Saturday, June 16, 2012

Start a stock dividend portfolio with $3000


The important point in finance and in building a dividend protfolio is to DIVERSIFY all the unsystematic risk.
$3000 dollars is a decent amount to start a dividend portfolio but it is just an example, more you put into your portfolio, more you will get in dividends , and it can give you some extra money to enjoy as a passive income, although it is not gonna make you a millionaire within weeks.
Building a portfolio requires you to be serious about your stock picking and to manage and reallocate your money from times to times.
Another important point is that the money you will put in, must be some money that you don't need in the short term, so don't  invest your mortgage money!

Step 1: Open a brokerage account:
Try to look at the different brokers, compare what they charge for the trading fees, and make sure they allow you (small investor) to open an account under $10 000.
I would reccommend the broker : Etrade,  as it proposes  you to buy stocks all around the world in order to diversify efficiently.

Step 2: Buy 3 dividend growth stocks:
As you have only $3000 in your portfolio, just invest your money in few stocks, otherwise the trading fees will be too important, you can follow this rule : buy 1 stock per $1000 dollars, and once you will have $1000 you can invest in another stock.
How to choose your stocks:
-Diversify across sectors 
- Find stocks with constant dividend payouts across the years
- Well established company, avoid newly listed company

Step 3: Make an investment plan (Important point)
The more money you put the best it will be, you should set up an investment plan, where you will invest more money on a monthly basis, let's say you earn $2000 dollars, you can add each month $150 on your saving account in order to make it work. Start with a small amount that you know you can make, and make the transfer automatic so you will not spend it on unnecessary things, and once you have $1000 it is time to buy another stock on your brokerage account.

Step 4: Reinvest Dividend:
The Keyword here is Compounding, it would be a non-sense to spend the dividend you just earned on your stocks, once you get it, use the dividend to reinvest in stock, some companies even pay stock -dividends meaning that instead of getting cash they pay dividend by giving you new shares of the stock, that would be perfect for you!

Step 5 Every time you get $1000, buy new shares

Everytime you have $1000 available from your saving acccount or from dividends, use it ti diversify and buy new shares across industries to spread the risk.
Read financial news try to understand it, gather opinions from people who knows about investment and keep in mind than diversifying is gonna make your investment safer and reliable on the long term.

Step 6 Do not only buy stocks, it is sometimes necessary to sell non-performing stocks 
You should review your portfolio 2 to 3 times per year and sell stocks that are in declining industries, for that look at each of your stocks' company revenue growth, company profits, if some stocks are not paying dividends and are not planning to do so for the next few years, it is maybe time to sell it, remember that you want a dividend portfolio.

The more money you put, the more time you should take to study the stocks and and select your dividend growth stocks, keep in mind that profit is long term oriented, and dont pay attention to people telling you that they double their account in a month, this is not true!



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Looks like a good idea.. This information is very useful while invest in dividend paying stocks. Please do share some more information.

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