Author Archives: Passive Income Earner

Wealth Creation: How to Double Your Money Faster

The beginnings of wealth creation all start from savings. Someone can become wealthy from starting their business or investing in stocks. Both require planning, hard work, and savings — particularly in the initial stage.

Some businesses can jumpstart with a loan based on a solid, viable business plan. You don’t need as much money investing in stocks. Moreover, dividend stocks allow you to start earning a return right away. Initially, regular monthly savings will carry much of the weight of growing your wealth. 

How long does it take to double your money?

Doubling your money only from saving is slow. Let’s say you’re able to save $500 a month. You’ll double your money in a month. But to double it again, it’ll take two months.

Double your money faster by earning interests. Let’s say you’re super conservative and decide to park a savings of $5,000 in a GIC/CD for five years. That’ll earn you an interest rate of about 2.2%. 

According to the rule of 72 (calculated by 72 / rate of return), it’ll take more than 32 years to double your money to $10,000 if you keep earning a 2.2% interest rate on your savings. This is better than just saving your money, but only a little better. It’ll probably maintain your purchasing power in the long run from keeping up with the long-term rate of inflation.

Double your money fastest in stocks. Stock investing is one of the fastest ways to grow one’s wealth. According to the long-term average market return of 7%, you can double your money in a little over 10 years, approximated by 72/7% = 10.3 years. 

You could do even better by selectively buying quality stocks at attractive valuations. Conservative stock investors who know their stuff should be able to get long-term returns of 10% or higher, which would imply doubling one’s money in about 7 years, approximated by 72/10% = 7.2 years.

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Dividend Investing: Should You Invest Actively or Passively?

Dividend investing is often used as a passive investing strategy. The idea is to buy and hold quality dividend stocks. At the very least, these dividend stocks should pay out healthy dividends that are well protected. Ideally, though, they should be increasing their dividend payouts over time. 

That said, a passive dividend investing strategy still requires some active investing. For example, non-retired investors would likely be adding to their holdings over time, especially on dips or market corrections. They need to know what price or yield ranges are good for adding and that could change over time. 

For example, with stocks like Pepsi (NASDAQ:PEP) and Fortis (TSX:FTS)(NYSE:FTS) that earn stably growing earnings, you can use their yields as a gauge on when to buy. It would be a yield of about 3.2% for Pepsi and 4% for Fortis.

grow a money tree
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Do Utilities Make Good Buy-and-Hold Dividend Stocks?

Utilities are a key component of solid dividend portfolios. Here are 3 utilities that provide current yields of about 3.5-4.4%. They’re fairly valued. Going through these examples will lead to an answer for the question in the title.

electric distribution

Brookfield Infrastructure

Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) split-adjusted funds from operations per unit (“FFOPU”) increased by 2% in 2020 during the pandemic, proving itself to be a defensive business in the face of adversity.

In the first half of the year (“H1”), BIP rebounded to growth with its split-adjusted FFOPU rising almost 19% to US$1.77. Contributing factors include an economic rebound, management taking advantage of market volatility during the 2020 pandemic market crash (such as by scooping up shares of Inter Pipeline (TSX:IPL) at basement prices), capital recycling, etc. Its H1 2021 payout ratio was 58% of FFO, which is a healthy payout ratio.

BIP remains one of our favourite utilities for income. We trust that management can live up to its word by increasing its cash distribution by 5-9% per year going forward. 

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