These days, my main category of passive income by far is Dividend Paying Stocks, with this stock portfolio, although I hope to eventually start earning similar amounts or more on my Internet ventures and eventually transition into a kind of digital nomad lifestyle. However, I still love the Dividend Stocks for the following reasons:
Dividends: the Ultimate in Passive Income
Of course, you need to do your research (and then research some more!) and stay up to date on your investments, but if you invest in big blue-chip companies (ie: Exxon, Apple, Coca-Cola, Pfizer), you don’t necessarily need to babysit them as you would for a much less stable company. Anyone could reasonably assume that these companies will be profitable and increasing dividends for the long-term.
It’s passive income in the form of dividends, but you also have the chance for capital appreciation (ie: the stock price goes up). If you’re careful to buy stocks when things are “cheap,” it’s really possible to have extremely high returns when you combine the dividends with an increase in stock price. Although I’m not planning to sell my stocks, when I “retire,” I will probably start selling off my stock positions to fund things like an apartment or house, starting a business, or in case of illness.
Low Trading Costs
One of the major indicators of total return in a portfolio is trading costs. Buying and holding clearly is preferential in this regard to frequent trading. My trading costs for the year are generally around $100.
There are plenty of other reasons too! Check out this book that I recently read about the topic. Although I knew most of the information, it would be excellent for those new to the investing in dividend paying stocks.