Jul 04 2014

3-2-1-Liftoff! First Post!

Expedition 31 Soyuz LaunchWelcome to dividendquest.com! Every blog has a first post and this is it. Passive income from dividend investing is the focus of this blog, visiting such topics as my approach to dividend investing, my successes, my failures, how dividend income has enhanced my financial security, and my general philosophy about dividend investing and passive income. I would like to also hear what others have to say about dividend investing as a form of passive revenue.

First, a requisite disclaimer: I am NOT a professional financial advisor or some-such expert, so I’m NOT trained, certified, degreed, or otherwise credentialed in any way about finance. I’m just a regular guy who wants to share his personal experiences and views about dividend investing with the rest of the world. If you decide to pour your entire life savings into a high yield junk bond fund or stock that I mention and it tanks, don’t come crying to me. With that said, let’s move on…

Who am I? Well, I’m a 40-something guy who works in the Portland Oregon metro area as a technical writer for a Pacific Northwest based company, married for over a year, and just recently moved into our first house.

How and why did I get into dividend investing?
Well, until a few years ago, I just followed the “live within your means” script. But three things roughly coincided to gave me the kick in the ass I needed to change and to make my money work harder for me.

1, Turning 40. I realized that it was high time for me to get serious about money. I wish I could say that I was in debt up to my eyeballs, living crazily beyond my means, gone bankrupt, or was totally financially inept so my story could be much more dramatic and compelling. But that was not the case and my relationship with money had been pretty dull and unexciting. I was a good little saver, had no debt, consistently paid off my credit card balance on time every month, had IRA and 401(k) accounts, and lived fairly frugally (although there were a couple weak spots that were difficult to overcome, such as eating at the company cafeteria and being in thrall to Comcast). In short, I was doing okay, but not doing *great*.

2. Declining bank interest rates. In 2007 interest rates rapidly tumbled and fell to practically zero. Savings account rates were a joke and CDs weren’t any better (Thanks Ben! Thanks a lot!!). With interest rates in the toilet and inflation quietly eroding one’s savings and buying power, action was clearly needed.

3. A feeling that I must do *something*. I had a pretty phat savings account that was more than enough for emergency funds and/or a house down payment, so I was at a point where I could finally comfortably invest without putting much of my net worth at risk.

Prior to 2007, I didn’t know much about the stock market and how to intelligently invest (“It’s soooo risky!!!” cried the internal fear-voice), which was one reason for my wariness of diving into stocks. However, I wasn’t a complete stranger to stock investing. In 1996, I bought $1500 of stock in Atari and sold it all six weeks later for $3000 (pure luck, not skill, although after watching the stock closely for months I developed a good feel for its average price and seized the opportunity when the stock dipped and then seized it again when the company got bought out and the stock price doubled) and used the gains to finance my first trip abroad. Since then, the only investing I have done has been my annual IRA contributions (and my investment choices were mediocre at best) and my automatic contributions to my 401(k).

So I procrastinated for years about investing, knowing that I should do something but unsure about what to do. With regard to dividends, I learned about dividends in a junior high school personal finance class. But when bank interest rates were around 5-6% and typical corporate stock dividend yields were around 1-3% , I wasn’t very impressed and so dismissed dividends at the time.

So in 2007, being much more open to improving my personal finances, I picked up a used copy of the best-seller “Rich Dad, Pood Dad” by Robert Kiyosaki and soon after his second book, “Cash Flow Quadrant.” These books opened my eyes about the cash flow habits of the classes, the stunningly simple “asset” and “liability” definitions, and what defines wealth (a very different concept than “rich” but the two terms are commonly used synonymously). With new eyes, I looked at my present and past financial decisions and didn’t like what I saw, despite my fairly comfortable state.

Inspired by Kiyosaki, I took the next step by learning how to research, buy, and sell stocks. For stock investing newbies, I heartily recommend “The Neatest Little Guide to Stock Market Investing” by Jason Kelly to learn the basic principles of stock investing. The book does a great job of explaining stocks, investing philosophies and methodologies, and how to trade online. With some financial education under my belt, I felt ready to jump on Wall Street’s roller coaster. Using the brokerage account provided by my employer to manage the stocks and stock options the company gave me, I started out investing in a couple companies purely for capital gains. But as I grew more confident with stock investing, I became much more interested in dividend yielding stocks and higher yielding ETFs in particular. However, even with the post-2008 crash and stocks selling at fire sale prices, I was just getting my feet wet and wasn’t willing to put thousands of dollars on the line quite yet.

But over time I’ve learned how to be less overly cautious and have become more willing to buy stocks (particularly high yielding ETFs, which I will cover in a future posting) that have a higher return (and risk, of course…). Since I first started my journey in dividend investing, I have experienced mistakes, smart moves, luck (good and bad), and developed my own processes and methodologies for finding stocks to watch and buy when I’m ready.

I hope you will find this site informative, interesting, and maybe even inspiring. Investing for dividend income isn’t very difficult, but it does take a willingness to learn, take educated risks, and a will to stick with it and grow one’s money tree seedling into a mighty oak.

Let me close this first post with a quote that has guided me on my dividend investment journey (and is equally applicable to life in general):

All courses of action are risky so prudence is not in avoiding danger (it’s impossible), but calculating risk and acting decisively. Make mistakes of ambition, and not mistakes of sloth. Develop the strength to do bold things, not the strength to suffer.
— Niccolo Machiavelli, The Prince

Image Credit: NASA/Bill Ingalls (Wikimedia Commons)