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How I Make Passive Income From The Stock Market

A highly experienced Stock Market Trader has in-depth knowledge of markets and how current events effect stock prices.


It's tough, if not impossible, to time market ups and downs. I am a huge fan of dividend stocks, and because I am not yet retired, market corrections allow me to reinvest my dividends and buy even more shares of the companies I own.

I am responsible for handling the financial matters of my family. It is not a responsibility I take lightly because if I make a mistake, it might put us out on the street. Okay, it's an exaggeration, but the burden is real for me, and the fact that the market is in a bear market does not make it any easier to bear.

On the other hand, I have a playbook I've followed for years, and market sell-offs are a perfect opportunity to maintain developing my passive income stream. I've lived by this playbook for years. This is how I convert difficult times into opportunities for myself.

The stability of my family's financial situation is a concern, and I view it as one of my primary responsibilities to provide for that stability. In this regard, I have a certificate of deposit (CD) portfolio that is structured as a ladder and has the equivalent of around six months' worth of living expenditures. If I don't intervene in the maturation process, one of the six CDs I own will mature and roll over every two months until I change the settings on the CD player.

The fact that this essential safety net operates on auto-pilot is the crucial factor. I have an innate sense that it's present. The process of setting it up only required one time of my attention, and from this point on, I do not need to give it another consideration. Essentially, I've always got access to some cash if I really need it, which makes buying equities less stressful.

"Keep it simple" is a critical phrase for me because I cannot manage an excessive amount of responsibilities simultaneously. I am enlightening you on this topic since the same line of reasoning is critical to how I approach my investments.

Focus On Success

Focusing your attention on businesses that have a track record of consistent achievement is one of the recommendations that can be found in Benjamin Graham's classic book, The Intelligent Investor. Look for companies with a long track record of increasing their dividends yearly, which will help you identify them more quickly.

Stop everything you're doing and wait until you have a varied list of names that appeal to you. All three of these categories are excellent places to begin your research: Dividend Achievers (10+ years of dividend growth), Dividend Aristocrats (25+ years), and Dividend Kings (50+ years). After that, you will need to do additional research to discover effectively managed businesses with only moderate debt.

The market rises to new highs and then falls to new lows, as we saw in 2022. Just sit still and wait for the stocks you're interested in to come to you. I don't have a predetermined point at which I will make a purchase, but in general, I will only add to my holdings when the dividend yield of a stock that I like is trading at the upper end of the range that historically represents that firm's yield. It gives the impression that the price is at least reasonable in comparison to the standards of the past.

I purchased shares of Federal Realty (FRT 1.67%), a real estate investment trust (REIT), during the COVID-19 pandemic bear market. Federal Realty has maintained an uninterrupted streak of annual dividend increases for over 50 years, making it the REIT industry's longest such streak.
This real estate investment trust owns a limited retail property concentrated in prosperous areas with significant populations.

Both development and redevelopment are essential talents for the stock.
During the pandemic, the retail industry was severely underperforming, but this company has often demonstrated that it can overcome challenges and continue paying dividends to investors like myself.

In the meantime, I increased my holdings in Texas Instruments (TXN 1.82%) and Medtronic (MDT 0.83%) throughout this year's bear market. Both companies have a track record of increasing their dividends annually for an extended period. Although both of these companies faced specific challenges, it took a bear market to finally reach levels that were attractive to investors.

Having said that, opportunities to make investments come up all the time, which is why I bought some Kellogg (K 0.3%) stock in the period between those two bear markets when investors were pessimistic about the iconic food stock due to company-specific issues such as a strike and a fire at one of its production facilities.

Although Kellogg's dividend has not increased yearly, it has risen consistently throughout its history. Because its manufacturing issues have been alleviated, Kellogg has actually seen a growth of about 15% so far this year. The next significant step is as follows:

I set all of those new acquisitions, along with the vast majority of my existing stock holdings, to automatically reinvest dividends (basically, like my CD safety net). For me, this is the simplest way to keep everything organized. As a result of how I go about things, I am aware that the stocks I own strongly emphasize providing returns to their owners.

Because I have chosen dividend names that I believe will be successful over the long run, I am confident that my diverse portfolio contains excellent businesses. And I've programmed them to run themselves, so all that's left for me is to sit back and observe as the quarterly dividend checks are converted into further shares.

When there is a bear market, I find it reassuring to see that the number of equities I own is growing rather than decreasing. Remember, though, that these are dividend stocks, which means that the passive income I generate increases with each share I purchase.

Even though it's a long process, the amount of money I receive in dividends has been steadily increasing for years without my having to do much of anything to make it happen. I plan to begin cashing those dividend checks when I retire to supplement my Social Security amount. Simple is excellent; autopilot is even better.

Slowly But Surely

If I said that I didn't give careful consideration to my portfolio, it would be a lie. I often listen in on earnings conference calls and keep a close eye on the newest developments involving the roughly 20 stocks I own. If fundamentals change significantly, I'll reexamine a stock. On the other hand, I do not spend my time worrying about the price of my shares fluctuating up and down due to the unpredictable nature of the stock market.

By centering my attention on dividends, dividend yield, dividend reinvestment, and the continually expanding source of passive income, I have almost eliminated the need for that step in my strategy. A sell-off in the stock market represents another opportunity for me to invest in and reinvest in excellent dividend firms, according to my investing philosophy.

The vast majority of investors should concentrate on developing an investment strategy that is reliable and easy to keep up with. You can maintain your investment strategy and continue building your passive income stream by purchasing dividend stocks and reinvesting your dividends.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

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