The Dividend Snowball: How Dividends Multiply Your Money
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- čas přidán 18. 03. 2024
- / dividendbull
The dividend snowball is one of the most fundamental principles you have to be aware of if you’re a dividend investor, or if you’re considering becoming a dividend investor. Understanding how your money can multiply exponentially as time goes on is the key to becoming a successful dividend investor, and thus, significantly wealthy. Because one reason why it’s important to clearly understand how the snowball effect works is because when you’re just starting out as a dividend or income investor, it can often be discouraging. The dividend snowball is the process of compounding your returns primarily through the reinvesting of your dividends. The whole reason it’s called the dividend snowball is because it’s very much like rolling an actual snowball. When you first form a ball of snow in your hands and begin rolling it, it starts off small. But the longer you roll it the larger it becomes, until the ball becomes large enough to build a snowman with. With dividend investing, the key to following the snowball method is by taking all of the dividends a stock or fund pays, and reinvesting them back into buying more shares of the same stock.
My dividend journey began when I realized that two particular expenses in my budget were always going to go up and never go down. The two expenses were taxes and insurance. I realized that the dramatic rise in both will need some added income. So, I started buying shares paying dividends. I can now see that this will be the path I need to take to make sure those two expenses will not overtake my future income.
As a beginner, educate yourself, Learn the basics of investing and the stock market. There are many resources available online, including books, articles, and online courses. It’s a good idea to diversify your portfolio across different stocks and sectors to minimize risk. I’ve heard of people accruing over $550k during recessions and inflation, its important to do your own research.
Yes, I've been in constant touch with a Financial Analyst for approximately 8 months. You know, these days it's really easy to buy into trending stocks, but the task is determining when to sell or keep. That's where my manager comes in, to help me with entry and exit points in the industries I'm engaged in. Can’t say I regret it, I’m 40% up in profits just in 5months with my initial capital of $160k
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’ Melissa Terri Swayne” for about five aiyears now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
Really where are investors putting their cash? Isn’t it crazy how mortgage rates continue to rise with higher imports and declining exports, but the FED is yet to lessen cost. Something will eventually break if they keep raising interest rates and quantitative tightening.
from my study, prices of great assets like real estate, dividend paying stocks, and gold never come down, so I buy what I can afford today. ideally, seeking financial advice in a crucial economy is necessary for everyone
I wholeheartedly concur; I'm 60 years old, just retired, and have about $1,250,000 in non-retirement assets. Compared to the whole value of my portfolio during the last three years, I have no debt and a very little amount of money in retirement accounts. To be completely honest, the information provided by invt-advisors can only be ignored but not neglected. Simply undertake research to choose a trustworthy one.
Impressive can you share more info?
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Colleen Rose Mccaffery” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Dividends are what got me into investing in the stock market. The thing to me is, if you invest and have other income outside of dividends then you will be able to live off dividends without selling. Which means you can pass that on to your kids which will give them a leg up in life. Have over $600K in my portfolio as I bought a lot of dividend stocks before, I'm buying more now, and I will buy more when it drops further
As a new investor it's always great to hear from a person who has gone through all the difficult times and come ahead of it. it's unnerving to see your portfolio go from green to red but as mentioned if you have invested in quality names just have to keep adding to them and stay the course.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances.
Amber Dawn Brummit is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..
Thank you for this tip. it was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé.
The thing to me is, if you invest and have other income outside of dividends then you will be able to live off dividends without selling. Which means you can pass that on to your kids which will give them a leg up in life. $52k dividends received in 2022.
With everything happening currently, this is some sort of good advice but then it can take a left turn when you go into something blindly, anything worth doing is worth doing diligently. Be sure to go in with the guidance of a qualified FA.
indeed and right now the markts are going berserk right now. this is the best time to watch them, get to know them better, and strike when the opportunity presents itself. i learned that from my mentor, “ Marisol Cordova” she's seen dozens of markt cycles over the past few decades, and she has a feel for how they move, why they move, and what comes next.
I’ve actually been looking into advisors lately, the news I’ve been seeing in the market hasn’t been so encouraging. who’s the person guiding you?
mostly, you can find her basic information online; you are welcome to do further study.
thank you for this Pointer. It was easy to find her handler Marisol cordova, She seems very proficient and flexible. I booked a call session with her.
I didn't discover dividend investing until my late 50s, when I had to manage my elderly father's account. Now I wish I could go back in time and tell my 25 year old self to invest $100/month and don't stop. I've opened a Fidelity account but 10 years pales next to what you can do in 30, 35 years.
Yeah, I’ve noticed how every year after 20 seems like an excruciating loss once we realize that time is more valuable than money.
in my country (Ger) you can only get stocks via reinvest, if the dividend surpasses the price of one Stock, otherwise you get cash...
5% annual growth for O is VERY generous
Based on?
Over what time frame?
Kind of need to elaborate.
@@mjs28s O has been underperforming for 5 years now. It’s a company that is very vulnerable to interests rates and is on commercial real estate something that has been struggling for a decade and will continue to struggle
Based on the fact that (O) Realty Income is NOT growing in share price.
If anything, it’s DROPPING. So a 5% growth in share price for this particular stock is incredibly generous.
Warren Buffett acquired the position in Coca-Cola for Berkshire Hathaway in 1988 for $1 billion and never bought more or sold the position. Today Coca-Cola now pays about $736 million in dividends to Berkshire Hathaway. Think about that.
Im okay with 1/10th of it ;)
What is your strategy for dividend investing?
1) r u hub in n out for dividend?
2) buy n hold for dividend?
3) at what price you exit after ex dividend?
In germany, DRIP is not possible... there is no broker or bank offering that. So I have to reinvest manually. Sucks, hope we get DRIP too some day. Then its realy "set and forget".
If I were going to do it that way, I'd let the cash accumulate then do all my buying at the end of October every year.
You know, the comparison between $KO and a double digit yielder isn’t fair. Because high yield stocks pay out 90% or more of earnings so a more fair comparison would be to collect $KO’s dividend and sell equivalent to 90% of their earnings (or cash flow) in total. Basically, it’s like reinvesting all your high yield dividends except 2% or whatever KO pays. A rule of thumb is to compare dividend yield + annual growth rate and whichever is higher is the better investment to live off of. Maybe this is harder to explain via comment…
A flaw with this calculator is that for the Dividend yield it assumes that the Dividend yield will remain constant with the share appreciation. Meaning say a stock is 100$ and the dividend yield is 5% and the stock appreciates to 110$ this calculator assumes that you will still be paid 5% of 110 but that’s not the case, because as shares appreciate the yield goes down unless the company raises their by the same amount
That’s why you need to look for dividend kings and aristocrats
We of course, mystery, but there are times when the price of a stock might be oversold / undervalued, which would mean the yield is higher and DRIP purchases more shares and then there are times when the price is pushed up / overvalued and the yield is lower.
Realty income, for example - the 5% yield is more than fair for the exercise here. You also could have bought O over 6% many a time or if you were buying during the financial crisis rather than hiding out like the FOMO investors do, you could have been picking Realty income up with an 11% yield at its peak and well over 5.6% for a nice 7 year period around the financial crash (a few years leading up to then during and a couple after). So I would say that 5.9% is fair for the example.
@@mjs28s Yes of course, but look what that calculator is doing when you increase the expected annual share price. Use a number e.g. 20%, which of course is ridiculous. Now the annual dividend income will rise dramatically because the calculator still assumes a 5.9% Dividend Yield. The way the calculator works is missleading.
This is absolutely crucial to understand and is the very reason why the increase in dividends in the example given was so big (almost twice the historical dividend growth).
In the last 30 years Realty Income went from $0.9 per year per share to $3.08 per year per share, a growth of 242%, while in the example given in the video this growth over 30 years was from $3.09 to $17.00, a growth of 420%.
The stock appreciated by about 500% in this time, meaning the expected dividend yield percentage went down in those 30 years (from 10.77% in 1994 to 5.9% in 2024). If this trend would continue you would not get anywhere near the stated numbers in the example in 30 years.
In addition, the impact of taxes on dividend compounding is in one word ENORMOUS, and must be taken into consideration to have an example that is at all representative.
You have been a great resource for helping me find companies to invest in but also to start building my dividend portfolio to provide sustainable income into the future. Seriously, I really appreciate the work that you're doing
I love that you posted some stocks in the energy sector recently, please if you can make videos on more decent companies offering dividends outside the financial/Reit sector that are north of 5 % , that would be sweet. Consumer staples and transportation are rough to find either A high yielding non struggling companies or consistency through all market types as far as transportation goes.
One topic that people often don't mention in dividend investing is that as the price goes up over time, it also goes down in peaks and valleys. So when it goes down, your drips have a higher yield and thus buy more shares with the money. When the price returns to the peaks, you now have more shares than you would have if the price went up at a linear rate. Therefore each roll of the snowball picks up more.
Get out of the debt snowball first and then create the dividend snowball :)
What is the website used in dividend calculator?
It’s in the video.
Good video, that's why I like dividend investing.
Enjoy these video's on what the smart money is buying. If you run out of smart money investors, another option would be to look at top holdings from successful ETF's. And if that doesn't appeal to you, there is always; you can look at the not-so smart money. My top five holdings are O, ABBV, KO, PG and PEP. :)
Great video, thanks for posting it.
I think, for young investors, who are putting money away in investments and don't need them anytime soon, growth snowball is more effective than dividend snowball.
I know you've done something like this before in your older videos but I would really like side by side clear comparison between dividend income investing versus growth stocks with taxes in mind in a taxable account. Back test with pros and cons.
Doing that would show why this method of investing isn’t for everyone
No need for him to do that, actually. One quick look at dividend focused but good ETFs like SCHD, DGRO or VYM versus growth ETFs like VGT, QQQ or SCHG for long term performance will tell anybody which is better 😀
@@rssharma9and which is it, in your opinion? I’ve been questioning
@@furtsmagee1513 very true. Total return is often sacrificed when an individual opts for dividend income versus the total returns offered by the entire stock market.
You can look at a graph (chart) of
VOO vs VYM
VOO vs VIG
Using portfoliovisualizer or Morningstar
10,000 invested (from Jan 2013 to Dec 2023)
VOO $41,087
VIG $35,633
VYM $31,895
using the backtest portfolio feature of portfoliovisualizer.
With Morningstar it shows 10 year growth (March 2014 to March 2024) of $10,000 invested as
VOO $33,803
VIG $29,298
VYM $25,985
Third option I use is google finance charts which allows a comparison of up to 6 stocks or ETF. I used Vanguard ETF but you could do the same thing with iShares Fidelity, Charles Schwab or StateStreet product.
Best wishes
Money makes money
Nice basic video for dividend investing motivaion.
I invested in Realty income half a year ago, very happy with the investment, but I didn´t get the dividend in march.
I´m very confused.
Greetings from Germany
That's strange. Contact your brokerage.
Meine Realty Dividende ist heute (20.03.) gekommen, obwohl sie am 15.03. angekündigt war. Trade Republic. Aber Hauptsache, sie ist da :D
@@bobaquatics6776 danke dann bin ich beruhigt.
Aber leider lässt meine immernoch auf sich warten.
Great video
What app for dividend tracking was shown?
Watch the video
I use DivTracker app. Pretty good
track your dividends and to-ranks
sorry that was tip ranks
It’s a marathon not a short track race
Thanks for sharing such a brilliant information
How can be that Buffet hold div. Stocks with div. less than inflation lvl.?are retailers cant efford this?
Cause he reinvests it back in the stock for capital gains to go with it that will beat inflation over time.
@@letsinvestigateit do the math...don't believe in ...inflation always more than dividend... And gains not wors much if u get it only after sell
@@letsinvestigateit don't tell aksiomes... Show me the math! Comperation?!
Once I get through this rough patch I'm fixing to get into dividends too. 👍🏼
I wish more people understood this.
I think it might not always be the best to reinvest dividends to exactly the stock they came from. The share price at one point might be too high to get a meaningful yield out of it. That's why I redecide monthly into what stock the payments go into. I usually look out for undervalued positions, but not exclusively.
Same here I reinvest manually I would prefer to buy more into a position that is down as it brings the cost avg down or to get another div stock that is at a good value to diversify a bit trying to have about 5 to 7 div paying stocks overall and 1 to 2 growth.
Curious, with alot of my investments that pay Div's at close to all time highs, why automatically reinvest the Div's? I shut off the auto reinvest and save the Div's for when the stock or etf has a bad day (dip), then use the Div's to buy more at a cheaper price. Yes I understand this would work well for a passive investor, but do any active traders really auto reinvest in this situation? Still new to this but always learning. If I'm missing something, let me know. Thanks for the Vid!
Unless your holding onto 3,000$+ to buy dips, It's not going to beat cost averaging. Your wasting time you could be using in a side hustle, to make more and invest more. I make 65/hr as a part time handy man, But that's after I clock out of my 25/hr. apartment maintenance job.
If you know when a stock or etf is going to have a bad day, start a YT channel and let us all know so we can all win together. Time in the market > timing the market. Would be nice to sit on a decent chunk of change in case a plandemic level event happens, though. I wish I had like $50k to drop at that time, but I didn't even know how any of this worked then.
@@HardTyberZann Yes I keep plenty of dry powder in the Keg for down days.
@@GrandPrix46 If I had a crystal ball I would! But I just have to wait for the down days. Never know when they will happen.
I agree I dont do the drip. I purchase on a sale and or mix and match the dividends to multiple other stocks. Funny thing is my average on most of my stocks and etf go down but my dividends go up go figure
Taxes are surprising me at the end of every year
One thing I wish I had done was not diversify so quickly, but use the step ladder approach. Get one investment to say 4-6 shares with every dividend before starting the next investment.
Did you mean multiplies instead of Multiples ?
Dividends are great until the stock drops so much it eats up all the dividend gains!
That’s why you only buy GROWING dividend stocks, not the dying ones.
If you're invested in quality companies, share price drop just means your dividends buy even more shares and the snowball grows faster. The sp will recover if the stock isn't garbage.
Thanks for the informative video..... I think BTC and ETH are more likely to retest resistance up and then move down. But as always, the situation changes every day and all we can do is trade responsibly, monitor the markets and re-evaluate our strategies often. I want to thank you John Preston for being my source of crypto education as I comfortably earn 15.7 BTC......
Please how do I go about it, am still a newbie on investment trading and how can I make profit?🙏
HE’S MOSTLY ON TELEGRAMS APPS WITH THE BELOW NAME.
@johnPtrader ⭐⭐⭐
Thanks for the information... I will contact him as soon as possible. I also want to gain good knowledge and stop losing..☺🙏👍
What impresses me most about John is how well He explains basic concept of winning before actually letting you use his trade signals. This goes a long way to ensure winning trades......👍👍
Reach out to Warren Buffet, DB. See if he'll donate $1 million to each of your subscribers' dividend portfolios. If he's gonna make $6 billion in the next year in dividends, this would be a drop in the bucket for him, but life changing for us.
I would be happy if i had 500 k at a start
If you start with 0 $ it s long way …
It is worth noting, that over a 30 year period. Simply owning a growth fund would be a better idea. Using something like the 4 to 5% rule, you will achieve your desired level of income, faster, and reach financial independence sooner.
Of course, the market could perform differently in the future, but after over 100 years, there is no reason to believe that it will.
As far as raising your portfolio balance, I'll grant that. However, you must then sell your holdings in order to pay yourself.
Or are you insinuating that you liquidate your growth funds upon retirement and 'then' acquire dividend paying holdings?
@@danarchism-dissident you could really do either, but the data clearly shows selling shares as needed is the better way to go from a total return standpoint, especially after considering the higher taxes and fees associated with high income holdings.
High quality growth companies have been more volatile, but the stronger upside performance has more than made up for selling a small percentage in a down market to produce income.
Do your own back testing. The results speak pretty loudly for themselves. I like a combo of pure growth and low yield dividend growth. QGRW/DGRW or VGT/DGRO, for example. And I keep 10% or so in cash equivalents and alternatives to smooth the ride, cover emergencies and jump on real estate opportunities. SGOV, SVOL, etc for that bucket. I also overwrite my portfolio at 10-15% with tactical options plays for an additional 1-2% overall yield. The extra income buys more of whichever fund is out of balance from an allocation standpoint. Or gets spent on lifestyle purchases.
This strategy along with my rental real estate portfolio has done very well for me over the years. We hit FI a long time ago and don’t plan on changing this strategy anytime soon.
How’s your ACRE snowball going?
Dont waste your money on anything below 3% rate.😂 You put soo much money into it you would never get back. Same with the bank CDs they love 4% nowadays, until people stopped using it.😂 why is it not 18-28% like the credit cards? MFs waste your time, and effort giving them your earnings. Play hard to get, get a higher rate anyway. The company's play it hard for their money. Why shouldn't you.😊
first :3
Sad indeed.
5:00 Wait, a 5% share price “growth rate”? Uhm. Realty Income (O) is not growing, period. It’s LOSING share price. And it’s done so for years.
And yet it is up 30% in the last 10 years.
It's been going to down, only fairly recently.
@@sebastianlucas704While that is true, who cares? You should be in it for the long term.
@@golfprocory That's what I mean. In the long run, it should go up.
@@golfprocory ...And DROPED 25% in the last 5 years. It's dropping since 2019. I hold "O" too and not selling, but I accepted it's growth has peaked and only declining for now on. So a 5% growth rate annually is not likely.
How many times are these same AI videos going to be re-posted, same warren buffet quote, same verbage on dividend snowball, same statements on investing earlier, lol. The video says the same thing twice in the first 4 minutes. 5:29 stating Realty Income would have a 5% share growth rate is ludicrous, after 10 years a 50% share price increase, from currently 50+ to 75.. not a chance. A 20 year increase to $100+, just stop.
So why do you keep watching?
This is the guys voice it’s not AI. He even did a video explaining it.
Overall, 51% of traders think this year would favor stocks, mutual funds, and other equity-based investments, despite Treasury yields and other safer cash-like investments paying big. I’m looking for opportunities in the market that could fetch me $1m ahead of retirement by 2025
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions. Alternatively speaking to a certified market strategist can help with pointers on equities to acquire
True. Having the right financial planner is invaluable. My portfolio is well-matched for every season of the market and recently hit 90% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, though this could take till Q3 2024.
I’ve been down a ton, I’m only holding on so I can recoup, I really need help, who is this investment-adviser that guides you
'Heather Lee Larioni' is the licensed coach I use. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.