Keeping things simple

For humans, the world is full of problems and all of these problems require some kind of a solution. The good news is that we as a species already accumulated a vast range of knowledge about most of our every-day problems, and how to solve them.

The bad news is that humans are not only slow learners with inconsistent memory functions. We are also easy to be influenced by others, and unfortunately, these “others” don’t always have our best interests at heart.

Let’s take a look at the concept of investing. As I wrote in my to date most popular article “Nobody wants to get rich slowly“, investing in the stock market is a fairly easy and straightforward process. The modern tools that we have at our disposal, namely easy access to information via the internet, access to the stock market, and to the right products (like ETFs), can help everybody becoming a successful investor.

But of course, everything simple can also be made more complicated. The world of investors today is not only about buying and selling stocks and ETFs, but the financial industry has added countless additional products to the mix. From FOREX trading to CFDs, short-selling, and BitCoins. Things can get pretty complicated.

Keeping things simple

I invest in single stocks and in ETFs only. I don’t trade with foreign currencies, I don’t put bets on the futures market, I don’t purchase digital coins, and I don’t engage in short-selling. Am I losing some opportunities along the way? Possibly. Does it bother me? Not a bit.

I like to keep things simple, and investing per se is a simple process. I do my research and then I purchase shares of a company that I believe has a bright future ahead. If I can’t find enough information about a specific company or can’t focus on one, I will look for an ETF that might cover that specific market group, and I invest in that ETF. That’s it.

It’s pretty rare that I sell any stock unless it made me a significant profit. Even then, I won’t sell the whole position, but probably only some part to free up cash and to buy the next stock or ETF.

My target is to grow my portfolio and to build up my stream of passive income via dividends. Ultimately I want to retire with sufficient passive income to not care about any government money or support from others. I want to be financially free and independent, and I still have plenty of years ahead of me to get there. History taught us that investing in stocks is the single easiest, most reliable process to reach this target.

Impatience and greed

But of course, there are some obstacles along the way, and the biggest ones are our own emotions, namely the feelings of impatience and greed.

Most companies don’t grow overnight, and the perspective of waiting for 2, 3, 5, or even 10 years for a breakthrough and the ultimate success is not easy for everyone. It can feel tempting to try to speed up the process with some CFDs and bets on the future, to hedge against losses with some short-selling options, or to divert some funds into bitcoins with the hope for a quick boost to your net-value.

And yes, there definitely are opportunities that I might be missing out on. But for me, it’s just not worth the headache, mainly because the trading frame is too short and the risk-reward ratio is not appealing enough for me.

I don’t want to trade stocks daily or even weekly. I don’t want to be forced to follow every single news-flash to be able to quickly react in a fast-paced environment. And I don’t believe in every single new trend is being said to become the next Trillion-$ market. So why would I give myself all these troubles, especially while knowing well that the simple investor approach that I am following now is historically also the most reliable one?

There is also the fact that while most of all these other opportunities in the financial industry offer viable options to make profits, they often also offer the possibility to lose your hard-earned money even beyond the originally invested amount.

Last but not least I am also perfectly aware that the main reason for the financial industry to push and empower a fast-paced environment is because they earn more in commissions and trade fees if their customers are more active.

Do your thing, but keep it simple and keep your emotions in check

I am not saying that people shouldn’t try other investments or explore other potential opportunities in the financial market on their own. Everyone can find a different path to success, and some products and concepts will work better for some than for others.

But no matter what you plan to do, learn from others who walked that path successfully, try to keep things as simple as it gets, and keep your emotions in check.

What to do with your Christmas bonus?

I am sitting at Starbucks (SBUX) and listening to some old Christmas jingles. Yes, even the Starbucks in Thailand is playing American jingles as Christmas is drawing near.

For many hard-working employees out there, this time of the year is not only an opportunity to spend some days with friends, family and to eat more than we usually do. It’s also the time when many employers pay a Christmas bonus. And the big questions is: What to do with it?

I know Apple (AAPL) got the new iPhone out and the Camera is really great. Plenty of people seem to think so because it’s constantly sold out in all the shops around here. I pre-ordered my iPhone 11Pro and just got it a week ago. It is awesome. It is also very expensive. So the question is, should you really spend so much money, or is there a better way?

Buying without spending

Me buying the iPhone was not a spontaneous decision. I was using my iPhone 6s for almost 5 years now and it was simply time. However, I also didn’t pay for it in a lump sum.

I got it with a 1-year contract which reduced my purchasing price by around 6.000 THB, almost 180 Euros. Then I put it on my credit card to collect cash-back-points and turned the total amount into an installment plan for 6 months. It will now cost me roughly 150 Euros a month, 6 months long, at a 0,79% interest rate – and it will be covered entirely by the dividends from my investments which I receive monthly.

So in the end, I didn’t even touch any of my cash to get it, and I will enjoy the benefits of the phone hopefully for another 5 years.

As for the Christmas money, well, I don’t get any. There is no such thing in Thailand. However, IF I would work in a place where a Christmas bonus is a thing, I would have done exactly the same. And the Christmas money would go straight in my investment account.

Conscious spending

There are many ways how we can get great things without actually spending money on them. A little preparation, creativity, and thinking. That’s all it takes.

And if you don’t receive monthly dividends just yet, then, even more, you should start investing now. The sooner you can start receiving and/or increase your passive income, the more money you will have left to keep increasing your assets and preparing for a worry-free future.

Disclosure: I have shares of Apple.

3 Things you should know about FIRE

The dream of financial independence and early retirement has gained a lot of steam in recent months. But despite the popularity of the movement, there are some important points that need to be understood and which I would like to point out.

It’s easy – and it’s not

Frugal living, saving as much as possible, investing. The concept is simple and easy to understand, easy to copy. In theory. Putting in practice, there is a lot of sacrifice along the way and even after all the hard work, chances are that you won’t be living like a king, but will need to maintain a frugal mindset for the rest of your life.

Here is some overview on how to get started: Let’s say you purchase stocks or ETFs that will generate a yield of 5% annually after tax. You might do better. You might do worse. But from my investing experience so far it’s a pretty realistic expectation to have.

Let’s do the math then, which means that for every 1000 Euro invested, a 5% annual return will generate 50 Euros each year. Let’s put that in lines:

  • 1.000 Euros invested = 50 Euros / year
  • 10.000 Euros invested = 500 Euros / year
  • 100.000 Euros invested = 5.000 Euros / year
  • 200.000 Euros invested = 10.000 Euros / year
  • 500.000 Euros invested = 25.000 Euros / year
  • 1.000.000 Euros invested = 50.000 Euros / year

You can play around with the numbers, the %, and your saving targets, but I think this pretty much explains the whole challenge: You need to save and invest a lot to get to a point that you could seriously relax. And even if you get to the point that you have a Million Euros on your account, a return of 50.000 per year is hardly an amount to live on to consider oneself rich. Comfortable? Yes. Rich? No.

If your target is really to completely retire early, not only would you need to save up a lot, but you would also need to maintain a frugal and simple lifestyle to make sure your income and your wealth don’t get drained too early on. The last thing you would want is to turn 70 and see how others retire on their hard-earned social security while you start to worry about your funds and income. Because if you retire at 35 or 40 and didn’t pay much into the system, then it would be blatantly wrong to expect the system to cover for you later on.

Most who achieve FIRE keep working

Given the staggering amount of money required to really and fully retire early, most people don’t go all the way. Because it’s too hard and it takes a too long time. BUT what many do is to turn to their passions and their actual idea of looking for a purpose once they reach a point of feeling secure enough to do so without going broke.

Say you have saved and invested 200.000 Euros and receive a 5% annual return after tax, 10.000 Euros a year. That’s not enough to retire. But living in the right place, it may be enough to pay your rent. Having “shelter” secured, you might not feel the pressure anymore to chase for a high paying job that would be required to protect you and your family. You could choose another profession or challenge that may suit your personal goals much better, and even if you would bring only another 25.000 Euros a year back home, that could be already enough for a decent living with the good feeling of doing something that you actually really appreciate.

I am also not sure if the actual goal of a “real” retirement would fit with the character of any FIRE aspirant. Because to get to the point that you could actually retire on your savings and investments is really hard work. It requires dedication, patience, and real commitment. Something that you see mostly in career and goal-oriented personalities. Now they might not be always the corporate types, but considering how much work and effort they put into reaching their goal, it’s hard to imagine that they would be able to stay idle right after hitting their target. There are simply too many exciting and interesting things to do in the world to waste time on doing nothing.

It’s really about time and independence

In reality, investing and generating passive income, escaping the rat race… it’s a mind game. Because with every step along the way, with every additional income you create for yourself and with every day you get closer to become financially independent, you are reducing the burden on your shoulders. The burden and the responsibility to yourself, to your loved ones, to society.

Financial independence empowers you to make conscious and responsible decisions, without the seductive element of money attached to it. When you live frugally and have a minimalistic mindset, when you know that you have “enough” and don’t need to compromise your values, your convictions and your personal goals for profits and gains, then you can act true to yourself at all times.

You can also take the time to think things through. To consult with people who matter and you will have more opportunities to do “the right thing”, which more than often goes not well along with the profit and benefit-oriented thinking of many corporations and individuals out there.

I am not sure how many other people out there see it this way. For me, this should be the ultimate outcome. I intend to keep working until I die, but not in the traditional sense and not on other people’s terms. I don’t want to deal with CRAP any longer than necessary and this is why I follow the FIRE movement.

Having said all that one thing should also be very clear: Without those companies which are striving for profits, without all those people who prefer to have a regular working life and who actually appreciate going to an office every single day, FIRE wouldn’t be a thing at all. Otherwise, how would we expect a 5% annual return after tax on our investments?

4 Reasons not to invest – Having no money

A majority of people out there thinks that investing is not for everyone. A recent survey by Blackrock revealed some critical reasons across generations, and as for why people would postpone or even not consider to invest at all. My previous post was about the no. 1 topic from that list, the access to and understanding of financial information:

  1. Access to and understanding of information about investing
  2. Having not enough money to start investing
  3. Being too worried about one’s current financial situation (and thus being too busy to worry about the future)
  4. Being afraid of losing everything

When you look at the second and third point, they do appear to be connected with each other. And surely they are. So today we take a look at the point no. 2 & 3.

It takes money to make money

A popular phrase, but is it really true? As always, it depends. If you talk to entrepreneurs, they will most certainly say “no” to it. For entrepreneurs, all you need is a great idea, dedication and hard work to make money.

But this doesn’t sound like the right approach to me. The goal for me is to stop trading time for money. Hard work and dedication always require to do exactly just the opposite.

So when you talk to investors, it’s a different story. For investors, it’s all about having money and making it work for you. As Warren Buffett likes to say: “If you can’t figure out how to make money while you sleep, you will have to work until you die.”

In other words, you have to figure out a way how to make money without having to trade time for it. The professional term for this is “passive income”.

Investing is the king of passive income 

If you just type in Google the term “passive income”, the result might produce various topics for further research. The website “Good Financial Cents” has this list in petto:

  • Savings Account
  • High Dividend Stocks
  • Passive Real Estate
  • Betterment
  • CDs
  • Index Funds
  • Corporate Bonds
  • Lending Club
  • Rent Your Space
  • Start a Blog
  • Buy a Blog
  • Affiliatize a Blog
  • Online Course or Guide
  • Online Tasks
  • Online Rebates
  • Cashback Credit Cards
  • Sleep Studies
  • Advertise with Your Car
  • Rent Your Car
  • Rideshare Driving
  • Silent Partner
  • Buy a Business
  • Outsource Your Business

Feel free to visit the website for more details on each and every single point.

From all these opportunities, investing in dividend stocks is probably the most efficient one. This is for several reasons, the most important one being that it’s completely scalable without any extra effort. Of course you need money to get started, but that is it. The only thing you need to get and/or to increase your passive income is additional money. With every additional Penny invested in a dividend-paying company, you increase your annual income.

Now you might argue that you need to trade time for money to have those funds necessary for investment in the first place. And it is true. But from some point onwards, those dividends that come up every month, quarter or year, they can and will grow your account without you having to lift a finger. Dividends grow, get re-invested and compound. In the long-run, it’s the single least-effort-strategy to go with.

How much do you need?

The belief that you need a lot of money to get started is not wrong, but it is flawed. You can start with as little as 25 Euros a month. That’s less than 1 Euro a day. But of course, with such a small investment it would take a very long time to let it grow large enough to be able to retire on it. It’s not impossible, but it’s not something to rely on.

The more you invest, the more return your investment can create. So it is advisable to invest larger amounts and to keep that investment growing until you reach a critical mass that becomes basically self-sufficient. My target: Getting to 100.000 Euros.

100.000 Euros invested in high-yield dividend stocks, REITs and BDCs or even CEFs can create stable returns of 6% or higher – after-tax. That is equal to 6.000 Euros a year. 500 Euros a month. Once you get there, your stock-investment becomes basically entirely self-sufficient. Whether you put in an automated savings-plan or add/buy more stocks each month on your own. The money just keeps coming.

With the above mentioned yield on your investment, every 1000 Euros that you re-invest will add to your annual income another 60 Euros. Times 6, that’s additional 360 Euros a year or 30 Euros a month. So just after 1 year, your monthly return will already increase to 530 Euros on average. And it will keep growing at a higher pace after that, year on year, following dividend increases and the compounding effect.

And the best part is, that you won’t need to do anything for this to happen.

Not having money and being worried about the present

So back to the original point for people not investing because of not having enough money, or to be too worried about the present. I am certain that this is for many the case. But you have to overcome it and find ways to get started. Even if it starts with only 25 Euros a month.

I like to compare this kind of situation with education or training. For example: If you can’t read and write, and your family has no money, you might be forced to engage in low-skilled-labor jobs that will ensure your families survival. But, if you keep doing it without looking for ways to improve yourself, you will never get out of this circle.

If you, however, put in the effort to study and to learn new skills, even if it’s in the late hours after work every day, on weekends, public holidays, whenever you can squeeze out that extra hour, you will set yourself up to be able to take advantage of opportunities that may pop up in the future.

So yes, not having money and being worried is absolutely a valid reason. But success won’t come to those who don’t set themselves up to be ready for it. As Warren Buffett likes to say: “The harder I worked, the luckier I got.” Look where that got him.

If you had your own business…

…how would you run it?

Many people dream of being their own boss. Making their own decisions. Dedicating their available time solely to their purpose, their passion and to their own, full benefit. But is this indeed the reality for an entrepreneur?

Well, as it is with everything, it depends. It depends on the type of business you want to run, on the size, reach, and scale, on your product or service, on your dependency of suppliers or contracted partners, on your team (or the lack of it), and on a thousand other points that may play a role once you decide to do your own thing. Most and of all, it will depend on your perspective and your definition of freedom.

Rule of a thumb is that the more people get involved, the more things get complicated. Whether it’s business partners, suppliers, contractors, your own team or your customers. With every person, every character who comes into play, you are losing some part of your independence.

Running a successful business means to serve others

I think it was Tim Cook who said it last year in a speech or an interview. “A truly successful product or service can only be realized by serving others.” However, serving others means, to a certain extent, to put yourself in the backseat, to figure out what those other people need and want, and to try to deliver it to them.

The thing is though that once you have a business, everyone becomes your customer.  The people who work for you. The people who work with you. And the people who buy from you. Those who work for and with you are called “internal” customers. Those who purchase your product and/or service are “external” customers. And your job as an entrepreneur is to serve them all.

Does this sound like freedom? It certainly is a step forward. By freeing yourself from a boss or a corporate structure, you will have definitely more freedom to make decisions. But at the same time, you will probably discover, that it is not what you might have originally imagined as freedom.

You will have more power when it comes to your decisions and it might feel like freedom in the beginning, when your company is small and easy to overview. But as your business grows and expands, your responsibilities grow with it. And with every percentage of growth, the percentage of your freedom starts to diminish.

The best of both worlds

Reaching financial independence means to me to stop trading time for money. Of course, I still need to have income, but I just don’t want to have to work for it. Not because I am lazy. I am a workaholic. But, as a great quote from Warren Buffett says: “If you don’t learn how to earn money while you sleep, you will have to work until you die.” And I definitely don’t want to end up that way.

There are several ways how this quote can be interpreted, but a realistic perspective is probably to assume that over your lifetime, your focus should shift from working yourself, to let others work for you. When you purchase stocks of companies and become therefore to a tiny part an owner of the respective company, you are doing just that.

As an investor and company owner, you start earning money by reaping the rewards of having other people working for you. And while you have to share these earnings with all the other shareholders, you are free from almost any responsibility towards both, internal and external customers. It is a pretty smooth way of becoming your own boss.

There are risks – but regular jobs bear risks as well

This is not to say that you wouldn’t have any risk. As a company owner, even to a small part, you carry the risk of realizing a loss if the company fails. Also, since your shares represent most probably only a tiny part of the company, you have hardly any vote in steering the companies politics or to contribute in any other way to its success – or failure.

But the degree of your freedom gets truly maximized. And the more different companies you invest in, the more your freedom is being manifested. As you diversify your portfolio, you automatically increase your risk protection and risk tolerance. Even if one company fails, if you have 20 others to support you, then your worries will be still limited.

This will become even more obvious if you draw a direct comparison with having a full-time job. When you invest, you can spread your investments over several companies and thus create multiple sources of income. If you have one full-time job, you are completely dependent on this single source of income. What happens if you lose it?

Food for thought

This is some serious food for thought. People who don’t invest will find a thousand reasons to tell you why investing is not something that regular people do. And they are right about that last part of that sentence. Especially in Europe, the amount of investors is surprisingly little compared to common folks who rely on their day-to-day jobs.

But those are the folks who get sleepless nights whenever companies start to talk about efficiencies, streamlining of processes, outsourcing, and globalization. Technological disruptions don’t excite them, because every disruption may put their livelihood in jeopardy. These are the people who constantly worry, and even more so as they get older.

And you can’t blame them, because these are the people who can’t come up with 500 Euros in cash even if any serious emergency appears in their life. I am not saying this to look down on anyone. I am saying this because people who never learned about how to handle money tend to end up in serious hardships. Despite having worked for 30 or 40 years, many fear that their retirement money won’t be enough to cover their rent and fill their fridge once they (have to) retire. We are not talking small numbers here. Surveys in Europe and the US show that the majority of our populations fall into this category.

This is in stark contrast to those who learned and understood that either having your own company or being a shareholder of another company, can significantly increase your chances for a worry-free retirement. There are no guarantees, but your chances are simply higher.

When it comes to human lives, things can easily and quickly get emotional. Investors, however, take the emotion out of the equation and simply calculate chances. Winning the lottery is not a valid form of retirement planning. Investing is. so when you get your next paycheck, put some part of it aside and start investing. Every single investment that you will do will put you a step closer to be a worry-free individual in the future.

When is the best time to retire?

If you are just about to enter (or new to) the workforce, thinking about retirement seems very far off. Not that it’s not somewhere in your head, it just seems very, very far away. But even if you already worked for a few years, you might still not be spending much time thinking about your future as a retiree.

When we are young, in school or university, nobody is really teaching us about retirement, about financial security. About the limited time that we have to prepare. And for sure, while your HR department might tell you about your options for provident fund support, they for sure won’t teach you how to prepare yourself financially in the best possible manner. It is even more sure that they won’t plant any ideas of early retirement in your head.

There are many reasons why this is a huge, missed opportunity. I would even argue that this hinders humanity on moving a giant step forward. It is a waste of resources, creativity and human potential on a scale that is impossible to estimate. Let me explain.

Asking the right question

So to start off, thinking about retirement, in general, is something that everyone should do. However, I would argue that instead of asking yourself the question about when and how to retire, it makes a lot of more sense to be asking another question: “When do you want to be financially independent?”

The idea of retirement is a very frustrating, de-motivational and overall just a negative thought structure, which clearly explains why we just don’t want to think about it unless we are forced to. Retirement is by most being perceived as one of the last check-points in your life. When, after working for 30 or 40 years, you reach that point in your life when either your body, your mind, or your countries legal structure forces you out of the workforce. Some, who thrived in their profession, might consider it a point when they draw a line to say “we had a good run, but it’s enough”. Some want to retire. Some don’t. But no matter where and in what state of mind you will find yourself, the core of every retirement is financial independence.

So if it all comes down to being financially independent, wouldn’t it make sense to reach this goal as soon as possible?

The benefits of aiming for financial independence instead of retirement

Thinking about financial independence instead of retirement changes the whole perspective, and takes out the negativity out of the equation.

For one, it doesn’t mark any specific point in your life in terms of not referring to you as being old, sick, or in any way considered to be useless by society. Because let’s face it, that is what happens at a certain age. Taking out all these negative thoughts that creep into our heads as soon as we think about the “golden age”, is turning the whole thought process around.

Secondly, financial independence can be a very motivating and encouraging tool that helps us not only to think about the last stage of our life, but that can greatly support us from a much earlier point on.

This is due to the fact that for many of us, challenges in relation to age start to show their ugly face very early on. Ask anyone who got laid off or who would like to pursue a career change and happens to be 45-50 years old. Finding a new job, a new venture at this age can be a very frustrating experience. You might suddenly realize that there are millions of younger, faster and smarter people out there who compete for the same positions. And like it or not, while you might have vast experience, your age will more than often be considered a hindrance rather than a benefit.

Being financially independent as early as possible will give you peace of mind. Knowing that you don’t need to worry about shelter, about food for you and your family and about medical support if needed, will give you the security and the opportunity to navigate through any hardship.

It will also give you opportunities to persevere in your quest for changes in your life. And, it will give you the self-confidence and advantage that you will need to outplay your younger competition.

Doing something else entirely

I hope to reach financial independence in a few years. In fact, I hope my current job to be my last, full-time-corporate assignment. I am 39 years old, the target is to be fully independent by 45, although I might stop working full-time earlier, let’s say at 42 or 43. The financial independence that I can reach by then will enable me to turn to some completely new ventures – and adventures.

I would like to pursue some opportunities that seem hard to reach for the moment. Like working for an NGO or a foundation and help to solve some problems in an area or field that require attention.

I would love to do some voluntary work in Africa or South America. I would definitely be interested in developing some startup companies that can help to shift some peoples lives in a better direction. I would also love to add a few more skills to my repertoire. A better understanding of electricity and potential products or solutions in that field. I want to learn more about renewable technologies, acquire basic coding skills and use that knowledge to find some new ideas and goals to strive for. I also like to learn to play the guitar and piano.

And I know that I am not the only one who would like to do something more with his life than just working for some company, following assignments that I might or might not agree with. Following orders just to meet the expectations of someone with an entirely different agenda… it just doesn’t feel fulfilling to me.

Just imagine, what humanity could reach if a majority of people could at some point in their life use their experience and knowledge, not for the good of some corporation, but to work on projects and ideas that are meant to solve problems and help others.

Our lives are so short and there are so many things to do, to learn and to experience. Staying all our lives in one job and waiting for that magic golden years to start just feels like a lot of missed opportunities. And I think, deep down, that is how most people feel. It may be one of the many reasons for us being reluctant on spending time to think about retirement.

Therefore, I would urge anyone to forget the idea of retirement and to replace that void with financial independence. Retirement is something to wait for, financial independence is something to strive for. After reading this article, which one would you consider making more sense?

The fastest way to get your first million

I like to keep my blog neat and simple. I like to write articles with text only, I seldom use pictures or videos. But every now and then I might encounter an interesting infographic that is worth sharing.

When it comes to the topic of money, the best place to find interesting graphics is in my humble opinion a website called Visual Capitalist. This is also the place where I encountered the following graphic:

infographic-time-to-first-million-dollarsNow the data for this graphic comes from a website that compares casinos. To be clear: I don’t endorse, recommend or promote anything that might be concerned with gambling in any way.

Having clarified that part, the data in this graphic is highly interesting. And kind of amazing. The vast majority of people who made it to the financial top gained their very first million in less than a decade from the moment of (really) trying. How did they do that? Mostly by setting up a business.

Having your own business

So evidently, the most effective way to gain financial independence is not real estate, stocks or gambling – but your own business.

This is actually not surprising. As we know, it takes money to make more money. When you start from zero, the fastest and only way to get some cash-flow started is to work for it. You might start with a regular job, but we all know that when you work for a company, even though you might get good benefits and salaries, the majority of the profits that result from your and from your teams’ actual work goes to your employer. Obviously, this is not the case when you got your own business. As you take on all related business responsibilities, you also reap the full benefits and cash-in the entire generated profits from your operation.

Shouldn’t we all strive for our own business then?

IF having your own business is granting the fastest way to riches, then this would be the right question to ask. And for many having their own business, being their own boss, it is something worth striving for.

Not to me. I invest in stocks for a simple reason. I don’t want to have to work at all. I want to reach FIRE. For me, escaping the rat race is all about reducing the amount of responsibility on my shoulders and to free up my time. When you have a business, you always take on additional responsibility and you always have to keep exchanging your time for money. I want to have the freedom to decide whether I work or not. As a business owner, you don’t really have that choice without accepting sacrifices on your income.

Furthermore, having your own business may be the fastest way to riches, but it’s probably also the hardest one. Of course, there are different types of business and you need to consider whether you just want to earn enough to get through the day, or whether you want to build wealth. Your workload might be mild if you have a small, self-sufficient thing going on. But if you strive for that million on your account, then you will have to work really, and I mean really hard, on a scale that will surpass the amount of stress and responsibility of most regular employees out there.

So it comes down to what you really want. There are many ways and opportunities to escape the rat race. But there are only a few ways that will truly align with your own expectations. For most people who become successful with their own business, the target is not FIRE. They want to work, just on their own terms. If that is your target, great. If not, then you got to find another way.

About monthly dividend stocks

It has been a while since I introduced the idea of receiving monthly dividends. To be more precise, the article was about receiving dividends every 2 weeks – with only 2 stocks in your portfolio. If you like to take a look, you will find the article HERE.

It’s easy to create a portfolio with dividend-paying stocks and if you buy the right ones, then it’s even easier to create a portfolio that will pay you monthly. Or even weekly. So where and how do you find these companies? Don’t despair, I got you covered.

Having a long-standing tradition of taking care of its shareholders, most of these stocks are either of US or Canadian origin. Some are just regular companies, some are REITs and some of them are BDCs. The two companies that I mentioned in the above-linked article are called Realty Income and Gladstone Investment Trust. One is a REIT, the other one being a BDC. But there are more. As of now and if I am not mistaken, 39 to be exact.

Out of those 39, I chose only 10. They have a solid market capitalization and sufficient data and forum discussions available online on them. The 10 companies are as follows. I sorted them alphabetically, without any specific evaluation in place:

  • AGNC Investment Corp.
  • Apple Hospitality REIT, Inc.
  • EPR Properties
  • Gladstone Capital Corp.
  • Gladstone Commercial Corp.
  • LTC Properties, Inc.
  • Main Street Capital Corp.
  • Prospect Capital Corp.
  • Shaw Communications, Inc.
  • STAG Industrial, Inc.

There you go, plenty of research for you right there to fill your weekend. Among all the monthly dividend paying stocks, one name stands out as a seemingly dedicated company to offer its shareholders as many monthly opportunities as possible. Gladstone. Gladstone Investment (GAIN), Gladstone Capital (GLAD), Gladstone Commercial (GOOD) and Gladstone Land (LAND) are four popular investments among monthly dividend seekers. Gladstone Land is not on my list above but you might want to do some research on it anyway. Gladstone Investment is also not mentioned here, but it pops up in my previous article and you can read more about it if you click on the above link.

Also just to mention, the Apple Hospitality REIT has absolutely nothing to do with the technology company that we all know as Apple. I have no idea whether there is any dispute on the name/branding, but both companies are not related whatsoever.

The benefits of monthly payments

You don’t need monthly-paying stocks to receive monthly dividends. You could also buy a bunch of other companies which pay dividends on an annual, semi-annual, or quarterly basis. If you purchase enough of different types of them, then you will surely also get to the point that you receive dividends each and every month.

But well, with monthly paying stocks it is just an easier way to get there. If well structured and wisely chosen, you might even get to a point that you receive weekly dividends. Isn’t that amazing?

Well, not everybody thinks so and there are plenty of debates and discussions on whether a monthly payment is indeed a benefit. At the end of the day, whether you receive a partial dividend every month or a lump sum once a year shouldn’t make any difference, right? Some argue even that the reduction in bank-fees alone would justify for a company to not make any monthly distributions.

For me, it’s more of a psychological thing. The immediate, and frequent satisfaction of seeing my investments paying off simply feels great. Watching my portfolio and dividends growing and seeing it first becoming a supplement to my regular salary, and later, as the dividend income keeps growing more, to see it developing into a full-fletched source of income for my future. It’s very rewarding.

We all have a living to make. We all have monthly bills to pay. Monthly dividends are a great way to get this under control. Especially if you aim for FIRE.

As Warren Buffett said, if you can’t figure out a way to earn money as you sleep, you will have to keep working until you die. Now I definitely don’t want that.

Recent article updates

On another note, I have recently updated two of my most read articles so far. Nothing is set in stone, and as I learn more I will keep updating some content every now and then. So if you like to read again why Nobody wants to get rich slowly or about The Rat Race, then please feel free to do so.

Disclosure

And finally, not to forget the obligatory disclosure. I have shares of Realty Income, Gladstone Capital, Gladstone Investment and Main Street Capital in my personal portfolio. Furthermore, I intend to have stocks of all the above-mentioned companies in my portfolio over the course of this year.

About ETF Investing and DRIP

One of the most popular ways to invest is to purchase so-called Exchange-Traded Funds, or short, ETFs. The concept is simple and quickly explained. It is basically a similar structure to a regular fund, where stocks of companies are being purchased into the fund and then being sold to potential investors as one product. The integrated mechanism is passive, which means that the fund is not being actively managed by any fund manager. Instead, it simply follows the share price of each stock within the fund.

This specific structure is great because it can keep the management fees of the ETF extremely low, while at the same time offering investors a wide diversification across several stocks at the same time. It is also a fact that most ETFs perform similarly or even better than most managed funds with the same investment scope.

I am invested in two ETFs. One is following the German MDAX Index. This ETF is not paying any dividends, but re-investing all profits immediately as they come up back into the ETF.

The other one is focused on European high dividend stocks within the EURO STOXX Index. This ETF is paying out dividends.

ETFs are a great way to DRIP

My previous article was about dividend reinvestment programs or DRIPs. As I mentioned, while it is very common in the US, it is not something European banks would offer to their customers. For my part, I am therefore usually collecting my dividends until I reach a critical sum of approximately 1.000 Euros and would then buy some new stocks/shares with it.

However, for people who just started to invest this may not be an option. If you only receive 10 or 20 Euros in dividends each month, then collecting a thousand Euros seems far off. Small investments of 10-20 Euro or even a hundred Euros may make little sense as the transaction costs for buying the shares will be too high and drag down (meaning it will increase) your average purchasing price per share.

Setting up an ETF-savings plan is a great way to solve this problem. ETF saving plans can be set up starting from as little as 25 Euros per transaction, and you can schedule it to be on a monthly, 2-monthly, quarterly or semi-annual basis. So even if you receive only 10 Euros a month, you can simply set up a savings plan on a quarterly payment basis and you will have effectively a DRIP in place.

If you prefer to set up a DRIP which will increase your dividend flow, then make sure to choose an ETF that is paying out dividends.

Creative thinking with investments

There are many methods and products in the world of finance that we can utilize to effectively set up our investments, to improve our income and ultimately to prepare ourselves for a bright future. Luckily, all we need to do is just a little bit of reading, an online banking account, and as little as 25 Euros to get started.

Investing in ETFs is a great way to diversify your portfolio, to DRIP and to build wealth in the long-run. So why not just start with it today?

DRIP it another way – DIY

Like in every profession, the world of investments is filled with abbreviations. One of the most popular, and dare I say most important ones, is called “DRIP”.

DRIP is an abbreviation for a Dividend Re-Investment Program which banks may offer their customers when they purchase certain stocks. The idea behind is very simple: When a company pays a dividend, the received cash is being immediately re-invested in more shares of the same company. This way one can automatically increase the amount of owned shares every time a dividend payment is due, without the need for any active involvement from the investor’s side.

It is a very effective and common system in the US. Unfortunately not so in Europe.

Europeans tend to be much more risk-averse and invest on average far less in stocks when compared with Americans. Over my investment lifetime, I had 6 different trading accounts with 6 different banks in Germany and none of them was offering DRIP.

DIY – Do it yourself

Well, if you have a problem and nobody is offering a solution, you got to take things in your own hands.

Every time when dividends are being paid out into my account, I am accumulating them until I reach an amount of approximately 1.000 Euros. Then I re-invest this 1.000 Euros. The 1.000 Euros is my guideline due to the rather high transaction costs charged by my bank. But, as long as I am working and my salary is sufficient to cover my on-going expenses, I am not withdrawing even one cent from my stock account. Ever.

Furthermore, I usually don’t re-invest this money into the same company. Instead, I will be on the lookout for another dividend paying company out there and purchase some shares of a new company.

My idea behind this is to diversify my investments to reduce the risk of any potential downturns in the market. For my FIRE account, I don’t buy companies that don’t pay dividends. So, my annual dividend income keeps increasing with every new investment I make. At the same time, as I spread out my investment over a vast range of different companies, my risk is being deleveraged.

That’s not the way of Mr. Buffett

Investment legend Warren Buffett is not a fan of this approach. He prefers a highly focused and compact portfolio. If I remember correctly, his investments as of today are in less than 20 companies. I have currently 16 different positions in my portfolio and expect to move up to 20 by the end of this year. Next year I hope to add another 10. And the year after another 10. My target is to have some 50 companies in my portfolio with ever-growing dividends.

I would love to have Mr. Buffett’s knowledge and experience, and to be able to make such successful investments as he did in the past. But let’s be realistic. I go to do this my way. I have far less money, experience, time and insights then him. For this reason, diversification is crucial for me.

DRIP or not – you got to keep re-investing

So whether your bank is offering a DRIP option or not. The lesson here is to keep re-investing your income from investments as long as you possibly can. Only this way you will be able to activate the power of compounding and see your dividends and investments grow.

Also, don’t get discouraged in the beginning. Dividend growth and re-investments are like a snowball that is slowly rolling down a mountain. It might take a while to get its momentum and it might even get stuck sometime. But at some point, it becomes a truly unstoppable avalanche.

The current market downturn will offer plenty of great investment opportunities. Watch out for solid, dividend-growing and dividend-paying companies and take advantage of the fear out there to grab them at a discount. Chances are that it will turn out to be a smart move in the long-run.