This is a continuation of my other article 'How I Invest in Stocks". I intended to write part 2 as I believe I need to add more contexts for others to understand how I invest.
How I Invest in Stocks Part 2:
For me, when comes to investment, the goal is always passive. For me, there's no point making hundreds, thousands, or millions if your money doesn't work for you.
True, for now, while we still at a young age, the pump and dump strategy seems better and logical. How about once we have grown older? I don't think we have the energy to look on the chart every day to pump and dump. After all, as you grow older; you won't be as strong to contain the emotional side as before and also as sharp to enter and exit on time.
Thus; my goal is simple: I want to be out of the rat race as soon as possible. I want financial freedom immediately. I want to have a continuation income constantly with less effort or without relying on a 9-5 job. How is that? dividend stocks.
I understand dividend stocks are slow but never underestimate the dividends given. Investing your capital of USD200K in a company's stock that provides a 10% dividend yield, you will be getting USD20K per year without putting in any effort. If you calculate, your expenses per year and they're equal to your dividend received- you're already out of the rat race. Meaning, you can quit your job.
Now, the dividend stocks I'm talking about are unlike those stocks such as Coca-Cola, Mcdonald's, etc. where;
- the stocks price are not meant for small investors as they are expensive to afford.
- they're already matured and no longer growing as before.
Hence, my kind of dividend stocks are companies' stock that is affordable, growing, and at the same time gives out dividends. This way I will have both growth and dividend at the same time. Is there such thing as that? there are, you just have to find them.
The reason I don't fancy just-growth stocks because to me, you are holding onto assets without any return or passive annually. You're simply holding them, hoping they will appreciate in value in years later, before you could taste the benefit (gains).
That means if the stocks take 5 years to appreciate, within that 5 years you earn nothing at all. Whereas for my kind of dividend stocks, even if they take 6-10 years to appreciate in value, I still able to enjoy the dividends/ passive gain.
To add on, why invest in growth stocks? especially when the underlying businesses are yet to prove to be profitable (means you're speculating, rather investing) and also, giving you only 50-100% gain for long months? whereas you could use that capital to invest in crypto where the assets are based on projects (another speculation) but give you more than 100% within weeks? Do you see the idea? I don't mean to condemn growth stocks (to one its own) but that's how I see it.
Thus; my strategy to earn passive is simple:
- I substitute just-growth stocks with crypto as my capital gain asset.
- the rest, I invest in my kind of dividend stocks that provide both growth and dividends.
If let's say you're not comfortable with substituting your entire growth stocks' capital to crypto; what I can suggest is that you split them into half so that way you can diversify them into both growth and crypto.
However, that's not the case. The real case is to start building your passives assets as soon as possible. That's the most important part.
So while you gain profits from your capital gain assets, ensure to take a portion of them to invest in dividend stocks. By the time you reach old age, your passive assets already set. Till then, you can decide to retire and spend time with your loved ones.
Again, passive is the goal.