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When the stock market took a dip back in March, I decided to do some research and add a new stock to the portfolio. I used the $220 left in my account after bills were paid to purchase a single stock. I literally forgot about it until I received a message on my phone letting me know that I had received a dividend of $12.80 and it was automatically reinvested.
Just like that, I added more than $50 ($12.80 X 4) a year to my annual income. The best part is that the number of shares will increase and the amount I receive will continue to grow year after year, even if I never add another dime to the position.
It wasn’t long ago that I was buying clothes with my extra money, only to find those same clothes months later in my closet with the tags still on them. I’d then have the audacity to not like the clothes anymore. And just like that, my hard-earned money was squandered and gone forever.
Those days are gone! Today, I’m only interested in building wealth with my extra money. Wealth that doesn’t require my attention, wealth that gives me real choices and wealth that will allow me to not just retire but retire comfortably.
In this post, I’m going to share the top seven income-producing assets for building wealth.
HYSA Savings Accounts:
A high-yield savings account pays an interest rate that is often 10 times higher than your local bank. When interest rates are on the rise, a HYSA will provide passive income and liquidity. A HYSA is a great place to park your emergency fund and money that you plan to invest in the near future, all while collecting interest.
CDs (certificates of deposit) are also very flexible. You can find terms as short as one month or as long as seven years. CDs allow you to take high interest rates into the future, if you pay attention to rate trends. With interest rates falling, I managed to lock in a rate that we won’t be seeing for years. You should have a fully funded emergency fund before venturing into CDs because if you need your money before the CD matures you’ll have to pay a penalty. Also, If you don’t get ahead of sinking interest rates, CDs often are not worth the commitment.
I invest in bond ETFs and individual treasury bonds. I consider bonds (I-bonds) a triple threat. They’re inflation-protected, they offer a higher-than-average yield and they’re exempt from state and federal taxes for 30 years. The yield is always higher than your local brick-and-mortar bank and are often better than many HYSA offers.
Bonds are also very stable and don’t fluctuate like stocks. But they also don’t have the tremendous upside that stocks offer. While bonds are frowned upon by most of the investment community, they will always have a place in my portfolio because they allow me to sleep at night. More importantly, bonds also produce a reliable passive income stream. Bond ETFs pay out quarterly and treasury bonds (I-bonds) pay out monthly.
ETFs, mutual funds and individual stocks. This is where most of my money is invested. I built my taxable portfolio around ETFs and I use individual stocks to ensure that I’m receiving dividends every month.
With the groundwork laid, the only thing I do is consistently buy shares. I love buying dividend-paying stocks and ETFs because I don’t have to wait 20 years to see the fruit of my choices. It only takes one quarter or in some cases one month to receive a dividend. Mutual funds play a big role in my retirement account because I’m able to put monthly purchases on automatic which is something that you can’t do with ETFs.
MLPs (Master Limited Partnership) like a partnership, an MLP issues units instead of shares. However, these units are often traded on stock exchanges. Investors receive tax-sheltered distributions from the MLP. MLP’s offer a very high yield in the range of 5% or more which makes them very attractive for income investors.
MLPs are also considered low-risk, long-term investments, providing a slow and steady income stream. The only MLP that I own and invest in regularly is ENB (Enbridge). I chose ENB for one reason: the company receives a fee on every barrel of oil that flows through its network. No matter which direction energy prices go, Enbridge still gets paid.
Real Estate Investment trusts. I go back and forth on buying an actual investment property. For now, my real estate investing involves Vanguards VNQ and O. I collect quarterly dividends from VNQ and monthly dividends from O. VNQ has a yield of 5.2% and O has a yield of 3.54%. There are literally hundreds of options out there but these holdings work perfectly for me and I continue to buy both on a monthly basis.
Websites, Podcasts and Youtube:
All have great potential as passive income-producing assets. But they do require a significant amount of upfront work. I’ve been writing this blog for the past three years and while I do receive a small amount of income for writing it, the income is not passive, the income is earned. If I stop writing, the income would also stop. Monetizing the site through adds and affiliate links would turn this blog into a passive-income asset.
YouTube and podcasting also require a significant amount of time before you would see any income. But once the work is done, your videos and podcasts have the ability to continuously make money for you without any additional work required from you.
Advice and encouragement while building assets
Get started! Building wealth takes time and accumulating enough assets to cover all of your bills will certainly take patience but every purchase will bring you one step closer. The assets referenced in this blog have the potential to generate a significant amount of income for you if you remain consistent with your investing. Whether you choose to own all the assets mentioned here or just a few its important to remember you’ll only get out of it what you put it in. None of these assets will make you rich quickly but you will build wealth faster and faster as time and compounding begin to work for you.
Remember, It is a fight to build wealth no matter where you are in the process. Everything around us conspires to take money out of our hands. But you must fight the good fight. Continue to save, invest, and grow your wealth even when it seems impossible. Save your pennies (copper) until they become dollars (cotton).
Note: The stocks and information presented in this blog are purely for entertainment purposes and should not be consumed as advice.
Originally posted 2020-07-23 08:30:00.