long-term – ROAD TO WEALTH!

Hi all, Joey Ortiz here.

Welcome back to this week’s edition.

Let’s chat about becoming a millionaire, shall we? You may be asking, “Joey, what’s the point?”…

The point is that you need goals. Becoming a millionaire is one of the most common goals when planning to build long-lasting wealth. You are looking forward to building wealth for you and future generations. If you do it right, at some point soon, you will become a millionaire, and then some.

I did not say “Rich” because you can win the lottery tonight, be “Rich” overnight, and be broke again in a year or two. It would be best if you learned how to build and create wealth. It all starts with financial literacy. A knowledge mix of investing and taxes. Yes! Taxes! It is imperative to learn how to keep what you earned and protect your assets.

It starts slow but then something unique happens. Not only snowball into big numbers as the years’ pass, but if something unfortunate happens, like losing it all, you won’t “sweat it” because you know how to build wealth, and you can do it again. But, this time is even faster because you will have something this time that you didn’t the first time around, experience!

Apple (AAPL) is one of the biggest holdings of the Nasdaq.

One way of becoming a millionaire over time is investing in dividend stocks. Many of you ask the same question: Can you live off dividends? YES! Yes, you can. You need to understand that this strategy takes time because you have to accumulate shares for decades. It’s not a get-rich-quick scheme. It takes time, knowledge, and planning.

Why dividend-paying stocks? Because it doesn’t take much time out of your daily life. It’s passive income. All you need to do is set a specific amount of money once a month and invest it in your favorite companies. Then, keep going about your life. Then the company will share part of their earning profits with you as a dividend for your time and investment. You are a partner, and you will profit just like all the big investors without putting in any work at all.

It doesn’t matter if you have a raw platform like RobinHood, or something more sophisticated like TDAmeritrade, Schwab, or Fidelity. The reason is you will be buying once or twice a month and not looking to sell ever! Instead, you want to accumulate for the long term. In that case, the platform makes no difference for this strategy.

Things to keep in mind:

1. How much money a month is required to cover your expenses and have some extra money for fun?

2. How to choose which company to invest in? Look under the company’s hood (aka fundamentals).

3. Compare companies long term growth

From the comfort of your home, invest anywhere in the united states with Fundrise.

HOW MUCH?

Starting point. It would help if you did your math. Each one of you is living a different reality. Numbers will vary greatly depending on your habits, income, and current location.

As an example, let’s say that your expenses amount to $2,500 a month, and you will live comfortably with an extra $1,000 for yourself. That means that you need to make at least $3,500 a month or $42,000 a year.

How much will that cost? It depends on the dividend paid by the company and the price you pay for the shares.

As an example, let’s use a very well-known retail store, Walmart (WMT).

Dividend = $2.16

Price = $147 (as of Dec 12, 2020)

Dividend Annualized growth = 12.19%

Dividend Yield = 1.47%

$42,000 / 2.16 = 19,445 shares needed of WMT to cover your yearly expenses.

The current yield of 1.47% will not suffice. It doesn’t even beat inflation.

The annualized growth doesn’t look bad, but the current yield of 1.47% projects to grow to 4.64% in 10 years. Not bad, but there are plenty of better choices.

And if you would buy it all right now, it would cost you a total of $2,858,415 (current price of $147 * 19,445 shares). So unless you have $2.8 million lying around, let’s look for something better.

Listen, when you are a beginner, you may doubt the strategy because all you are about to see is that you received $1.50 or some ridiculous number like that. You will not be even close to where you need to be when you first begin. But you will be there eventually. The critical factor, you need to start! The sooner you begin, the sooner you can get there. It’s like needing to walk somewhere. If you stay on your couch, you won’t make it. But if you put your shoes on and start walking, you will get there eventually. Take action!

Divide that into three steps:

1. Decide if you want to live off dividends and take on this journey; if you do, go to #2.

2. Create your investing plan (includes how much money you will invest monthly and in which companies)

3. Take action and execute your plan!

Amazon (AMZN) is one of the fastest-growing companies in the world.

HOW TO CHOOSE?

Point number two. How do you choose where to put your money? Ok, there are thousands of options for you to choose from in the stock market. Not what you wanted to hear? Sorry, but it’s the truth. So what now?

A quick but not always beneficial way of choosing, only invest in companies that you shop at or know well. That will probably be something like Apple (AAPL), Walmart (WMT), Walgreens (WBA), Verizon (VZ), among many others.

Is it wrong to buy what I know? No, it’s not. If that is the route you want to go, so be it. Just like everything in life, we have to live with our choices.

The good thing is you know and trust these companies. The bad thing is they may not be offering you the best bang for your buck.

Alright, smarty-pants, what other choice do I have? Not the quick way, that’s for sure.

Look under the hood—the company’s fundamentals.

Use a free stock screener like Finviz or BuyUpside (Dividend Growth Rate Calculator – See How Fast Dividends Grow) to look at your favorite companies or not so famous. You never know what you might find. You will be amazed when you find out that your favorite companies are probably too overpriced, and you should invest your money somewhere else.

I use Finviz to look at the current numbers of a company like:

– price

– current EPS

– current Dividend and Dividend Yield, Dividend Payout

– ROE

– Current Ratio, Quick Ratio

– Long term Debt / Equity, Debt / Equity

– Forward P/E, PEG, Price to Sales (P/S), EPS past five years.

From BuyUpside, I find the Annualized Dividend Growth of stock to project into the future using that same growth.

COMPARE COMPANIES LONG TERM GROWTH

Point three. Collect the information to compare companies and their growth. Then, plug in the numbers into an Excel Sheet, and formulate it to highlight only the best. In the end, add up which company highlighted the most, and those companies are usually the ones to choose to invest in because they provide the best cushion from all angles.

In conclusion, I’m looking for a company that can provide an excellent Return on Equity. Has sufficient cash to pay their bills and expenses, has medium to low debt, a good dividend yield now that can beat inflation of 3.5% on average, and sustainable growth for the future. So even if the price doesn’t go anywhere for ten years, I can still receive more in dividends, thanks to their growth. In addition, look for positive earnings growth into the future and growing sales.

Now, begin your Road to Wealth!

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The amount of financial terminology is enough to send anyone into a panic when you enter the world of investing. So today, we will cover Dollar-Cost Averaging.

Long-term investors often use the term, especially when the markets begin to pull back or fall entirely on its face.

Readers keep asking about it, and the question often goes something like this:

“Dear Joey,

I keep hearing about dollar-cost averaging on my investments, but I’m new to investing and don’t understand it. So how does it help me in the long run?”

Zoom (ZM) is one of the darlings during the pandemic.

What Is Dollar-Cost Averaging?

Simply put, it means that you set an amount of your paycheck to invest itself automatically, or you can do it manually as well. In addition, the strategy takes advantage of the stock market fluctuations. Every time you buy shares, the overall cost will average out between all your shares while the price goes up and down.

Let’s analyze the picture below:

This person set a monthly amount of $100 (Set amount column) to invest at the beginning of every month (Date column). The stock they invested in fluctuated between $20 and $25 during the year (Stock price column). And the last column shows how many shares this person was able to buy each month.

At the end of the year, the person bought a total of 54.41 shares (Total column) while investing $1,200. When you have the two numbers, you can divide the total amount ($1,200) by the total amount of shares (54.41), and you get the number $22.06.

That means that the average cost of all your shares is $22.06. So you effectively average up and down throughout the year to not buy at the top or the bottom.

With Fundrise you can become a digital landlord anywhere in the United States, without the hassle.

Advantages of Dollar-Cost Averaging

When you buy with a set amount throughout the year, you ensure to not overpay for your shares. The market mainly moves upward, but it also has down moves. Therefore, they provide excellent opportunities for you to buy more shares at lower prices. In contrast, you buy fewer shares when the prices are high.

Things to Consider

Dollar-Cost Averaging is an excellent strategy if you are a long-term investor. You are not trying to time the market. Instead, you want to have time in the market while accumulating shares and taking advantage of the famous “the average return over the last 100 years is 10%”.

That doesn’t mean that the market goes straight up each month to end at 10%. Instead, the market fluctuates up and down but, in the end, finishes on average with a 10% increase.

Overall, it is a powerful strategy when you don’t want your money to sit on a bank account with a bit of interest of less than 1%. Instead, you will grow your account and net worth slowly but surely. If you are new to investing or don’t have much time to analyze the markets, consider this a great strategy.

Now, begin your Road to Wealth!

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