Passive Investing – Savings With A Dividend

When you’re 18 years old, money you invest in the stock market is unlikely to generate enough income to live from. You’re just starting with too little capital for a 5-7% return to make a financial difference.

 

You’ve got to do something active like starting a company that generates 100-1,000% ROI for a few years. Then, you’ve got your capital to earn 5%-per-annum passively.

 

But, I still think you should invest in ‘passive’ assets as soon as possible, with whatever money you have. (Even if you earn just $.50/day from those investments.) Here’s why:

 

Investing Is Free

 

This took me a long time to understand, because I always felt like when money left my bank, it was an expense.

 

But investing, like saving, isn’t an expense. It isn’t like ‘spending’, where the money is gone. Investing is a reversible non-event.

 

The stock may go up or down, but you can always sell and get the money back. The only material event (and the only one that’s taxable) is the dividends you earn by storing money as stocks instead of cash.

 

It’s less like ‘spending’ and more like the marshmallow test… can you wait for 5 minutes before eating the marshmallow, in order to get the same marshmallow plus a dividend?

 

Any And All Additional Income Releases Financial Pressure

 

For some, and for me, dealing with low-to-no money was like a python wrapping itself around me… constant pressure, no relief, with intermittent unexpected ‘crisis’ like not being able to pay a hospital bill. Any additional income, especially if it’s recurring, helps relieve this death-grip. (Remember, investments aren’t expenses!)

 

Also, I’ve found that a small dividend (NOT just re-invested!) helps me ‘reset’ my spending downward, making me more mindful how I spend the bulk of the money I earned actively.

 

Tasting Your Dream Today

 

Let’s say your ‘dream’ is to go fishing every weekend. Does it make sense to never go fishing until you can afford to do it every weekend? No, of course you probably only knew you liked fishing because you did it before, just not at the scale you have in your dream.

 

If you want $50,000/year totally passive income from stocks, you should get at least $50/year passive dividend income today, investing just $1,000.

 

It doesn’t make sense to wait until you have $1,000,000 to start investing, and it doesn’t matter that the numbers are small.

 

Receiving those first small, but 100% passive checks is a wildly motivating experience, validating your dream, fueling you for all the active work ahead today.

 

Valuable Experience – Even At Break-Even Or A Loss

 

Planning on having lots of big passive investments but not investing when the stakes are low is like planning to drive race cars without going through Driver’s Education.

 

If you start investing when you are 18, you’ll have learned a lot by the time you’re 28, 38, 48… meaning you’ll be less likely to make a dumb decision when you’re older and have more money, and more likely that you’ll be the savvy passive-income investor you want to be.