Make $1 million in 24 years investing $1,000 per month in dividend stocks

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