Buy yourself an income
I’ve been reading this book called “Stop Working, Here’s How You Can” By Derek Foster and i’ve enjoyed it so much that I thought I’d share it with you.
The author has created a strategy that has allowed him to to retire early (at the age of 34). He did this by thinking differently than most people do about the stock market.
Did you know that many companies give a large portion of their earnings back to their shareholders? At the moment, most of these companies only pay between 1 and 4 percent which is hardly enough to keep up with inflation. There are some companies however that have a history of raising their dividends (the money that gets paid to the share holders) year after year even during recessions. He gives an example of RBC shares that could have been purchased at $15.56 in 1995 which would now be giving you an almost 13 percent yearly payout. Derek Foster says that these are the kind of companies that you should focus on. There are many other examples like this in his book.
So how much money can this actually make for you on a regular basis? Well lets say you spend about $150,000 (less than most people spend on a house) and buy shares in a few different companies, and after a few years if you are receiving an average amount of 13% per year, you would be bringing in $19,500 per year. I know this doesn’t seem like a lot but keep in mind that you are being taxed at a lower rate. It might be enough to live off of while you continue to build up your portfolio, and because of the companies that you invested in, your income would continue to increase year after year.
I know that there is (as always) a risk in investing in the stock market, but Mr. Foster has a set of rules that he follows in order to minimize the risk involved. He admits that many of his ideas are different from what most people will tell you, but his strategy has allowed him to retire at age 34 (just 10 years after he started working towards this goal).
Derek says that the idea is not to worry about whether your stocks are up or down. As long as the dividends are increasing year after year, then there is no need worry about the share price. Also as long as your shares are paying out and increasing, you should never sell them. The idea is to focus on recession proof companies (companies that sell things that people will buy even when they’re short on cash) then hold on to them for dear life. “Plant trees but don’t ever think about cutting them down!”
Also, he suggests only investing in Canadian stocks because of the added tax advantage this gives you.
I like his strategy because it takes a lot of the stress and apprehension out of investing in the stock market. I’ve always dismissed the idea of investing in individual stocks because I considered it to be more like gambling than investing, but now I’m thinking I might learn a little more about it and give it a try.
This book is a great read; it has definitely given me something to think about. I would recommend it to anyone.
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[…] Elenanellson.com wrote an interesting post today onHere’s a quick excerpt I’ve been reading this book called “Stop Working, Here’s How You Can” By Derek Foster. The author has created a strategy that has allowed him to to retire early (at the age of 34). His goal was not to buy stocks that would increase in value, but to invest in companies that would likely pay a high percentage of dividends and and that would increase their dividend payouts year after. Did you know that many companies give a large portion of their earnings back to their shareholders? At the mome […]
Pingback by » Buy yourself an income — March 10, 2008 @ 11:19 pm
Sounds like a great idea, i have now added this to my amazon wish list!
Comment by 1990 toys — March 11, 2008 @ 6:46 am
These plans always sound appealing because they seem so quick. But I must say that I agree with Hugh MacLeod when he talks about starting his successful business, Gaping Void. He blogs about how to be creative, and these are his first 3 points:
“1. Ignore everybody.
2. The idea doesn’t have to be big. It just has to be yours.
3. Put the hours in.”
I’ve never found someone else’s plans or schemes to work for me-glad they worked for Derek Foster-who wouldn’t want to retire at 34?
Comment by InjuryProne — March 11, 2008 @ 6:31 pm
Hi “InjuryProne”,
I wouldn’t say this idea is “quick” it will still take a while to build up your portfolio. It may be a faster alternative to other retirement investment options like mutual funds or GICs.
Comment by Aimee — March 11, 2008 @ 10:32 pm
Buy an income…??!!?? That is a new idea… Hmm… have to think about that.
Comment by internet tv — March 14, 2008 @ 4:31 am
I agree that it aint quick - but its still worth doing.
Comment by 1990 toys — March 14, 2008 @ 7:44 am
Looks really interesting. I am always looking for new ways to earn money, but I must admit that I have never dabbled in the stock market. It sounds intriguing but I am pretty tight fisted with my money and fear losing it. I will pick up this book next time I am out and give it a read, thanks for sharing.
Comment by Work from Home Guru — March 14, 2008 @ 9:48 pm
no shortcut to earn money
Comment by job — March 17, 2008 @ 5:03 am
The content sounds like it makes sense, but I’d rather the title distinguished between *not working* and just working smarter.
Comment by Matt — March 17, 2008 @ 1:29 pm
Thanks for the information. What needed in stocks is to studying it first before investing.
Comment by paulette — March 19, 2008 @ 9:10 pm
I would love to play around in stocks, but I know that I would end up losing a fortune.
Comment by new zealand tourism — March 22, 2008 @ 10:41 pm
This is the way to truly build passive income. Trading stocks was all the rage in the 1990s and early 2000s, but its very labor intensive, risky and (most of all) expensive. You end up siphoning off a lot of your earnings with brokerage commissions. Buying and holding blue chip stocks that pay dividends is probably the safest and easiest strategy to invest in the stock market.
Comment by texas refractive surgery — March 25, 2008 @ 11:09 am
Sounds like a great idea, i have now added this to my amazon wish list!
Comment by inşaat — March 29, 2008 @ 12:21 pm