118. Make $1 million in 24 years investing $1,000 per month in dividend stocks
Investing in dividend stocks, can be seen as a long-term goal which can achieve 10% annual return (4% estimated dividend rate and a 6% annual estimated stock appreciation growth over 10 years).
It is a "lazy"-way investment approach of becoming rich, or in other words, one does not need to trade actively to get this 10% return.
The dividend payout can be seen as "rental" income, like $100,000 at 4%, brings in $4,000 per year of rental income, comparable like rent on a property. You are certain of this income as the dividend is set upfront by companies, however what is not certain is the appreciation, price-increase of the stocks you are investing in.
What this means is that it is possible in a bear-market to lose 30-50% of your investment, but in a longer-term view, like over 10-20 years, these stocks should appreciate.
So the dividend-income somewhat reduces the risk of investing in dividend stocks.
As well, one can know if the US economy goes into a (big) recession or not, as long as the economy is growing, one should not be immediately worried of losing his/her investment in dividend growth stocks.
Another advantage is that by investing on a monthly basis into the dividend stocks results in "dollar-cost averaging" his/her investment over a longer period of time, thereby reducing volatility risks.
For example, if one invest $100,000 instantly, his/her full investment is at risk, while someone who invests only $1,000 per month is less worried about the fluctuations of the stock market; he/she invests in the long-term.
Here is a calculation how $1,000 per month at 10% annual rate of return yields:
Year 1 12000
Year 2 25200
Year 3 39720
Year 4 55692
Year 5 73261
Year 6 92587
Year 7 113846
Year 8 137231
Year 9 162954
Year 10 191249
Year 11 222374
Year 12 256611
Year 13 294273
Year 14 335700
Year 15 381270
Year 16 431397
Year 17 486536
Year 18 547190
Year 19 613909
Year 20 687300
Year 21 768030
Year 22 856833
Year 23 954516
Year 24 1061968
As you can see, in about 10 years, one has accumulated about $200,000 and after year 24, over $1 million.
If you save only $300 per month invested into dividend stocks, in 24 years, that's $300,000, $500 per month becomes $500,000!