The Easiest Way To Get WEALTHIER || SugarMamma.TV

Hi everyone. Welcome back to my channel
SugarMama TV. Before I launch into money Monday I have a small favor to ask. If
you purchased The $1000 Project, and you really enjoyed reading
it. I would greatly appreciate it if you can leave me a review from wherever you
bought the book. So whether that be Booktopia, The Book Depository, Amazon,
iTunes or iBooks or even eBay. I would greatly appreciate if you can leave a
few words explaining what you thought about that the book and how it helped
you. Now on that note if you haven’t subscribed already please make sure you
do. Now moving on to money Monday it is all about how to build up your share
portfolio using dividend reinvestment strategies. Now dividend reinvestment
strategies is essentially where you forego receiving your dividends or that
is your passive income. Instead of taking the cash you choose to have that money
used to purchase a bigger ownership in that business. For example say I have
10,000 shares in company XYZ traded on the stock exchange. And they
announced that they’re going to be paying a dividend of 17 cents per share
to the dividend holders the shareholders. Now instead of receiving $1,700 in cash.
I decide that I’m really serious about building up my wealth and creating
financial freedom, and I want to make the most of that income to really build my
wealth. So instead of receiving the $1,700 in cash. I choose to have that
money used to purchase more shares in the company. So with the dividend
reinvestment plan instead of the getting $1,700 cash I will get approximately 204
more shares in the company. So now after the dividend reinvestment
has gone through I actually own ten 10,204 shares in that
company. Now this is a fantastic way of building wealth if you could afford to
forego the dividend. If you can delay the gratification and have a little bit of a
sacrifice it’s a brilliant way of building wealth. Because that share
portfolio is now worth 204 shares more than what it was previously. Plus I
didn’t have to pay any brokerage to pick up those additional stocks so that’s
actually saved me money. Also sometimes companies offer discounts when you
choose to reinvest the back into the company. Means the company
doesn’t have to pay out those profits, and they can actually build up the
capital within the company. Also it’s a fantastic set and forget strategy it’s
really simple. When you buy shares and you get the paperwork in the mail
confirming you’re a shareholder and how many units you have in that company. They
will give you the option if it’s available to reinvest the dividends, and
you simply tick a box. For full dividend reinvestment or you can even do
partial dividend reinvestment. Sign it and send it back. You do not need to
think about constantly having to buy more shares in that company because it
doesn’t for you organically. Also I think one of the best things that comes with
dividend reinvestment is it’s forced investing there is no temptation for me
to spend that $1,700 cash because I simply haven’t received it.
It’s proactively gone back into the portfolio for more compounding growth
opportunities. And as I said most of the shares within The $1000 Dollar
project SugarMama portfolio are enrolled in an automatic dividend
reinvestment. I do not want to see that money going into my bank account if I
don’t want to. Because I don’t want to accidentally spend it or have any
temptation I want to make sure it all goes back for compounding growth
opportunities. Now in that example that I just used where I had ten thousand two
hundred and four shares in that company. When it comes to paying a dividend again
I’m going to get even more passive income or even more shares to reinvest.
And that is because my ownership within the companies even bigger. So next time
they pay a dividend or say eighteen cents. You know per share I’ll be getting
even more shares in that company, because it’s based now on not the ten thousand
that I own right now but now the ten thousand two hundred and four shares
that I now own. Now there are a couple of limitations that come with dividend
reinvestment that I need to make you aware of. When they announce a dividend
and the share price might be quite high and if you choose to enroll in a
dividend reinvestment plan. That may mean you’re picking up new shares at a very
high price that you’re not actually happy with. But for me because investing
owning shares is a long-term investment generally I’m not too concerned about it. Also when it comes to reinvesting your dividends particularly over the long run.
You need to be really meticulous with keeping records. If you own stocks for
say thirty years and dividends are paid two times per
year. There’s essentially 60 transactions that you need to make where of when you
need to go and actually sell those shares potentially further down the
track. But for someone like myself, I never intending selling. Why would I want
to cut off my passive income stream?When I buy shares I want to hold them
indefinitely. Now the final thing and probably the biggest concern that comes
to dividend reinvestment, and that is diversification. Say you have 20
different stocks in your share portfolio. And only 15 of them have this dividend
reinvestment plan. The other five remaining stocks or companies in your
share portfolio have to pay those dividends as cash. Over time you end up
risking the portfolio being out of balance. Those 15 stocks that have
dividend reinvestment plants have really grown. And they have a heavier weighting in
your share portfolio than the remaining 5 that couldn’t actually have dividend
reinvestment plans. You have to actually monitor and track the diversification. So
that you never have too much business ownership in one or two companies in
comparison to the whole portfolio. Now one of the ways to overcoming that is
with new money or when you receive those dividends that cannot be reinvested. Is
you manually and proactively go and buy more shares in those companies that
don’t offer that plan. So you make sure that your portfolio is equally balanced
across a whole range of different stocks and of course different industries. This
is really important for helping reduce investment risk in your share portfolio.
So if you’re in a situation where you’re building a share portfolio and you’re
working and you’re able to survive financially living off your own salary.
And you are really enthusiastic and motivated to build your share portfolio. Using a dividend reinvestment strategy is a fantastic one and it’s not just
available for shares you can also do this with some of the exchange-traded
funds and also listed investment companies. Which are also a fantastic way
of building up a diversified share portfolio. Alright everyone that is it for this video. I really hope you’ve enjoyed it
it’s a little bit more technical than my other videos. But as I like to say I’m
helping build your level of financial knowledge and information. If you haven’t
subscribed please make sure you do and as always feel free to share any of
these videos. And make sure you check out many of my other Money Monday
financial advice videos. Ciao for now

20 thoughts on “The Easiest Way To Get WEALTHIER || SugarMamma.TV

  • I have heard that on an average you make 5% profit on the share market. Does this mean that if I reinvest my dividends I can make more profit.

  • I like your more technical videos! Would love a few more actually. I'd love to hear more about property investing – in your videos with Lars (?) you seemed to prefer shares in the sense that they a more liquid but you also own/invest in property?

  • Such a great video Canna, thank you! The way you explain things are so clear and understandable, these are very useful advice for a new investor!

  • I ordered my book from Booktopia. I really enjoyed it. It is like having all of these types of videos in written form to reference and be inspired. I am in the US and have a 401k so I think that already reinvests any dividends. I'd love to try my hand at stocks but I'm so afraid to mess up haha. Perhaps my 2019 goal should be just to do it. Find one to three stocks and just go for it, but I don't know where to go to do that.

  • No automatic reinvestment, as far as i know, in Norwegian stocks. So i let liquidity from dividends dam up, and buy when prices are getting sexy. I find that the portfolio balances itself out fine, that way, as years runs by.

  • Canna great video I really enjoy it! I have a question can you create a portfolio from a foreign country ? For example I’m from Ecuador South America but as economy is not really good I would love to invest and have my dividends in other country. Is that possible ?

  • I bought the book on Audibles, it was a great book, it helped me face my situation and get motivated about savings and investments. Also the book help me feel that it can happen via little steps here and there. It was really inspiring and I loved it!!! I am listening to it again the second time around to make sure I didn’t miss anything. Thank you for writing the book I think it helped change my mindset a lot 🙂

  • Great video Canna! BTW just got your app so am excited to create my budget and get a grip on my finances! I may need your book too! Off topic, i love your blush (or cheek colour)!

  • I, too, look for dividend paying shares and companies with Dividend Re-Investment Plans (DRIPs). Best investments ever!!!!

  • Hi Canna, if you automatically reinvest the dividends in the company does this mean you are not taxed on the dividends as you don't receive the cash. Or do you still have to pay tax? Just trying to work out if it would be better to just reinvest the dividends myself or automatically have it done. Cheers.

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