Reader Mailbag: “I’d like to build a rock-solid portfolio that can help me retire early. I’d also like to build financial security for my family.”

Dear DTA,

I am new to investing. I have some prior knowledge. And I can follow directions well. I want to learn how to research investments so that I can build a rock-solid portfolio that can help me retire early. I would also like to build financial security for my family, which is growing as we speak.

-Edward C.

Thanks so much for writing in, Edward. We very much appreciate our readers. And we want to express our appreciation and gratitude by responding directly to your emailed question.

Welcome to the exciting world of investing. Your whole life (and your family’s lives) could change for the better, as intelligently and successfully investing capital is a surefire way to gain security and independence in this world.

While it’s ultimately up to you to implement the steps we’ll outline, you should feel a bit more confident about your steps forward after you’re done reading this article and the related/recommended content.

I was once totally new to investing, too.

And it wasn’t even that long ago. I’m talking early 2010 here – less than eight years ago.

Not only was I new to investing, I was flat broke.

Actually, I was below broke.

My net worth was in the hole (my liabilities outstripped my assets).

But I decided to change my life for the better by living below my means and investing my excess capital into high-quality dividend growth stocks.

These are stocks that pay dividends. Better yet, they routinely and reliably increase those dividends.

Because what’s better than passive income? Passive income that’s growing!

You can find more than 800 dividend growth stocks to choose from by checking out David Fish’s Dividend Champions, Contenders, and Challengers list – a compilation of all US-listed stocks with at least five consecutive years of dividend increases.

Perusing this list will leave you with an inescapable conclusion: many dividend growth stocks simply represent equity in wonderful businesses that end up paying increasing dividends almost naturally as a byproduct of simply selling products and/or services that society demands.

These are often blue-chip stocks that offer the security you’re looking for in two different ways.

First, there’s the security that comes with investing in great businesses with longstanding track records of business improvement and growth.

After all, there’s an element of security that’s present when you’re investing in global behemoths that have “been there and done that” through wars, economic cycles, business crises, technology changes, etc. This element of security is hard to come by if/when you’re investing in newer and/or smaller companies that haven’t proven themselves as much.

Second, there’s the security that comes with the growing passive income that growing dividend payments provide.

When you think about being able to provide for your family and secure their future, your mind naturally gravitates toward building enough wealth and passive income to make sure they’re going to be okay.

And this feeds into early retirement, as the same dividend passive income that can provide security can provide for early retirement, as passive income pays bills just like job income does.

I’d know this firsthand, as I quit my full-time job in the auto industry back in 2014, at the age of 32.

And the passive growing dividend income my real-life portfolio generates on my behalf started to cover all of my core personal expenses less than two years later, rendering me financially free in the process.

So I went from being new to investing to financially secure in about six years by aggressively saving my income and intelligently investing that excess capital regularly into high-quality dividend growth stocks.

I watched both my wealth and passive income grow in the process, which likewise increased my independence and security. It’s such an incredible, fun, and rewarding process.

Sticking to the best businesses in the world can generate significant and growing passive income for you and your family.

And growing dividend income can be far more secure than a paycheck, as a diverse portfolio of dividend growth stocks can provide for dozens or even hundreds of individual “paychecks”.

Instead of relying on one paycheck from a job, I rely on more than 100 different “paychecks” from the businesses I’m invested in.

Moreover, you can’t fire a shareholder. Your job could let you go at any time. But shareholders don’t get “let go”.

In this day and age, when jobs are slowly becoming extinct and companies are downsizing, that’s the kind of security that goes a long way.

Meanwhile, just look at some of these track records.

Johnson & Johnson (JNJ) has paid increasing dividends for 55 consecutive years.

The Coca-Cola Co. (KO) has paid increasing dividends for 55 consecutive years.

AT&T Inc. (T) has paid increasing dividends for 33 consecutive years.

Track records like these don’t just get built accidentally.

A lengthy track record of growing dividends is a manifestation of running a high-quality business.

Furthermore, it’s the “proof in the profit pudding”.

Who wants to be told about profit?

Show me! I want to put my hands on the cash. I want tangible proof of the profit. And I want growing passive income that I can use to pay my bills.

Shareholders are the collective owners of any publicly traded company. And the dividends are their rightful share of that profit. As profit grows, so should the dividends.

But it all starts with educating yourself, Edward.

Toward that end, I’d highly recommend reading through Dave Van Knapp’s series of lessons on dividend growth investing, which essentially reads like an online book on dividend growth investing.

These articles will take you through the dividend growth investing strategy from front to back, showing you why it’s a great strategy and how to successfully implement it.

And once you’re ready to actually put capital to work, I reveal and discuss an undervalued dividend growth stock each Sunday as part of a regular series that I write.

Like I mentioned earlier, it’s ultimately up to you to take action.

But there’s no reason not to take action now.

Your family’s security and your early retirement won’t happen magically.

It takes hard work to get there. You’ll have to sacrifice in order to save. And you’ll have to spend the time researching investments.

But the means justify the ends. The result is worth the hard work. And anything worth having is worth working hard for, right?

I wish you luck and success.

Jason Fieber


Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.