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Recently, I received an e-mail from a friend, who wanted to know my thoughts on this article.
At first glance, it seemed as if the author’s strategy was very similar to my own cash flow-focused philosophy. Here’s an excerpt from the article that endorses my point of view:
“The goal of dividend investing is to generate a rising stream of income in order to pay monthly expenses. Dividend income is always positive and is more stable than capital gains, which makes it a preferred way to live off your portfolio. With dividend investing, your retirement income is not reliant on the wild swings of stock prices.”
Of course, if you have read my previous articles on cash flow investing, you know that the best way to generate secure passive income is through cash flow real estate in non-volatile markets. However, the author of the article goes in a completely opposite direction altogether. Instead of investing in low-risk real estate, he pursues blue chip stocks, which produce dividends.
I finished reading the article and considered how it can apply to most cash flow focused investors.
My conclusion?
I felt that this strategy was great… only if you have a monster-sized portfolio!
According to the author, the companies in the table below are great long-term holdings. They also provide good dividend returns and will likely increase earnings over a 15-20 year period.
If your strategy focuses on generating cash flow to pay off expenses, then why in the world, would you settle for a measly 2.70–4.40% return?
Such low returns would not even help you keep up with the historical average rate of inflation. Therefore, when you invest in these companies for cash flow, you are really just spinning your wheels.
In previous articles, I have outlined how you can easily make 10-14% ROI from day one. This amounts to 400 percent more interest than that paid by typical dividends!
What does that mean to you? Let’s have a look.
$100,000 invested at 3.5% for 30 years = $284,462
$100,000 invested at 14% for 30 years = $6,206,431
$6,206,431 = A Comfortable Retirement
That is a $5,921,696 difference over the 30-year period.
Therefore, if your long-term goal is to have your passive income exceed your monthly expenses, get your planning right. Ensure that your investments are actually going to help you achieve that goal.