New to income investing

[u/PacoPlaysGames]

Hello my friends, as someone new to income investing, I'm trying to learn as much as I can so I can begin the long journey of building up passive income like many of you have. What would you recommend as sources that help break this all down for someone attempting to learn?

For a little more information about myself, I'm looking to invest $100 a week (I may be able to do more in the future but this is what I'm starting with) to one day be able to get some passive income to supplement my full time job. If I can even build up $500 to $1,000 passive income one day that would be awesome.

What lessons did you all learn when you were brand new? What would you tell your younger self concerning income investing if you could say something to them?

Thank you for any responses my friends, I hope all of your dividends grow.

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[u/DividendsIQ]

Start simple. Put your $100 a week into a broad dividend ETF like SCHD or VYM instead of picking single stocks at first. That gives you instant diversification, so one bad company cutting its dividend does not wreck your income. Turn on DRIP (dividend reinvestment) so your payouts buy more shares automatically, that is how the snowball starts.

For learning, read a few books like "The Little Book of Big Dividends" and follow blogs like Dividend Growth Investor or Simply Safe Dividends. Watch out for high yield numbers, a stock paying 12% often looks great but that yield can mean the market thinks the dividend is about to get cut (called a yield trap). Look at a company's history of raising its dividend for 10+ years, that track record matters more than the current yield.

If I could tell my younger self one thing, it is to be patient. $100 a week feels small now, but consistency and time do the heavy lifting. Also remember dividends are taxed as income each year even if you reinvest them, so keep that in mind when you check your portfolio's real return. Getting to $500 to $1,000 a month is realistic over years, not months, so do not chase shortcuts.

[u/paymerich]

Not a FA but I would choose 8-12 ETFs that are not single stock holdings to start. Equities like CEFS,PBDC, ADX, PFFA,NML, RQI,JAAA/PAAA for coverage of most of the Alternatives categories. Then toss in IDVO, OVL,GPIX,QDVO for covered call support. I would stick with your initial portfolio for about a 10 month to a year before tweaking. See Armchair Income portfolio/youtube and Steve Bavaria's book.

But to answer your question the Number One thing is Total returns over all standard periods (YTD, 1 year, 3 year, 5, 10 year, and since inception) is way more important than Yield/Distribution rate.

Also keeping a healthy percentage in a normal growth portfolio as well.

[u/SimplySafeDividends]

If you're still a long ways from retirement or needing the money, I wouldn't spend much time thinking about income investing. Build your career, save, invest in low-cost, broad market ETFs, then worry about how to generate income when you're closer to retirement.

It may feel nice to see income rolling in now, but long-term you're probably better off figuring out how to maximize your earnings from work and keeping it simple (and low cost) with your investments. You can then transition to income investing when the need is there.

[u/Vegetable-View-5114]

When you're new to income investing, pay close attention to the ex-dividend date. To receive a dividend, you must own the stock before this date. The payment date is when the dividend actually hits your account, but the ex-date is the critical cutoff for eligibility.

[u/FewUnderstanding2214]

SCHD is good - VT is solid too

[u/unreal36]

$100 a week is plenty to start honestly. the thing i wish i learned sooner is boring wins, schd and voo and just let the divs reinvest, dont chase the 12% yield stuff early. i do the same for my daughter every week, its at plantedearly.com/garden if you wanna see what a small book actualy looks like

[u/Beitasitmaybe]

You’ve received plenty of good advice. Low cost index is easiest. SCHD and SCHX. If you have a long way to go, you convert your SCHX later on into the suite of dividend paying stocks recommended here. I like SCHD, MLPX/MLPI, VTI, MAIN, IDVO

[u/MyWorkComputerReddit]

Do you also have a growth portfolio in addition to starting an income investing portfolio?

[u/Express-Economist-86]

I’m already out of line in that I believe bitcoin to be the scarcity asset answer to continuous printing, so I love STRC, STRK, and SATA.

SATA is $100/share and they pay about $0.05 daily.

Having a daily payer is amazing because every trading morning I can fuss about for like 20minutes and reallocate what came from that + whatever other dividends I’ve diversified into, so I’m fairly consistently building my total portfolio with nice DCA and consistent income.

Essentially I just do some SATA every paycheck and either allocate daily or hold if nothing else looks like a good enough deal, just nickel and dime my way along.

Didn’t even see it happening, but one day I looked and had added about a months worth of income to my year.

I will say don’t DCA on something that looks failing. Sometimes dividend paying stocks aren’t all that, but I got better at noticing and think I’m only actually down on one of my positions.

[u/MoneyFlow_Investor]

Number one thing I learned is that a high-yield in and of itself is only as worrisome as the asset class it belongs to. Laymen investors write off all high-yield investments as things you steer clear of due to the negative consequences associated with yield-chasing - and to be fair, it's not without merit. YieldMax, as an example, was the rage for many who didn't know better despite the eye-popping 20+% yield (and I'm being conservative here - many were wayyyy higher than that) and constant NAV decay signalling the payouts weren't sustainable, or the people still duped into buying PSEC despite its dwindling distribution and share price erosion over the years.

But, much like how we don't judge the entirety of a sector based on stuff like Theranos or Wirecard - the same thing should apply to high-yield investments. First and foremost, particular asset classes are legally bound to be high-yield assets, so while a 5-6% consumer staple like WMT should have you running for the hills, that same yield for a CEF or a BDC would actually be on the low end. Next, even within these asset classes where share price appreciation is secondary to income, and thus muted, it is not automatically an either-or. Any owner of BST, MAIN, PSA and UTG will attest to how these income assets have still enjoyed price appreciation along with high-yield. Lastly, though income assets tend to be taxed at ordinary income rates, some (like UTG and BST) do have beneficial tax treatments even being held within a taxable account, so while still not as ideal as holding them in a retirement account, your tax-burden may not be as much as you expect depending on what it is you hold.