Dear DTA,
I want to know how to turn my stocks into actual currency. How do I get cash from my investments?
-Trevor Z.
Hi, Trevor.
Thanks so much for your readership. And thanks for writing in.
This is a great question!
I don’t believe you could find a better person than me to answer this question. Getting cash from my investments is basically my life.
So let’s break it down for you.
First, I’d recommend reading my Early Retirement Blueprint.
That step-by-step guide shares how I went about saving money and constructing a real-life stock portfolio that generates enough passive income for me to live off of in my 30s.
I went from below broke at 27 to financially independent and retired early at just 33 years old. I was able to do so largely because I was able to turn stocks into currency.
How does this happen?
Squeezing income out of investments can happen via a variety of mechanisms.
But I’ll share with you how I’ve gone about it.
It’s surprisingly simple. Its simplicity is part of what makes it so wonderful.
I’ll tell you the secret in one word: dividends.
Yep. Dividends. The lifeblood of my financial independence. The foundation of my life.
I’ve spent the last eight years of my life buying shares in high-quality, world-class enterprises that pay growing dividends.
In other words, I buy high-quality dividend growth stocks.
You can see the result of all of that investing by checking out my FIRE Fund.
That’s my real-money dividend growth stock portfolio that generates the five-figure and growing passive dividend income I live off of.
Dividends are an amazing source of passive income. And it’s the easiest way to go about getting cash from your investments.
I don’t have to lift a finger in order to collect my dividends.
They flow into my brokerage account passively.
I wake up. Dividends are in the account.
It literally couldn’t be simpler.
Shareholders are the collective owners of any publicly-traded company.
Any profit a public corporation produces is technically owned by it shareholders
And so a shareholder should expect their rightful share of profit.
A dividend is a cash payment by a company to its shareholders.
Logic should also follow that an investor would only aim to invest in companies that are able to grow their profit over time.
If you’re not growing, you’re dying. Nobody wants to invest in a dying company, or one in stasis. Due to the time value of money, we want our money to be worth more in the future. That requires growth.
Growing profit means growing dividends.
Take a look at the Dividend Champions, Contenders, and Challengers list to see how this works out in real life.
That list contains information on more than 800 US-listed stocks that have raised their dividends each year for at least the last five consecutive years.
You’ll see names like Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and Apple Inc. (AAPL) on that list, among other household names.
These are blue-chip stocks, Trevor.
It takes a wonderful kind of business to regularly produce the growing profit necessary to sustain growing cash dividend payments.
As they prosper, shareholders prosper.
Not only can you generally look forward to those growing cash dividend payments, but the stock prices tend to rise over time, too, as these companies produce more profit and become worth more.
Have your cake and eat it, too!
If you don’t believe me, just take a look at the common stock portfolio managed by Warren Buffett.
There are many high-quality dividend growth stocks in there.
Shouldn’t be a surprise.
After all, Buffett likes to invest in wonderful businesses.
Make sure to read through fellow contributor Dave Van Knapp’s Dividend Growth Investing Lessons.
This series goes over all of the basics of the strategy, how it works, why it’s so great, and how to successfully implement it.
It won’t take you long to understand why dividends are so great, or how to start collecting plenty of them.
But putting capital to work requires actionable ideas.
We have you covered in this department, too.
I personally highlight a compelling long-term dividend growth stock idea, every Sunday.
These stocks are vetted by undergoing a stringent screening process for quality and valuation.
And they’re presented, for free, via the Undervalued Dividend Growth Stock of the Week series.
The sooner you can start collecting growing dividends, the sooner you can start turning stocks into cash.
That means you’re that much closer to financial independence, Trevor, which is the goal of just about every investor out there.
There’s no time like today to get started!
I wish you luck and success.
Jason Fieber
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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.