Image source: Getty Images
Have you ever thought how useful it is to earn money without having to work for it? I know I have, but so many promising plans that seem like pie in the sky to me. That’s why my approach to generating secondary income is based on buying dividends.
That doesn’t require me to spend a lot of money – at the end of the day I can put in whatever I want, even if it’s just change. Here’s how I do it.
Save a few kilograms every day
Nowadays, three pounds is not too far – in some places it is the price of a sandwich or a coffee.
But all those pound coins could soon add up. Losing three kilograms a day will add up to over a thousand pounds in a year.
I’m hoping that if I can use that to start buying dividend stocks, I can create a second income. The amount depends on the dividend yield of the stock I buy. For example, if the yield is 5%, a year’s worth of savings could buy me a share with an annual dividend yield of around £55. If I hold those shares and the dividend is maintained, I hope to continue to make gains for years to come.
That way, even though my daily savings are the same at £3, hopefully the secondary income for me will grow.
Choosing the shares of stock to buy
However, not all stocks pay dividends and even those that do can stop them at any time. So how do I decide which objectives best suit them?
I tend to stick with industries and businesses that I feel I understand, which helps me assess their attractiveness to me as an investor. Then I looked for companies that I felt had some competitive advantage that would help them maintain good profit margins even under pressure from competitors. For example, there is only one. McDonalds. At the same time Jersey Electric It has a network and is expensive and probably impossible for a competitor to copy AstraZeneca He has exclusive rights to profit from several drugs under his patent.
But share price is also important. If I pay too much for even a good company, my return on investment can be poor. That’s why I want to find the best deals at attractive prices – and with the juice I paid to help build my secondary income.
Implementation of the second income plan
Even the best-laid plans for companies and investors can go awry, though. So to reduce the risk to income streams if a business cropper comes along, I diversify my investments across a range of stocks.
To get going, I’d start by putting £3 a day into a stock dividend account or Stocks and Shares ISA. Then I start hunting for the kind of promising income stocks I want to own – today!