I took the lazy journey to wealth and it’s worked out well for me. Thanks to Younger Me, I’m financially comfortable and should be for the rest of my life. My parents gave me a good education, but no one would ever mistake me for a trust fund baby. They set a good example of how to live below one’s means, to save for the future, and to invest in the stock market. However, I never followed their path of stock-picking. That was a little too much work for me. So I took the lazy journey and it worked out for me.
When we were both still living at home, I watched my younger sibling read the stock pages in the newspaper each day. That never appealed to me. After all, what good could come from reading all those numbers? At the time, I didn’t have the brains to realize that my sibling was on to something major. Had I simply done what he had done, my financial situation would’ve been so much different. If he could learn it, so could I. Had I simply recognized that my attitude stemmed from an arrogance rooted in my status as the eldest, I would’ve made a different choice.
The fact is that I could’ve simply copied my sibling’s study of the stock pages and I would be in a completely different situation than I am today.
Dividends had me at “Hello”.
Instead, dividend investing turned my head. In the tinies of nutshells, this is what I understood about dividends. Some companies pay dividends to investors who buy their shares.
All I had to do was buy shares in dividend-paying companies. I found this investing style incredibly attractive, and it didn’t require me to pour over the mouse-sized font that was printed in the newspaper every day. I wouldn’t have to pay attention to the daily stock prices. Instead, all I would have to do was continue to hold the stock and the companies would continue to send me money. The only thing I had to was invest some of my part-time paycheque and a company would send me money? Where do I sign up?
So I started investing for dividends many, many years ago. Every two weeks, my automatic transfer siphoned money from my chequing account and re-directed it to my investing account. Today, I’m comfortably earning a few thousand dollars every month. Thanks to automation, my monthly dividends payments are re-invested to maximize compound growth. My portfolio grows from both my paycheque and my dividends. It’s a beautiful system!
Younger Me made smart decisions.
Looking back now, I’m pleased that Younger Me took the initiative to start. Younger Me consistently invested every two weeks and allowed time to work its magic. This is called dollar-cost averaging. Regardless of the price, Younger Me bought as many units of the chosen security as possible and never sold them. More units meant more monthly dividends. Spending the dividends each month was never an option. Instead, Younger Me wisely relied on the dividend re-investment plan (DRIP) to ensure that every single dividend bought more of the underlying security. Younger Me switched from mutual funds to exchange-traded funds upon realizing that the same basket of stocks could be acquired more cheaply.
Each of these decisions required no more than 15 minutes of work to put in place. I had to fill out a few application forms and I entered some information into my computer. I only had to take each step one time and then I never had to think about it again. My system is well-established and it operates extremely smoothly. It requires very little attention from me. The end result? Today, I am a happy member of the Double Comma Club. I still enjoy seeing the dividends pouring into my portfolio every month. Knowing that I could live off my dividends if I absolutely had to gives me no small amount of comfort. It’s a wonderful feeling!
However, with age comes wisdom. As I reflect back on choices that Younger Me made, I recognize that…
Younger Me could’ve been smarter.
Had I been a little less lazy, I would’ve done a tad more research and invested in growth-oriented securities. After all, the stock market was on a tear from 2009 until March 2020. The returns from the growth in the stock market dwarfed the returns earned on my dividend ETFs. I should’ve invested more in the young and hungry companies by contributing my money into equity-based ETFs. That’s where the engine of portfolio growth really comes from. In other words, had I invested in equity-based ETFs, I would’ve had the natural growth of the stock market in addition to my contributions propelling my portfolio forwards. My returns from equities would’ve been much larger than they were from dividends.
By investing in dividend-paying companies through my dividend ETFs, I was essentially investing in the established, old-school companies that don’t really have room to grow. I had placed my bets on income-based securities rather than equity-based securities. From a certain perspective, this was a mistake.
The second way that my laziness cost me big time was in failing to appreciate that higher returns sooner would mean that I’d reach my current financial situation years earlier. I’ll retire early thanks to my wise choices, but I could’ve retired 5 years ago… and with a lot more money… had I done that little bit of extra research that I’d mentioned. One little tweak in my decision-making could have propelled my portfolio forward by leaps and bounds. Fully participating in the 11-year bull market would’ve done wonders for my portfolio.
Better late than never, right?
Alas, I didn’t start investing in equity-based ETFs until October of 2020. Even in 4 short years, I can see the difference that equity-based ETFs have had on my returns. Trust me. I won’t repeat Younger Me’s mistake. From this point forward, equity-based ETFs will have a prominent place in my portfolio. Accordingly, I anticipate that my portfolio will continue to benefit from my recently-acquired wisdom.
Today, I tell others who are starting their investing journey to invest in equity-based ETFs. I remind them that the potential returns are better because compounding works faster with higher returns. They need not make the same mistake that I did, i.e. failing to appreciate this lesson when I was younger.
Let my story & mistakes be your cautionary tale. When investing for the long-term, well-diversified equity-based ETFs are the securities that will deliver the best bang for your buck. It’s definitely a more volatile path, but it will get you the Double Comma Club faster than my journey took me. Had I invested in equities instead of in dividends, I would have been better off financially.
Let’s face facts. Time still would’ve passed. I still would’ve earned dividends and capital gains. However, my portfolio would be larger thanks to the higher returns of equity-focused securities. Oh well… I can’t win them all!