How dividends can change your life
To live on passive profits and not think about anything. It may seem like a dream job to buy securities and proudly call yourself an investor. Living on stock money won’t be easy. But even in such a situation, there are downsides.
Building passive income with dividends
Buying shares doesn’t guarantee you an income. You need to constantly monitor prices, analyze the market, and calculate moves.
Investing is a risky business. You need to prepare for the fact that where you choose to invest depends on whether you’ll have a livelihood next month.
What should I do when I buy shares?
Let’s assume you’ve acquired minimal knowledge, and you’ve bought your first shares. With the purchase of the shares, dividends will begin to arrive. What to do with them is up to you to decide. You may reinvest them in other stocks, or you can take them out and live on them, forgetting about your primary job.
You must start by building up a financial safety cushion or an alternative way of earning money. The safety cushion must be sufficient for you to live without income for at least three months. Many stories occur on the Internet of how people put in their last money and burned out — do not repeat such mistakes.
How to trade shares?
You should trade only with a cool head, i.e., control your emotions and not panic because of a minor price movement. To avoid emotional outbursts, you have to develop a trading strategy, i.e., decide for yourself under what conditions you will close a position and under what conditions you are ready to wait.
Trading the market means being constantly afraid of its changes. And if you aren’t sure of success, you shouldn’t purchase more than you are prepared to lose.
Dividend payouts fall
If you want to create passive revenue, you must understand the conditions under which dividend payouts can fall.
The first option is a change in the world situation. You don’t have to go far, and you may take COVID as an example. With the onset of the pandemic, some companies stopped paying profits to shareholders for a while.
The second option is the trap. If not forward-thinking investor relied on large early payouts and decided that nothing will change from now on, which means he has fallen into the dividend trap.
From the above, we can conclude that you don’t essentially get rid of your job once you start purchasing. You are your boss, and the responsibility is now solely on you. You will no longer be able to complain to your friends about how much of a jerk your boss is.