Establish a paycheck pot for passive income
- Focus on investing for income, not growth.
Look for established companies with a history of stable or increasing dividends. Consider investing in dividend stocks, ETFs, bonds, closed-end funds, and mutual funds.
- Divide your portfolio into three parts.
Each part should have assets that pay dividends in different months.
- Calculate the portfolio yield.
Divide the total dividends by the principal investment to determine the portfolio yield.
- Take advantage of favorable tax treatment.
Dividend stocks held for more than four months receive favorable tax treatment.
- Follow the rent and snap rules.
Make sure investments are reliable and can be quickly converted back to cash if needed.
- Monitor and rebalance investments.
Regularly review investments to make sure they are performing as expected. Rebalance investments periodically to maintain the desired asset allocation.
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