Can I earn money with ads on my blog?

Among the many jobs that emerged popular in recent years are those of the so-called influencers. Individuals who can motivate others through engaging online content. They encourage others to visit destinations, and to purchase products or services. As an influencer you can either get paid directly by the party which engages you in promoting their service or product, or passively, via ads and commercials. This is how Instagram and YouTube capitalize the content.

Blogs have something almost ancient in the technological world about them. They have been around for a while. In the beginning it was all only about sharing ideas, knowledge, or just about keeping public diaries. However, they can also be used to generate earnings.

Earning with ads

My blog is mainly about motivating people to develop better financial understanding. It’s a niche topic that some may consider a little “dry”. Certainly not sexy. I am hardly posting any pictures, except for the occasional infographic. I don’t promote any specific products or services. Not yet anyway. But even for this kind of blogs there is an option to collect some cash, and to get rewarded for all the effort that is being put into writing all the articles. Online advertising by placing banners in the articles.

I was curious how this could work out and have activated on my WordPress blog the option of the so-called WordAds. It’s basically an automated integration of commercials into the blog based on it’s content and visitors. It is the easiest way with WordPress to setup this kind of service as it can be activated with two clicks on the wordpress website.

Without further adue, I like to share with you the results of my ad-integration:

Screenshot 2019-11-18 at 14.14.51

Low effort equals low results

I admit, I put the lowest possible effort into it. I didn’t put up banners and ads on my main website. I just don’t want to do that. I hate clutter, so you see the banners only if you actually really read a full article. I also didn’t look for any specific partners or looked at affiliate marketing options which are more targeted and specific and which pay significantly better. I seriously just did the bare minimum. And yes, the result speaks for itself.

So if you intend to earn money with you blog or website, I am afraid you should put much more effort into it than I did. Otherwise you might get just this: A mere 0,13 $ for almost an entire year of writing.

Why investing in Pharma makes sense

Today, let me dive a little into the topic of income-investment and why I believe that every income-focused investor should have some pharma stocks in his or her portfolio.

As my readers know, my goal is to escape the rat race with the help of investments in the stock market. With my eyes targeting financial independence, having a passive stream of income is crucial. One way to get it is to invest in dividend-paying companies. The strategy is called income-investing and it is a reliable strategy of building up passive income, large enough to be able paying bills (and more) once the decision to retire has been made.

When it comes to income-investing ideas, how to pick a stock, and what one needs to be aware of, the pharma industry emerges quickly as a good direction to look at.

Profits for years to come

My personal portfolio contains shares of two pharmaceutical companies: AbbVie (ABBV) and GlaxoSmithKline (GSK). They are not THE biggest in the industry, but large enough to reward their shareholders with frequent dividends for many years now. And chances are good that this won’t change anytime soon.

Big Pharma is a term that is being used in a mostly negative manner. Overcharging customers, abusing their power, and either way, health should be free for all, shouldn’t it? Maybe. Maybe not. But what is pretty certain is that this industry has a tremendous cash-flow that is only increasing with a growing and ageing population.

People get sick. It’s how humans work. We get sick, we get better. For most of the time anyway. But the part of getting better for most of the time involves medications, treatments, surgeries, vaccines, anti-biotics, hospital stays. It’s a never-ending battle that will always require someone to develop, produce and distribute all those essential products that help us to have a long and healthy life.

They can do what no one else can

Some people may think that supporting Big Pharma can’t be the only way to get things done. Some smaller companies should be able to pull it off as well, right? Research, development, production, distribution. Well, the bad news is, that smaller companies simply can’t do all this. And even if they try to share the work process with other companies, chances are that they either fail or can’t make enough profit for a sustainable contribution.

There was a recent story about a company called Achaogen that comes to my mind. The company was working on a new type of antibiotics. The scientists and researchers were looking for a way to develop a new type of antibiotics, as the currently widely available versions are becoming increasingly less effective. They were largely successful in the beginning but failed after a very short time in operation. The business was just not profitable enough to sustain.

This case highlights the need for some for really large economies of scale, cross-incentives among products, and distribution scale that a small company simply can’t sustain. And we are talking only about antibiotics. How about those much larger and even more cost-intensive projects. Cancer, HIV, dementia. There are so many challenges in front of us. They require the right people, with the right education and research experience, the right equipment, sufficient funding, the right connections for distribution and the stamina to dive through ups and downs of the world without going bankrupt.

Bill Gates, for example, is working closely with many companies including GlaxoSmithKline through his Gates Foundation. When asked about the reason for this collaboration instead of just using his immense wealth to simply find solutions on his own, he said it very simply: These companies can do things that no one else can do.

This is a powerful statement for any investor out there. It says that, to a large part, there are not many alternatives. That’s a big moat to cross and perfect protection for any long-term investor.

The risks are limited

Unsurprisingly, AbbVie and GlaxoSmithKline are both considered to be rewarding long-term investments for income investors not only by me but by pretty much every analyst out there. The combination of the long-term focus, available resources, knowledge and power of distribution, together with a reliable and stable cash-flow give pharma companies excellent risk/reward ratios.

Some analysts point out that the big cash-cows might at some point disappear, especially when cheaper alternatives come to market. When patents run out. When the competition catches up. These concerns are legit. It will happen. But unlike some electronic toys or tools, health is a different story with plenty of areas that are still under development and which are almost impossible to copy in a simple and cost-efficient process. The electronic cycle for product improvement is only roughly 1 year and has very limited regulations in place. Health related products take 10-15 years to develop and are subjected to heavy approval processes and regulations. This will always keep the competition at pace, even if some profit margins might occasionally suffer or take a blow.

Disclosure: I own all stocks mentioned in this article.

Depending on work is not a smart long-term plan

I don’t remember whether my parents were asking me about my aspirations when I was young. I also don’t remember hearing them talking to neighbours, friends or family about what I am going to do when I grow up. They never really tried to push any particular profession on me. Maybe because they wanted me to discover the world on my own. Or maybe because as a kid I was not easy to talk to.

We went to school, learned all the basics that were considered important to find our passions, to figure out our talents, sharpen some skills, and to give us a hint of a direction towards some of the opportunities that were out there for us.

What nobody talked about were the things that would stand in our way. The things that would hinder us to develop, hinder us to grow, hinder us to follow our passions and hinder us to truly try to discover our full potential.

To some part, I understand. I wouldn’t believe anyone who would tell me that there was a very high probability to end up doing a job that I might not really care about, for people I might never get to know, to receive some money that will be just enough to cover my living expenses. Mundane tasks day in and out, without passion and without any true commitment, just to get through the day.

This is what we call the rat race and a reality for so many people in the world.

Everything has a price-tag

The grown-ups give us a lot of hope when we are young. They tell us that we can be anything we want. Do whatever we want. And achieve whatever is possible. In reality, it’s all not that simple.

Once we move out from home and leave the protective roof of our parents home and their care, reality quickly kicks in. We need money. Money to pay the rent, groceries, utilities, to go out, to travel. Everything in this world has a price tag on.

So whether you want it or not, you have to start to work. And the moment you get your first job, you enter the rat race. We all got to make a living and yes, living has a price to it. Shelter, food and health. These are the basics and to secure them one needs money.

The bad news is that as long as our financial system exists in its current form, these price-tags will never go away. They just grow larger. With inflation always present, you will experience that over your lifetime prices for everything around you double and triple.

It always starts with trading time for money

I started when I was 14 years old. My parents couldn’t pay me too much pocket money and sometimes cash would be short even for the simplest basics like new shoes or a jacket. So I just found a job to be able to afford what I wanted and needed. I started filling up shelves in a grocery store.

From there on, I would sacrifice every Saturday for it. 6-8 hours every Saturday morning, putting milk cartons into the shelves, sorting frozen pizzas, yoghurts, re-fill soda bottles and occasionally guiding some customers through the store. My salary was something around 6 EUR per hour if I remember correctly. I would earn 36-48 Euros for each Saturday, being paid-out in cash by the end of each week. A huge improvement to the 5-10 EUR that I would get from my parents per week.

This is how I learned to trade time for money. When I needed money, I went to work. When Saturdays earnings were not enough, I would free up an afternoon during the week and work one more day after school. Suddenly I could afford to buy new shoes, to get rid of my glasses and buy contact lenses. I had money to spend when hanging out with my friends. It seemed to be a great concept.

What I obviously didn’t think about at that time was that at some point in my life I would have to pay the rent on my own. Utilities, food, to have my own medical insurance. I didn’t think about how many hours I would need to spend in that grocery store to be able to afford all of it.

Depending on money is killing your opportunities to grow

When you grow up, before you even know it, you start trading most of your time for money. Regular work contracts in Europe have something around 35 working hours per week on them. In Asia, it’s around 48. And more than often, this one job is just enough to secure the previously mentioned basics: Shelter, food and health.

Those who want to be able to get a little more out of life start taking part-time jobs, freelance online and adding up hours of work. This is what they know, what they learned. To trade time for money. But as more and more of their time is being traded out for cash, their opportunities in other areas shrink with every traded minute. Learning new skills, discovering new passions, spending time with their loved ones. The time to do those things disappears with every traded hour. Minute by minute.

How long can you work

And the big question is, how long can you actually do this? What will happen when you get old? Will your social security be enough to live on? What if you get sick? Handicapped? When your mental ability goes down?

And how about all those things you always wanted to do in life? Going for a trip around the world, feel some wanderlust in the Swiss Alps, climbing in the Himalayas, snorkelling in Thailand, drinking Mojitos in Cuba or visiting the Empire State Building? Do you think that you will be able to pursue your dreams once you left the workforce?

We are not smart enough to consider all those things when we are young. I wasn’t smart enough then to think about the next logical step when I started to work in the grocery store. But as we get older and develop a deeper sense of logic, we certainly should be smart enough to put it into consideration, shouldn’t we?

Working is not bad – depending on work is

There is of course another way. A way to develop passive income and to stop being dependent on any job. This does not mean to stop working. Absolutely not. I can’t imagine a life without work. I want to do something. I want to work.

But I don’t want to worry about money.
I don’t want to have to work for money.
I don’t want to depend on work for money.

Those whose minds are trapped in the system won’t understand this idea. How could they? They never learned anything else. But, what if we could work for our passions, our beliefs, our aspirations and our dreams? Wouldn’t it just be something else entirely?

FIRE is all about that. About freeing up your time, your mind and your passions. Because once you reached financial independence, you can focus on things that will truly matter to you. Isn’t this a goal worth striving for?

Dividends are everyones friends

I am a strong promoter of companies that benefit shareholders by distributing dividends. While many companies refuse to do so in order to keep the cash for future investments, I believe that since a shareholder carries risk in regards to the companies success, he or she should also reap a reward from his investment and participate in the companies profits.

There is obviously no guarantee for any company to generate profits for a lifetime, but there are companies that have paid dividends and rewarded their shareholders in a very reliable manner.

Dividend Kings and Dividend Aristocrats

The terms Dividend Kings and Dividend Aristocrats are being associated with companies that have not only distributed dividends for 50 or 25 years respectively without a single interruption. They also have never lowered the dividend payout but increased it every single year.

For investors who are looking for a regular income to receive out of their investments, these are the stocks that might be the most attractive ones to look at, as they earned a status that promises a relatively secure financial future. A promise of paying out dividends for as long as one stays invested.

Compounding dividends

This is not only tempting for retirement investors who are looking to secure their nest egg while continue generating a steady cash-flow. It is even more interesting to young investors who possess two important traits: Time and patience. The magic words that come into play here are “compounding dividends”.

Stocks that generate regularly increasing income do not only secure a return on your investment. But given enough time, they might easily outgrow it by ridiculous amounts. How is this possible?

For these companies, revenue and profit growth lead to dividend increases. If a company can grow its dividend by 10% year on year, it will almost double it’s dividend payouts within 6 years.

So for example, if you buy now shares of AT&T (the biggest telecom provider in the US) which yield 5.8% at the time of writing this article, and AT&T would increase its dividend by 10% year on year, then over the next 6 years your return on investment would grow year on year and reach a return of over 11% by 2025. This would look like this:

2019 = 5.80 %
2020 = 6.38 %
2021 = 7.02 %
2022 = 7.72 %
2023 = 8.49 %
2024 = 9.34 %
2025 = 10.27 %
2026 = 11.30 %

The power of time and patience

So just imagine how this will play out if you keep holding the stock for another 30 years. At some point, your yield on investment might actually outgrow your initial investment. Every. Single. Year. Ridiculous? Crazy? Impossible? Not at all. Let me bring up the greatest investor of all times: Mr Warren Buffet.

One of the largest investments in his lifetime was to put money into Coca Cola. Not only did the value of the company shares appreciate over his lifetime but so did the dividends. From what I was reading, his annual dividends on Coca Cola offer a yield on cost of anything between 40-55% – depending on which source you follow.

Just think of it: You put 100.000$ in a company and given enough time it will return to you between 40.000-55.000$ – every single year. And not only that, but it keeps growing and you don’t need to lift a finger.

The astonishing thing is that Coca Cola and AT&T are not the only examples out there. As of the time of writing, the 2019 list of Dividends Kings has these companies on it:

  • Amer. States Water(AWR)
  • Dover (DOV)
  • Northwest Nat. (NWN)
  • Emerson Electric (EMR)
  • Genuine Parts (GPC)
  • Procter & Gamble (PG)
  • Parker Hannifin (PH)
  • 3M (MMM)
  • Cincinnati Fin. (CINF)
  • Johnson &Johnson (JNJ)
  • Coca-Cola (KO)
  • Lancaster Colony (LANC)
  • Lowe’s (LOW)
  • Colgate-Palmolive (CL)
  • Nordson (NDSN)
  • F & M Bank (FMCB)
  • Tootsie Roll Industries (TR)
  • Hormel Foods (HRL)
  • ABM Industries (ABM)
  • California Water Services (CWT)
  • Federal Realty Inv. Trust (FRT)
  • Stepan (SCL)
  • SJW Group (SJW)
  • Stanley Black & Decker (SWK)
  • Target (TGT)
  • Commerce Bancshares (CHSH)

Personally, I haven’t bought a single Dividend King stock yet. I have two current Dividend Aristocrats in my portfolio, namely AT&T (T) and AbbVie (ABBV). And I am purchasing stocks that I expect to become a Dividend Aristocrat at some point in the future. Apple (AAPL) is such a company as is Starbucks (SBUX) which I also both owe.

Over the next two years, I am planning to purchase several of the official Dividend Aristocrats and to add them to my portfolio. I am currently looking at 3M, Coca Cola,  and Target and will probably purchase some shares within this or during the first quarter of the next year.

I am not entirely focused on dividends only, but having a good mix of shares that offer great potential for growth as well as companies that will secure me a steady cash-flow and grow it year on year is a pretty great combination. Dividends can be an investor’s best friend as they create exactly what every FIRE aspirant is looking for: A steadily growing passive income.

Disclosure: I own shares of AT&T, AbbVie, Apple and Starbucks. 

4 Reasons not to invest – Having no money

A majority of people out there thinks that investing is not for everyone. A recent survey by Blackrock revealed some critical reasons across generations, and as for why people would postpone or even not consider to invest at all. My previous post was about the no. 1 topic from that list, the access to and understanding of financial information:

  1. Access to and understanding of information about investing
  2. Having not enough money to start investing
  3. Being too worried about one’s current financial situation (and thus being too busy to worry about the future)
  4. Being afraid of losing everything

When you look at the second and third point, they do appear to be connected with each other. And surely they are. So today we take a look at the point no. 2 & 3.

It takes money to make money

A popular phrase, but is it really true? As always, it depends. If you talk to entrepreneurs, they will most certainly say “no” to it. For entrepreneurs, all you need is a great idea, dedication and hard work to make money.

But this doesn’t sound like the right approach to me. The goal for me is to stop trading time for money. Hard work and dedication always require to do exactly just the opposite.

So when you talk to investors, it’s a different story. For investors, it’s all about having money and making it work for you. As Warren Buffett likes to say: “If you can’t figure out how to make money while you sleep, you will have to work until you die.”

In other words, you have to figure out a way how to make money without having to trade time for it. The professional term for this is “passive income”.

Investing is the king of passive income 

If you just type in Google the term “passive income”, the result might produce various topics for further research. The website “Good Financial Cents” has this list in petto:

  • Savings Account
  • High Dividend Stocks
  • Passive Real Estate
  • Betterment
  • CDs
  • Index Funds
  • Corporate Bonds
  • Lending Club
  • Rent Your Space
  • Start a Blog
  • Buy a Blog
  • Affiliatize a Blog
  • Online Course or Guide
  • Online Tasks
  • Online Rebates
  • Cashback Credit Cards
  • Sleep Studies
  • Advertise with Your Car
  • Rent Your Car
  • Rideshare Driving
  • Silent Partner
  • Buy a Business
  • Outsource Your Business

Feel free to visit the website for more details on each and every single point.

From all these opportunities, investing in dividend stocks is probably the most efficient one. This is for several reasons, the most important one being that it’s completely scalable without any extra effort. Of course you need money to get started, but that is it. The only thing you need to get and/or to increase your passive income is additional money. With every additional Penny invested in a dividend-paying company, you increase your annual income.

Now you might argue that you need to trade time for money to have those funds necessary for investment in the first place. And it is true. But from some point onwards, those dividends that come up every month, quarter or year, they can and will grow your account without you having to lift a finger. Dividends grow, get re-invested and compound. In the long-run, it’s the single least-effort-strategy to go with.

How much do you need?

The belief that you need a lot of money to get started is not wrong, but it is flawed. You can start with as little as 25 Euros a month. That’s less than 1 Euro a day. But of course, with such a small investment it would take a very long time to let it grow large enough to be able to retire on it. It’s not impossible, but it’s not something to rely on.

The more you invest, the more return your investment can create. So it is advisable to invest larger amounts and to keep that investment growing until you reach a critical mass that becomes basically self-sufficient. My target: Getting to 100.000 Euros.

100.000 Euros invested in high-yield dividend stocks, REITs and BDCs or even CEFs can create stable returns of 6% or higher – after-tax. That is equal to 6.000 Euros a year. 500 Euros a month. Once you get there, your stock-investment becomes basically entirely self-sufficient. Whether you put in an automated savings-plan or add/buy more stocks each month on your own. The money just keeps coming.

With the above mentioned yield on your investment, every 1000 Euros that you re-invest will add to your annual income another 60 Euros. Times 6, that’s additional 360 Euros a year or 30 Euros a month. So just after 1 year, your monthly return will already increase to 530 Euros on average. And it will keep growing at a higher pace after that, year on year, following dividend increases and the compounding effect.

And the best part is, that you won’t need to do anything for this to happen.

Not having money and being worried about the present

So back to the original point for people not investing because of not having enough money, or to be too worried about the present. I am certain that this is for many the case. But you have to overcome it and find ways to get started. Even if it starts with only 25 Euros a month.

I like to compare this kind of situation with education or training. For example: If you can’t read and write, and your family has no money, you might be forced to engage in low-skilled-labor jobs that will ensure your families survival. But, if you keep doing it without looking for ways to improve yourself, you will never get out of this circle.

If you, however, put in the effort to study and to learn new skills, even if it’s in the late hours after work every day, on weekends, public holidays, whenever you can squeeze out that extra hour, you will set yourself up to be able to take advantage of opportunities that may pop up in the future.

So yes, not having money and being worried is absolutely a valid reason. But success won’t come to those who don’t set themselves up to be ready for it. As Warren Buffett likes to say: “The harder I worked, the luckier I got.” Look where that got him.

If you had your own business…

…how would you run it?

Many people dream of being their own boss. Making their own decisions. Dedicating their available time solely to their purpose, their passion and to their own, full benefit. But is this indeed the reality for an entrepreneur?

Well, as it is with everything, it depends. It depends on the type of business you want to run, on the size, reach, and scale, on your product or service, on your dependency of suppliers or contracted partners, on your team (or the lack of it), and on a thousand other points that may play a role once you decide to do your own thing. Most and of all, it will depend on your perspective and your definition of freedom.

Rule of a thumb is that the more people get involved, the more things get complicated. Whether it’s business partners, suppliers, contractors, your own team or your customers. With every person, every character who comes into play, you are losing some part of your independence.

Running a successful business means to serve others

I think it was Tim Cook who said it last year in a speech or an interview. “A truly successful product or service can only be realized by serving others.” However, serving others means, to a certain extent, to put yourself in the backseat, to figure out what those other people need and want, and to try to deliver it to them.

The thing is though that once you have a business, everyone becomes your customer.  The people who work for you. The people who work with you. And the people who buy from you. Those who work for and with you are called “internal” customers. Those who purchase your product and/or service are “external” customers. And your job as an entrepreneur is to serve them all.

Does this sound like freedom? It certainly is a step forward. By freeing yourself from a boss or a corporate structure, you will have definitely more freedom to make decisions. But at the same time, you will probably discover, that it is not what you might have originally imagined as freedom.

You will have more power when it comes to your decisions and it might feel like freedom in the beginning, when your company is small and easy to overview. But as your business grows and expands, your responsibilities grow with it. And with every percentage of growth, the percentage of your freedom starts to diminish.

The best of both worlds

Reaching financial independence means to me to stop trading time for money. Of course, I still need to have income, but I just don’t want to have to work for it. Not because I am lazy. I am a workaholic. But, as a great quote from Warren Buffett says: “If you don’t learn how to earn money while you sleep, you will have to work until you die.” And I definitely don’t want to end up that way.

There are several ways how this quote can be interpreted, but a realistic perspective is probably to assume that over your lifetime, your focus should shift from working yourself, to let others work for you. When you purchase stocks of companies and become therefore to a tiny part an owner of the respective company, you are doing just that.

As an investor and company owner, you start earning money by reaping the rewards of having other people working for you. And while you have to share these earnings with all the other shareholders, you are free from almost any responsibility towards both, internal and external customers. It is a pretty smooth way of becoming your own boss.

There are risks – but regular jobs bear risks as well

This is not to say that you wouldn’t have any risk. As a company owner, even to a small part, you carry the risk of realizing a loss if the company fails. Also, since your shares represent most probably only a tiny part of the company, you have hardly any vote in steering the companies politics or to contribute in any other way to its success – or failure.

But the degree of your freedom gets truly maximized. And the more different companies you invest in, the more your freedom is being manifested. As you diversify your portfolio, you automatically increase your risk protection and risk tolerance. Even if one company fails, if you have 20 others to support you, then your worries will be still limited.

This will become even more obvious if you draw a direct comparison with having a full-time job. When you invest, you can spread your investments over several companies and thus create multiple sources of income. If you have one full-time job, you are completely dependent on this single source of income. What happens if you lose it?

Food for thought

This is some serious food for thought. People who don’t invest will find a thousand reasons to tell you why investing is not something that regular people do. And they are right about that last part of that sentence. Especially in Europe, the amount of investors is surprisingly little compared to common folks who rely on their day-to-day jobs.

But those are the folks who get sleepless nights whenever companies start to talk about efficiencies, streamlining of processes, outsourcing, and globalization. Technological disruptions don’t excite them, because every disruption may put their livelihood in jeopardy. These are the people who constantly worry, and even more so as they get older.

And you can’t blame them, because these are the people who can’t come up with 500 Euros in cash even if any serious emergency appears in their life. I am not saying this to look down on anyone. I am saying this because people who never learned about how to handle money tend to end up in serious hardships. Despite having worked for 30 or 40 years, many fear that their retirement money won’t be enough to cover their rent and fill their fridge once they (have to) retire. We are not talking small numbers here. Surveys in Europe and the US show that the majority of our populations fall into this category.

This is in stark contrast to those who learned and understood that either having your own company or being a shareholder of another company, can significantly increase your chances for a worry-free retirement. There are no guarantees, but your chances are simply higher.

When it comes to human lives, things can easily and quickly get emotional. Investors, however, take the emotion out of the equation and simply calculate chances. Winning the lottery is not a valid form of retirement planning. Investing is. so when you get your next paycheck, put some part of it aside and start investing. Every single investment that you will do will put you a step closer to be a worry-free individual in the future.

The fastest way to get your first million

I like to keep my blog neat and simple. I like to write articles with text only, I seldom use pictures or videos. But every now and then I might encounter an interesting infographic that is worth sharing.

When it comes to the topic of money, the best place to find interesting graphics is in my humble opinion a website called Visual Capitalist. This is also the place where I encountered the following graphic:

infographic-time-to-first-million-dollarsNow the data for this graphic comes from a website that compares casinos. To be clear: I don’t endorse, recommend or promote anything that might be concerned with gambling in any way.

Having clarified that part, the data in this graphic is highly interesting. And kind of amazing. The vast majority of people who made it to the financial top gained their very first million in less than a decade from the moment of (really) trying. How did they do that? Mostly by setting up a business.

Having your own business

So evidently, the most effective way to gain financial independence is not real estate, stocks or gambling – but your own business.

This is actually not surprising. As we know, it takes money to make more money. When you start from zero, the fastest and only way to get some cash-flow started is to work for it. You might start with a regular job, but we all know that when you work for a company, even though you might get good benefits and salaries, the majority of the profits that result from your and from your teams’ actual work goes to your employer. Obviously, this is not the case when you got your own business. As you take on all related business responsibilities, you also reap the full benefits and cash-in the entire generated profits from your operation.

Shouldn’t we all strive for our own business then?

IF having your own business is granting the fastest way to riches, then this would be the right question to ask. And for many having their own business, being their own boss, it is something worth striving for.

Not to me. I invest in stocks for a simple reason. I don’t want to have to work at all. I want to reach FIRE. For me, escaping the rat race is all about reducing the amount of responsibility on my shoulders and to free up my time. When you have a business, you always take on additional responsibility and you always have to keep exchanging your time for money. I want to have the freedom to decide whether I work or not. As a business owner, you don’t really have that choice without accepting sacrifices on your income.

Furthermore, having your own business may be the fastest way to riches, but it’s probably also the hardest one. Of course, there are different types of business and you need to consider whether you just want to earn enough to get through the day, or whether you want to build wealth. Your workload might be mild if you have a small, self-sufficient thing going on. But if you strive for that million on your account, then you will have to work really, and I mean really hard, on a scale that will surpass the amount of stress and responsibility of most regular employees out there.

So it comes down to what you really want. There are many ways and opportunities to escape the rat race. But there are only a few ways that will truly align with your own expectations. For most people who become successful with their own business, the target is not FIRE. They want to work, just on their own terms. If that is your target, great. If not, then you got to find another way.

About monthly dividend stocks

It has been a while since I introduced the idea of receiving monthly dividends. To be more precise, the article was about receiving dividends every 2 weeks – with only 2 stocks in your portfolio. If you like to take a look, you will find the article HERE.

It’s easy to create a portfolio with dividend-paying stocks and if you buy the right ones, then it’s even easier to create a portfolio that will pay you monthly. Or even weekly. So where and how do you find these companies? Don’t despair, I got you covered.

Having a long-standing tradition of taking care of its shareholders, most of these stocks are either of US or Canadian origin. Some are just regular companies, some are REITs and some of them are BDCs. The two companies that I mentioned in the above-linked article are called Realty Income and Gladstone Investment Trust. One is a REIT, the other one being a BDC. But there are more. As of now and if I am not mistaken, 39 to be exact.

Out of those 39, I chose only 10. They have a solid market capitalization and sufficient data and forum discussions available online on them. The 10 companies are as follows. I sorted them alphabetically, without any specific evaluation in place:

  • AGNC Investment Corp.
  • Apple Hospitality REIT, Inc.
  • EPR Properties
  • Gladstone Capital Corp.
  • Gladstone Commercial Corp.
  • LTC Properties, Inc.
  • Main Street Capital Corp.
  • Prospect Capital Corp.
  • Shaw Communications, Inc.
  • STAG Industrial, Inc.

There you go, plenty of research for you right there to fill your weekend. Among all the monthly dividend paying stocks, one name stands out as a seemingly dedicated company to offer its shareholders as many monthly opportunities as possible. Gladstone. Gladstone Investment (GAIN), Gladstone Capital (GLAD), Gladstone Commercial (GOOD) and Gladstone Land (LAND) are four popular investments among monthly dividend seekers. Gladstone Land is not on my list above but you might want to do some research on it anyway. Gladstone Investment is also not mentioned here, but it pops up in my previous article and you can read more about it if you click on the above link.

Also just to mention, the Apple Hospitality REIT has absolutely nothing to do with the technology company that we all know as Apple. I have no idea whether there is any dispute on the name/branding, but both companies are not related whatsoever.

The benefits of monthly payments

You don’t need monthly-paying stocks to receive monthly dividends. You could also buy a bunch of other companies which pay dividends on an annual, semi-annual, or quarterly basis. If you purchase enough of different types of them, then you will surely also get to the point that you receive dividends each and every month.

But well, with monthly paying stocks it is just an easier way to get there. If well structured and wisely chosen, you might even get to a point that you receive weekly dividends. Isn’t that amazing?

Well, not everybody thinks so and there are plenty of debates and discussions on whether a monthly payment is indeed a benefit. At the end of the day, whether you receive a partial dividend every month or a lump sum once a year shouldn’t make any difference, right? Some argue even that the reduction in bank-fees alone would justify for a company to not make any monthly distributions.

For me, it’s more of a psychological thing. The immediate, and frequent satisfaction of seeing my investments paying off simply feels great. Watching my portfolio and dividends growing and seeing it first becoming a supplement to my regular salary, and later, as the dividend income keeps growing more, to see it developing into a full-fletched source of income for my future. It’s very rewarding.

We all have a living to make. We all have monthly bills to pay. Monthly dividends are a great way to get this under control. Especially if you aim for FIRE.

As Warren Buffett said, if you can’t figure out a way to earn money as you sleep, you will have to keep working until you die. Now I definitely don’t want that.

Recent article updates

On another note, I have recently updated two of my most read articles so far. Nothing is set in stone, and as I learn more I will keep updating some content every now and then. So if you like to read again why Nobody wants to get rich slowly or about The Rat Race, then please feel free to do so.

Disclosure

And finally, not to forget the obligatory disclosure. I have shares of Realty Income, Gladstone Capital, Gladstone Investment and Main Street Capital in my personal portfolio. Furthermore, I intend to have stocks of all the above-mentioned companies in my portfolio over the course of this year.

Dividend Stocks make your worries go away

Over the last couple of months, I have started to reduce my social media presence and to close many of my online accounts. My Facebook account has been deleted (I seriously didn’t miss it a single day), and the same thing happened to my Twitter account and AirBnB. As I move closer towards my goal of FIRE, I plan to reduce my social media presence to a bare minimum. In the end, this blog… and possibly also my LinkedIn account for business purposes shall remain. Most others will be got to go.

But speaking of LinkedIn, I have recently noted a larger amount of posts where people are actively and openly seeking jobs, while also publicly stating that they have been unemployed for a couple of months. Some of them even go as far as to explain that they can’t pay for their children’s schools anymore, or to pay rent and needed to sell their house or downsize their condos.

Some of those CVs out there that I took a look at are actually quite impressive. From experienced, well-traveled professionals who reached tremendous success over the years, to aspiring intellectuals who surely made an impact in their previous organizations. And yet it seems that while they grew older, their age outweighs their experience. It just gets tougher to get hired, especially when you reach your 50s.

Prepare yourself

There are tons of situations why and how you might lose your job. You could debate on what is right or wrong, whether something is fair or not, and who to blame for what happens. Or you can prepare yourself. I like to prepare myself because blaming and guessing or discussing the issue at hand will probably not solve my problem. At least not as fast as I need it to get solved.

For me, investing in dividend-paying stocks is one pillar that I use to build my protection on. Due to the nature of my job, I grew with this challenge in mind since the beginning of my career. Every year or two I have to find a new hotel to work for, or worry whether my contract gets extended. Working as an expat in Asia comes with tremendous benefits and financial advantages, but the price to pay is a huge lack of security. Because every contract is limited to only 1 or 2 years and most come without any retirement pre-cautions, one can never truly relax and consider things to go well forever.

This is why securing several independent streams of income is crucial, and why the idea of financial freedom has been engraved in my DNA. I got to prepare myself for the worst-case scenario. I am 39 years old now and just signed another 2-year contract. Looking at my colleagues and other professionals in my industry, I know that 45 is the magic number when things will start to get really tough for me. Therefore I need to be ready for that before this challenge kicks in.

Dividend-paying stocks are a great source of income

It takes some time to play out well, but dividend-paying stocks are an amazing opportunity to benefit from our financial system. Buying the right stocks can result in tremendous advantages and a strong, re-occurring source of income.

When I was significantly younger, I didn’t really understand the power of what appeared to me “small yields”. 2% or 3%… this means that when I put 1.000 Euros into some company shares, I will get only 20-30 Euros back every year? Laughable.

What I didn’t appreciate at that time, was that not only do these amounts compound over a long period but also that those well-run companies tend to increase their payouts year-on-year.

Why is this important? Let me give you an amazing example. Warren Buffett is invested in Coca-Cola for a very long period through his company, Berkshire Hathaway. Over the years, Coca-Cola kept increasing its dividend payout. Year on year. The result: The yield on cost for Warren Buffett is now a stunning 62%!

This means that every year the stock returns him 62% of his initial investment. Getting back to our investment thesis of 1.000 Euros, this means that every year now he gets 620 Euros back in dividend payments for every 1.000 Euros that have been invested.

There is no hocus-pocus there, it’s just very basic and simple mathematics. And coca-cola is not the only company out there with such stunning results. Look no further than the brands you know well: Apple, Starbucks, Microsoft, Daimler, Shell… the opportunities are endless.

Start investing and stop worrying

No matter what your job or your business is, setting up a solid stock portfolio with dividend-paying stocks is a smart thing to do. While you are still working, it will increase your income. When you have no job, it will secure your most urgent needs. And when you plan to retire, you might be able to do so without even touching your savings.

But even more importantly, having another stream of income will put your mind at ease. Because even if you should lose your job, you will still have cash coming in. You will be able to buy food, and if you invested enough even pay your rent or your children’s school.

What happens if there is a crash in the stock market? Keep your cool, lean back and wait. The most reliable dividend stocks continued paying dividends even during the worst time on the stock market. Shell i.e. never lowered their dividend since the II. World War! Of course, there is some risk to every company and every stock, but that is why you need to diversify and purchase several stocks of different companies.

Do this especially when times are good, so you worry less when times turn bad.

Disclosure: I own shares of Apple, Daimler, and Shell at the time of writing. This article doesn’t represent investment advice. Please ensure to do your own due diligence before making any investment decisions.

The Power of Cash-Flow

Conservative investors or people who believe that stocks are too risky often prefer to put their hard earned money in real estate. The usual arguments are always the same and go something along those lines:

  • It’s a “real” asset, meaning that you can touch it, you can see it, you can visit it or live in it
  • It’s a safe investment because real estate rarely loses value
  • It’s generating regular and re-occurring income on a predictable basis

I will get on all three points but the focus will be on the last one: Generating regular and re-occurring income on a predictable basis. This is what we call cash-flow, and I will tell you why it’s such a powerful tool.

A “real” asset

This is a very true point and among the main reasons why people like real estate. Probably most of us have this little dream, of having our own place that we call home. Where we don’t need to pay rent, where we can do what we want and how we want it. Where the only limitation to our creativity and our wish on how to shape it is only our own imagination and the available budget to follow through on it.

So let me tell you first that this is, and probably will remain a dream. The sheer amount of regulations imposed on house construction, building permits, safety requirements, and local rules & regulations will restrict how your house has to be shaped, what building material you are allowed to use, where the doors and windows need to be placed and much more. So, there will be many things to restrict you, and you won’t be able to decide on your own every single part of your dream. You still got to follow some rules.

Second, while it is a so-called “hard” or “physical” asset, it comes with a few flaws that are worth mentioning and required to think about. While you might save money on rent, there are tons of other considerable costs that will strongly diminish your return on investment and may even put you in financial trouble if you are not well prepared for them.

Broken toilets, pipes, roofs, and floors are just one part of it. But new legislation or state laws might come in at very unfortunate moments and force you to spend much more than you bargained for. For example, imagine that the government decided that all houses require to become more energy efficient and thus you will have to upgrade the entire house insulation. A toilet or a pipe might set you back only a few hundred Euros, but a broken roof or house insulation will quickly go to the thousands.

Ever-increasing value

This one doesn’t require too much explanation, I mean the last housing crisis is not that far back. So yes, there is a real risk that real estate also may lose value. But while this point might still be debatable, the more interesting challenge for real estate is about the trading of the asset itself.

Buying and selling real estate is just hard work. It’s not easy at all. It’s not easy to initiate the sales, not easy to find buyers, not easy to negotiate the price and certainly not easy to process the whole thing with banks and all involved parties. Because while for some areas it might be easy to find a place to buy, when it comes to selling the property things can turn really challenging. Finding a buyer takes time, negotiating the price takes time. And the result is everything but certain.

Therefore, and to sum it up, the promised or expected value increase might turn out very different once you deduct all the cost you had to cover over the years holding it, and on top of that, if your few potential buyers won’t be willing to pay your expected price.

It’s generating a steady cash-flow

Whether you save money on rent or cash in rent from your tenants, real estate generates solid and predictable cash-flows every single month. And depending on the size, location and attractiveness of the property, it may be some quite serious money.

Cash-flow is great for a few reasons. For one, it makes you feel to be in control over your asset, it feels safe and very predictable, and you see the result of your investment immediately on your bank account.

Furthermore, due to those regular payments, you are able to manage your cash more actively and spent or re-invest on a frequent and dependable basis. The greatest advantage of solid cash-flows is your control over the money and many real estate investors consider it therefore superior to owning stocks.

There is another way

I got to admit that cash-flow is probably one of THE arguments to bring to the table on any investment discussion. It simply represents everything we expect from an investment: Receiving cash back straight to your account.

However, I argue that you can reach this with stocks in a much better, smarter, faster and easier way, and you are still able to choose whether you invest in companies or real estate.

Dividends also generate cash-flow

To start off, most company stocks that I invest in pay dividends. That’s my cash-flow and it’s also very important to me. Not only does it feel good to receive cash regularly, but even more it allows me to re-invest my earnings. This means that I can take advantage of upcoming opportunities to either reduce my investment costs (cost-average-effect) or furthermore increase my earnings by adding more shares of the same or another company. No matter which of these 2 options I choose, the result will be the same: The number of my shares will increase and so will the amount of my next dividend payment(s). Albert Einstein called it the 8th world-wonder and we all know it from our school-days as the 2 magic words: Compound interest.

Dividend-paying companies have all different policies and they tend to be also very diverse, depending on the country and company profile. But even the very average investor can manage to buy stocks to receive dividends every single month. Hell, just take a look at one of my previous articles where I show you how to get paid dividends every 2nd week!

Mix the best of both worlds – with REITs

If you think that real estates are still the more secure option then you can do even a much smarter thing that will combine the benefits of regular shares with the advantage of the benefits of real-estate by investing in so-called REITs (Real Estate Investment Trusts). Not only do they distribute a large chunk of their profits in the form of dividends, but also you won’t need to bother with all the physical and hard work that always comes with any physical property that you own. Broken roofs or new regulations won’t be your headache and on top of that, your risk will be spread across a significant amount of properties, as most REITs tend to manage not just one or two, but hundreds of different objects.

Investing in REITs won’t give you the feeling of owning a “real” asset, but it will take away all the hard work, balance your risk, and finally also remove all the trading obstacles. Because REITs can be traded on the stock exchange, finding a buyer or seller is as easy as it possibly can be. Just place the order and watch it being processed in a blink of your eye. It’s so easy.

Last but not least and a very, very, VERY important point to me: You can invest with as little as your wallet lets you. There is no need to talk to banks, take on hefty loans and keep paying back for the next 20-30 years. Borrowing money is called leverage, and it’s a serious thing. As our mastermind Warren Buffett famously said, leverage is the single thing that can crush any investor and you got to be really smart how to use it.

I don’t consider myself smart enough for that, so I prefer to stay away from leverage and instead invest only the money that I have available at the time of my choice.

It’s all about passive income

My personal aim is FIRE – and it means to generate sufficient passive income at some point so I really don’t need to do ANYTHING – unless I want to. That’s what the word “passive” stands for.

Buying and managing hard assets is not matching my definition of passive income. Buying a house or condo requires a lot of work, dedication, and responsibility. All the things that I want to get rid off. Therefore, stocks and REITs are for me a much more desirable solution.

This is, by the way, the reason why financial advisors need to evaluate your character, risk factor and expectations before helping you on making an investing decision. So you might want to ask yourself now: What kind of investor are you?