit back from her retirement contributions, $2,000 max per person. The amount of credit depends on your income.
Okay, what do you think? Do you have any advice for Grace? Is there any option for the annuities? The returns are so low.
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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