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Looking to make some extra cash without breaking the bank? With just a very small investment of $25 per week, you can start your journey to earning over $5,000 per month. Yes, you heard that right — it’s possible.
This guide shares simple and practical tips that investors keep secret. You'll learn the DRIP strategy and how to make it even better. Ultimately, see how using this strategy can turn a $25 per week investment into an over half-a-million-dollar portfolio paying over $5,000 in monthly dividends. So, grab your $25 and let’s get started on the path to financial success.
Why You Need a Strategy
Everything needs a strategy. You need to plan out what you need and how to get there. The same is the case with investing. In our case, our goal is to retire and still have free monthly payments as if you never retired from a job.
But the problem is, we only have $25 per week to spare. So, the only strategy for this is using the DRIP investment strategy.
What is DRIP (Dividend Reinvestment Plan)?
DRIP, or Dividend Reinvestment Plan, is a smart way to grow your investments over time.Think of it like planting a seed and observing it develop into a powerful tree. Instead of soil and water, you use your dividends to buy more shares, which then generate more dividends — creating a cycle of growth.
Here’s how it works: imagine you own shares in a company that pays dividends.Rather than taking those dividends as cash, you reinvest them to purchase more shares. This means you own more shares, which in turn generate even more dividends. It’s like a snowball rolling down a hill, getting bigger and bigger with each revolution.
The Power of Compound Interest
One of the key benefits of DRIP is compound interest. When you reinvest your dividends, you buy more shares. And when those shares pay dividends, you reinvest them as well. This snowball effect leads to exponential growth over time.
Let’s break it down with an example. Suppose there’s a stock that’s worth $20 per share and you own 100 shares of that company. It pays a $1 dividend per share each year. At the end of year 1, you’ll have $100 in dividends. Instead of cashing out, you reinvest and buy five more shares of the stock.
Now you have 105 shares of the company. The next year, instead of receiving $100, you’ll get $105 in dividends. The following year, you’ll own 110 shares, then 120, and so on — each time increasing the dividend amount.
Benefit of Dollar-Cost Averaging
Another benefit of DRIP is dollar-cost averaging. Instead of trying to time the market, you buy shares regularly regardless of whether the market is up or down. This helps to smooth out the highs and lows, averaging out the cost per share over time.
Let’s see how this works: suppose you invest $100 every month in a company’s DRIP. Some months, the share price might be high, so you’ll buy fewer shares. Other months, the share price might be low, so you’ll buy more shares. Over time, your average cost per share will be somewhere in between — helping to reduce the impact of market fluctuations.
Automatic Investment Convenience
Finally, DRIP offers the convenience of automatic investment. Once you set up a DRIP with your broker, it takes care of everything for you. You don’t have to worry about manually reinvesting your dividends or timing your purchases. It’s a streamlined process that helps you stay focused on your long-term goals.
Supercharging the DRIP Strategy
Now here’s how you can supercharge the DRIP investing strategy — by contributing a set amount every week, month, or year. In this example, the investment is $25 per week into a portfolio. That’s $100 per month or $1,200 per year.
By increasing your contribution to $25 per week, you accelerate the pace at which you buy more shares. With more money going into your portfolio regularly, you’ll be able to purchase additional shares more frequently.
Adding more money every week helps you take better advantage of dollar-cost averaging. This means you spread out your purchases over time, reducing the impact of big price swings. Putting in $25 each week is simple and fits into your budget without trouble. And with DRIP, you don’t have to worry about remembering to invest — it’s done automatically.
Choosing the Right Stocks
When it comes to building a successful DRIP strategy, choosing the right stocks is key. By selecting stocks that meet specific criteria, you can ensure the effectiveness of your DRIP investments and maximize long-term returns.
The four categories of stocks ideal for DRIP investing are:
Blue Chip Dividend Stocks
Dividend Aristocrats
High-Yield Dividend Stocks
Growth-Oriented Dividend Stocks
Blue Chip Dividend Stocks
These are reputable companies with a long history of consistent dividend payments, indicating financial stability and reliability.Popular examples include household names like Coca-Cola, Johnson & Johnson, and Procter & Bet.
Dividend Aristocrats
These are companies that have increased their dividends for at least 25 consecutive years, showcasing a strong commitment to returning value to shareholders. Stocks like AT&T, ExxonMobil, and Walmart fall into this category.
High-Yield Dividend Stocks
These stocks typically have higher-than-average dividend yields, making them attractive for income-focused investors. Examples include Realty Income Corporation, ABBY Incorporated, and Verizon Communications.
Growth-Oriented Dividend Stocks
These companies combine the benefits of capital appreciation and dividend pay. Examples include Microsoft, Apple, and Visa.
If you’re selecting stocks using these criteria, it’ll narrow down the list of available stocks. Make sure your stock ticks at least three of the above four boxes.
Sample DRIP Portfolio
Based on the above criteria, the selected stocks to boost a portfolio include:
NextEra Energy
Starbucks
Abbott Laboratories
The Home Depot
ProShares S&P 500 Dividend Aristocrats ETF
Portfolio Metrics
NextEra Energy Inc.:
Dividend Yield: 2.76%
Dividend Growth Rate: 10.98%
Share Price Appreciation: 11.98%
Starbucks Corporation:
Dividend Yield: 3.01%
Dividend Growth Rate: 16.69%
Abbott Laboratories:
Dividend Yield: 2.1%
Dividend Growth Rate: 11.4%
Share Price Appreciation: 10.31%
The Home Depot:
Dividend Yield: 2.59%
Dividend Growth Rate: 17.91%
Share Price Appreciation: 16%
ProShares S&P 500 Dividend Aristocrats ETF:
Dividend Yield: 2.04%
Dividend Growth Rate: 20.48%
Share Price Appreciation: 8.17%
Portfolio Average Metrics
Current Dividend Yield: 2.5%
Dividend Growth Rate: 15.49%
Annual Share Price Appreciation: 10.87%
Projected Portfolio Growth
Now the question is: can this portfolio return enough over time for you to retire? Let’s find out.
If John invests $25 every week into this portfolio (which amounts to $100 per month or $1,200 per year), his investment strategy would unfold like this:
End of Year 1: $2,560
After 10 Years: $27,825
After 20 Years: $145,500
After 30 Years: $823,000
Alongside this impressive capital appreciation, he’ll also receive $63,900 in dividends every year — translating to approximately $5,280 every month.
In total, this portfolio has the potential to add $786,500 to his investment, with $464,500 of that coming from reinvested dividends.
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