This Simple Strategy Could Pay You $50,000 In Yearly Dividends
- Date: 30-Jan-2021
- Source: Forbes
- Sector:Economy
- Country:Middle East
This Simple Strategy Could Pay You $50,000 In Yearly Dividends
One of the biggest risks you'll face as an investor is the temptation to listen to people at the extremes.
In income investing, these so-called "gurus“ break down into two camps. The first are the indexers, who argue that all you need to do is buy a fund like the Vanguard S&P 500 ETF (VOO), which, as the name suggests, simply tracks the S&P 500. Sure, the yield is a crummy 1.5%, but you need to stick with it, work for 40 years, save as much as you can, and live off the low payout.
Unfortunately, if you follow this "advice,“ you'll have to save north of $4 million if you want a $50,000 dividend stream to live on without selling down your holdings. Let's be honest: almost none of us will be able to save that much, no matter how long we work.
Then there's the other camp, which points to ultra-high-yielding stocks and bonds with dividends of 14%+. At that rate, you need just $360,000 to get $50,000 of dividend income.
The trap most followers of this approach fall into is that they simply spot a big yield and plunge in, forgetting that the double-digit-yield space boasts many payouts that are unsustainable.