Investors Should Build Wealth Slowly
Get Rich Slowly
When I first started publishing my web/blog, I was denied an Adwords account because they thought I was promoting a “get rich quick” scam. Their paranoia came from my nostalgic reference to investment income as “mailbox money.” I had to change my blog name and I chose TheMoneyMadam, but I want you to know that the way to get rich, albeit slowly, is through mailbox money.
Mailbox money may seem a little quaint today. Don’t forget that not that long ago investment income was delivered to your mail box. Bond interest came with physical delivery of the coupon which you clipped and took to the bank to cash. Rents were and may still be delivered to your mailbox. Even dividends used to come in the mail. Now income delivery is electronic and mailbox money is only a metaphor for investment cash flow.
One of my MBA classmates used the phrase “mailbox money” to encourage me to invest for income just as he was. This was 1980 and it took me a while to catch on: but catch on I did. This concept of getting rich slowly has made a huge difference in my life and that of my former clients. I now share this wisdom with you.
Ordinary investors need to learn how to get rich slowly and you do that through investments that create income. Ordinary investors cannot rely on the Lotto or get rich quick ideas (Adwords had a point) to build wealth. When you invest for income, you can double your money more quickly than you expect because reinvesting income leads to the miracle of compounding. Compounding your investment returns at only 7% per year leads to doubling your money in 10 years.
Most people who study income investing tend to be already retired or looking down the barrel of retirement. They want to turn their capital gains or wealth into income. Those who used the big bet like my former dentist in San Francisco who had all his eggs in one basket and that was his house have a nervous route. He retired at the right time and got lucky. He was able to sell his house, move to a lower cost area and turn the difference into income producing investments. But how many people in the last five years were successful with that strategy. The streets are filled with educated but poor investors.
If you invested in Apple from the beginning you have made a lot of money but Apple will not pay your monthly expenses because it does not pay you income. Do you really want to sell a few shares of Apple just to pay your electric bill? I don’t think so. For every person with a great story of the big kill; I can tell you 10 stories that did not turn out so well. However, that investor who stocked up on income producing investments, and reinvested that income had only to turn on the income spigot at retirement time. Isn’t that a more realistic and sane way of creating your post working income.
Hasbro was the subject of my income investment profile for the second week of 2012. If you had invested $5,000 in Hasbro (the toy company) 10 years ago and reinvested the ever increasing dividend, your investment would be worth over $12,000 and your current income would be $456 per year. Come on even the most skeptical person likes getting nearly $500 per year on a $5,000 investment. Don’t forget that the income should continue to increase every year because Hasbro (HAS) meets my criteria as a Dividend Machine which means it has increased the dividend every year for at least five years and meets other criteria that would lead me to think they will continue to increase the dividend. See my post at http://www.themoneymadam.com/2012/01/dividends-machine-hasbro-has.html
I appeal to young people to study income investing; I encourage you to reinvest and trust your research; I encourage you to use my blog on dividends and covered calls to get rich slowly. Then, when you need the income, just turn on the spigot.
Very Truly Yours,