Welcome to my first dividend income update for 2014. For those of you new to these posts on my site, every month I discuss my approach to investing using dividend paying stocks and how reinvesting the dividends paid from the Canadian companies I own are helping me reach financial freedom. You can check out my previous dividend income update here.
I enjoyed reading this article recently in the Globe and Mail – lessons from legendary investors on what to do with your money. Here’s how their advice relates to my investing journey with dividend paying stocks, and these updates.
Peter Schiff – best investment advice you ever received?
“I have been given lots of advice over the years—most of it bad. That is why I try to invest for the long term.”
Charles Brandes – what keeps you up at night?
“Nothing, really. However, after 2008-’09, investors were scared about investing in equities—and it’s still going that way. The institutions used to have 60% in equities, 30% in bonds and 10% somewhere else. Now, they’re down to about 40% in equities. When you look at the long-term rates of return, equities are absolutely the superior place to be. If you’re a fundamental long-term investor, you just keep with equities because they always recover to new highs.”
Jeremy Seigel – What’s the best investing advice you ever got?
“The late Paul Samuelson, who was my PhD thesis adviser at MIT, talked about low-cost indexed investments. That stuck with me, and I was one of the very first people in the Vanguard S&P 500 Index Fund. Low-cost investing is still the way to go, but I now prefer fundamental indexing, which weights stocks by earnings or dividends instead of by market capitalization.”
Satish Rai – What can a boomer approaching retirement do?
“I have a simple piece of advice for boomers: Live off the dividend income, not capital gains from stocks or bonds. If you need the capital gains, you have to try to time the market when you buy and sell. But if you’re able to sustain your lifestyle with dividend income—plus OAS, CPP and your pension plan—you won’t have to worry about fluctuations in the value of your portfolio.”
So, the best brains in the business say: invest for the long-term, stay in equities, focus on low-costs and seek out a plan to live off dividend income. I’m working on it gentlemen. Thanks to Canadian companies and ETFs that pay regular dividends and distributions we’re projected to earn $7,900 this calendar year. This was an increase over last month thanks to a new TFSA contribution for 2014 – an account we want to max out. I could foresee us earning close to $9,000 in dividend income 10 months from now if we continue to save, make smart investments in our TFSA and keep DRIPping the stocks we currently own. Stay tuned for more updates later this year and thanks for reading.
Got any comments or questions for our dividend income plan?