Today, I want to share my thoughts about money. I want to discuss my relationship with money and how I think about investing in the stock market (dividend paying stocks) versus saving money in the bank versus spending money. Ultimately, I have concluded that investing in dividend stocks is the best possible use of my money, as saving and spending are both losing strategies (for me).
This video starts with some practical examples about spending money. I share the example of a pair of shoes that just "broke". I spent money and I realized a 100% loss. I also share some examples of things breaking that are fixable (my fireplace and refrigerator, which are both now fixed). When one buys stuff, the items are typically either a loss (like the shoes), or they will break and need to be fixed (like the fireplace and refrigerator). Spending certainly is not a solid investment strategy.
Next, I discuss saving money in the bank. In my opinion, money in the bank is also a losing strategy. With low interest rates, the value of savings erodes over time (it does not keep up with inflation). Moreover, money sitting around requires huge self-control. It's so tempting to spend! I have personally faced challenges letting it be (vs. being tempted to spend such money). It's easy for money to move from the savings bucket to the spending bucket.
The last bucket, my favorite, is dividend stocks. Dividend stocks grow in value over time. They offer a stream of dividends and also capital appreciation. The stream of dividends is quite rewarding and motivating, so one is enticed to hold for the long term. In fact, buying more dividend stocks has positive reinforcement built in! For me, I have concluded that spending and saving don't make much sense for me (when I can avoid it). Rather, I like to go all in with dividend stocks. (Of course, I do enjoy buying the necessities, splurging once in a while, and saving a small but growing emergency fund.)
Given this holistic picture on money, I am so confused as to why investors (both new and seasoned) get scared about "losing money" in the stock market. I guess I get it for "buy low, sell high" investors. (That is a strategy that just does not make sense for me as I'm buying to hold forever, to enjoy the dividends.) When one invests for dividends (as long as the fundamentals are strong), it's my belief that one cannot really lose in the long run. Taking a step back and looking at the alternatives (spending money or saving money), the concern over losing money in the market drops even more!
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Last, I want to share the other PPC Ian videos mentioned in today's video.
Are you scared to start investing in 2018? This video may be for you:
Want to learn more about my recent budgeting challenge with my fireplace? This video shares how I approached the situation (with a frugal mindset):
Want to learn how I have historically been "all in" when it comes to dividend stocks? Here's a fun video on this very topic:
Want to learn more about my big budgeting mistake of buying a M3 Convertible? Want to learn from my top 5 money and personal finance challenges? This video is a really fun one:
Disclosure: I am long Clorox (CLX). I own this stock in my portfolio.
Disclaimer: I'm not a licensed investment advisor, and today's video is just for entertainment and fun. This video is NOT investment advice. Also, I'm not a tax advisor and today's video is NOT tax advice. Please talk to your licensed investment advisor before making any financial decisions.
All content on my YouTube channel is (c) Copyright IJL Productions LLC.