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[weenog]

I've recently come to two conclusions: my earnings have the potential to be dangerously unstable, and the interest rates on savings accounts are for suckers.  I'd like to start building a steady income stream to supplement my wages in the lean times, allow the occasional unpaid vacation or job-seeking period, or just reinvest to my future benefit any time I'm collecting more than I need to spend.  Eventually I'd like to retire.  I think I need to start investing for dividends, but I have no experience there, and only the tiniest scraps of theoretical knowledge (not much spare time to spend on research).

Any time I'm considering doing something new and risky with my money, I like to seek out the advice of people with relevant knowledge, ones who stand to gain nothing from my misfortune and therefore won't be tempted to give me bad info for their personal gain.  AFAIK, I don't personally know anybody with knowledge in this field, but bay12 is a big place, so I thought I'd throw out a line and see what comes up.

Possibly relevant info: I'm 31 years old, currently make about $1400-1600/month, and my bills eat about $1000 of it. I have no credit history (not bad credit, I simply don't show up in credit checks because I've never lived on credit), but intend to start building one soon with a small loan and a secured credit card.  I am not supported by anyone else, nor do I have any dependants.

[Max White]

In general there is a risk/reward relationship. Higher risk = higher reward.
Just find some blue chip company that pays some dividends and invest over time.

[Levi]

In Canada we have RRSP's(Which I think might be like 401 plans in the US).  They are essentially just mutual funds, but the neat trick is that up to a certain limit you can drop money in and not have in taxed as income.  So every year I drop about 9000$ dollars in it and I get a nice rebate during tax season.  Its pretty much the easiest way to invest I think.

If you are interested in stocks, then things are a bit more risky, but also more fun.  I don't have any great advice there though, because I mostly just invest as a hobby so I don't mind high risk. 

I do view money just sitting in a savings account as a waste, so its best to do something with it!


Edit:  Apparently 401k's have a 10% penalty if you take it out before you are 59.5 years old, so maybe that isn't the best option...

[weenog]

Well I'm looking for dividends, not buy low/sell high market speculation.

[Levi]

Mm, I don't know as much about investing for dividends.  It usually looked pricey to me.

[Max White]

It is pricey, because it is safe. Safer = higher cost. If you want the big money, you need to invest in riskier ventures.
Or, better yet, invest other peoples money, and reap the benefits.

[Warthog]

You probably want to invest in a mutual fund or ETF that focuses on high dividend yields then.

There are various sites that can help you screen ETFs and funds by their yields, like for example:
   http://etfdb.com/compare/dividend-yield/

But you'll still want to read what each ETF is focused on to see if it meets your style.

I would recommend NOT picking individual stocks;  you should only pick stocks if you can afford to buy many of them to diversify.  Single stocks will swing wildly in price and their gains/loss will wildly exceed any dividend gains.

Frankly the same goes for ETF and fund.  If you want stable value, with a fixed return you should be looking at bonds...

[Warthog]

One more thought is that you should be explaining how you manage to live off $1000/mo.  I could never do that, I'm really impressed...  That in and of itself shows you're pretty financially savy.  And having internet access to boot!

[Mullet Master]

Let's do a quick number crunch for some ballpark figures.  I'm not trying to give advice here.

You are saving approximately $600 a month. That's $7200/year.

Pretty admirable, really. I've never been able to save money at that percentage of income, and I consider myself pretty thrifty.

Look at a Fortune 500 company that pays dividends. I just picked GE, Kellogg, and Coca-Cola off the top of my head. For any given one of these stocks, they are from 2.83% div yield/year to 3.28%. Right now, inflation is at an all time low, approximately 2%. So having any one of these stocks would give you approximately 1% above inflation a year.

So, with a $7200 initial investment... that means..

$72 a year, above current inflation. And current inflation is incredibly low , so likely it'll be a number much closer to zero on a long term basis.
That's a lot of money down, for not a lot of return.

But, somebody will argue "There's stocks with higher dividend yields out there!". I will say yes, that is true, but... most of those stocks have also taken a nose dive in value and that inflates the dividend yield value. You don't want to invest a large sum of money and lose a large % of the initial value.


 

[weenog]

I lost my place at the end of August and spent a period of time homeless and broke.  Then I moved on to somewhere with a better economic climate and spent a period of time homeless but not broke.  Got into an apartment just after Christmas, but I still behave more or less like I did before.

• Rent is $775/month (I'll be looking for something cheaper when the contract is closer to expiring), and includes heat, water, and basic cable.  Garbage collection bill is indirectly included also; we have a communal dumpster and the landlords take care of that.
• Phone bill for 1 smartphone with unlimited calling minutes and text and 2 GB data/month is $125.  I will probably be cutting this to 1 GB/month, I never come close to the 2 GB mark and it would save me $10/month.
• Cable internet and modem rental is $55/month.  I could cut this to $50, but I don't think I'll be using this cable service long enough for the purchase price of the modem to equal the money I'd save by not renting one.
• Electric bill is a $9 flat fee plus the price of how much power I'm actually using, and I use very little (I did the math once and apparently my girl and I put together use less than 1/10th the average electricity consumption for 1 person).  The highest it's been so far is $30, and that was the month that folded a $15 initial setup fee into the bill.  No television, no lights when they're not needed (and a couple of 7-watt sensor night-lights for basic navigation purposes), no stereo, and portable devices like phones and the laptop are charged at public outlets like the library or McDonald's as often as they are here.  Shaving razors are bladed, not electric.  Hot food is cooled in the snow before it goes into the refrigerator.  I use layered normal and hand-knit blankets (both from the thrift store) to trap warm air like thermal underwear and keep my sleeping area warm on extremely cold nights, not electric blankets.
• I don't often pay for food.  One of the reasons I work where I do is so I have access to free food made of real ingredients, not empty carbohydrates and fried lard like you'd get at KFC or somewhere similar.  Now that I have access to a refrigerator, stove and microwave, I can keep leftovers to use later, and when I do pay for food, I can get raw foods cheaper, and I don't have to pay extra for overly sealed, single-serving items to avoid having open food emitting smells and attracting wild animals to my tent.
• I don't own a motor vehicle.  I get around on foot, by bicycle, sometimes by mooching rides from coworkers.
• I wash my clothing when it's visibly dirty or when it smells, not necessarily after a single use.  I use only half the recommended amount of laundry detergent, which saves me money on detergent, and also on clothing.  As I learned around the same time I learned to hand-wash clothing when necessary, manufacturers recommend you use about twice as much detergent as you actually need.  This is wasteful, and it can actually damage what you're washing.  Try cutting back, your clothes could last longer before wearing out.

[Brewster]

(*) To answer your question: Merck, Intel, Verizon, ConocoPhillips, Lockheed Martin, and Altria Group are your high dividend stocks.
(*) Get a credit card, buy like groceries with it and pay it off right away so you don't incur any interest fees. Best, and simple way to build credit.
(*) To me, clean, good smelling clothes beats a smartphone, but that's up to you.
(*) Get an antenna and cut the cable - cable sucks really, and you can always see shows online.

[Catsup]

what i know:
-stocks are riskiest, but pays out the most if you can find the right ones
-bonds, especially governmental ones are less risky but you wont likely get your money back for some time, and give less return than stocks
-bank saving accounts give out the least; you may even be interested in joining a creditor's union which lends money directly to businesses, but not so directly as in investing (im talking particularly about businesses in the starting phase).
-try to have your money split between multiple investments

one more thing...
-maybe invest your spare money into continuing education