How much do I need to start Investing?
This is a wonderful question, being asked at a most amazing time in history. Speaking of history, historically investing in Mutual funds or having a Stock broker was very costly just a couple of decades ago. Those days are over, you can literally start investing with $50-$100 in accounts that are literally free to use, yes I said free, meaning no commission fees or account fees, like seriously. Robinhood is one such platform where you can start with $5, but the catch with Robinhood is you can’t open taxed advantaged retirement accounts with them (so you lose the tremendous tax advantages of Individual/Roth IRA’s). M1 Finance is a newcomer where you can open a taxable account for a mere $100 minimum, or you can open a retirement (Roth, Tradtional, SEP) account with a starting balance of $500. If you are interested in trying M1 finance and want to get an extra $10 when you open and fund your account with at least $100, use this link to open your account. If you want to try Robinhood you can get a free stock just for opening up an account and no minimum amount needs to be invested. Here’s the Robinhood link to open an account and claim your free stock . So with all that being said there’s really no excuse not to start investing today!
What are Dividends?
Dividends are a sum of money paid regularly (typically quarterly) by a company to its shareholders (you and I) out of its profits (or reserves).
When are Dividends Paid, and how do I receive them once they are?
The companies that pay the dividends come up with when and how much dividends are paid to shareholders. The majority of companies pay quarterly, but there are some companies that pay every month, a few that pay twice a year, and a very small amount pay once per year or annually. You will receive the amount paid that month, quarter, bi-annual, or annual in your brokerage account, retirement account, or 401k provider (I’ve heard but am not old enough to have ever received dividend checks in the mail, haha).
What is the Ex-Dividend Date?
To determine whether you will get a dividend when you purchase a stock, you need to look at two important dates. They are the “record date” or “date of record” and the “ex-dividend date” or “ex-date.” When a company declares a dividend, it sets a record date when you must be on the company’s books as a shareholder to receive the dividend. Companies also use this date to determine who is sent proxy statements, financial reports, and other information. Once the company sets the record date, the ex-dividend date is set based on stock exchange rules. The ex-dividend date for stocks is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.
Does the Stock Price Change on the Ex-Dividend Date?
The price of the stock drops by the same value of the dividend amount on the ex-dividend date, therefore buying a stock right before the ex-date shouldn’t result in any profits. Similarly, investors buying on the ex-dividend date or after get a “discount” for the dividend they will not receive.
What is Dividend Growth Investing?
Dividend Growth Investing, sometimes abbreviated DGI, is a strategy of investing where the main focus is investing in companies that year after year raise the amount of dividends paid back to shareholders (you and me). This has a tremendous compounding effect and make it one of the most profitable investing approachs there is.