How to Buy Your First Dividend Stock (Noob Vs Pro) | Step by Step
What is a Dividend?
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business.
How to buy a dividend stock (step by step)
1) Open a brokers account
There are two different accounts you can open. The first one is an IRA account, an individual retirement account in the United States is a form of "individual retirement plan", provided by many financial institutions, that provides tax advantages for retirement savings. This account has tax benefits when you want to retire. The second account is a standard brokers account, a standard brokerage account allows you to easily deposit money and buy and sell investments through a brokerage. With this type of account, you'll be able to take advantage of penalty- and restriction-free withdrawals, no contribution limits, and more flexibility within the stock market.
2) Research and Rules
When you are an investor your job is too research stocks and find the best one that fits your goals. Also all investors should have a set of rules that they must follow to become a great investor and dividend investor.
3) Build a Base
This step is my favorite step of all, all smart investors should understand that they need a base of ETFs and bonds. ETFs are great because they on average return 10%-12% per year with a 3%-4% dividend yield. Bonds are a great way to have a defense in your stock portfolio, they perform better in a falling market and have a 3% dividend.
4) DRIP (Dividend Reinvestment Plan)
But bottom line, reinvesting dividends through a broker or by signing up for DRIP plans directly through the dividend-paying companies, is a surprisingly powerful tool to passively improve your investment returns. So yes, DRIP plans are worth it, as long as they fit with your investing goals.
5) Repeat (Compounding)
Investing consistency is the most important thing. I would recommend investing $200-$300 per month into dividend stocks.
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