Every month, I write about the evolution of the Ultimate Sustainable Dividend portfolio which plays a critical role in building my passive income flows for my goal of financial independence. Last week I got an interesting email from a reader asking how to get started building such a portfolio.
It’s Not An Overnight Thing
I personally think the USDP is ideal for what I’m trying to do and as it continues to grow, it will surely evolve. That being said, building a solid, diversified and growth-focused dividend portfolio can seem like a huge challenge and without a solid plan, you might never get started. Another part to keep in mind is that while I started keeping track of the USDP with a capital of $20,000, many start with a lot less and I think it’s critical to start as early as possible, no matter how much you have. I’ve written about starting a dividend portfolio with as little as $5000 and to be honest, could start with a lot less. How would you get it done? Here are the steps in my opinion:
#1-Open a Brokerage Account
We did discuss a few of the top broker options recently on TheDividendGuyBlog if you need some ideas
#2-Transfer whatever money you can start with
This can be as little as $1000, the bigger, the better obviously!
#3-Setup An Automatic Transfer To This Account
This is critical. Don’t build a dividend portfolio without one. I’ve written frequently about this being the most critical factor. If you feel like you can’t afford to put much, that’s more than fine. Simply start with a small amount and try to increase it every year, or as frequently as you can. Ideally it transfers money from your bank account to your brokerage account on a monthly basis or more.
#4-Determine How Many Dividend Stocks You Should Own To Start Off
If you have $1000 or so, it’s likely that you will start off with 1 dividend stock while bigger portfolios might reach 15, 20 or perhaps a bit more. You can read my post about it here.
#5-Build A Solid Foundation
Those initial stocks are critical. As is the case with anything that you build, starting it off right is very important. What do I mean? While I certainly think that a stock such as Apple (AAPL) could be part of a dividend portfolio, I would never have it as the base. Why? I would personally try to get started with stable, longtime dividend payers that have an extremely stable (albeit probably slower growth) business. Companies such as Coca-Cola (KO), Pepsi (PEP) or Procter & Gamble (PG) come to mind as good foundation stones for any dividend portfolio. If you’re looking for inspiration, I obviously have a few recommendations (shameless plug)..
-Subscribe to our free mailing list which gives dividend stock analysis, etc
-Download our free dividend investing ebook at TheDividendGuyBlog
-Download our most recent Dividend Investing eBook on Amazon
Once you know which stocks you are going to start off with, you can buy them in the market, hopefully by making sure to not use market orders, avoid buying ahead of earnings, etc.
#7-Review And Rebalance Portfolio
This should be done at least monthly. If you can use the DRIP for your portfolio, I do recommend it. Ideally, you can write down or blog about your trades in order to help you take a look back and improve on your trading. I personally try to look at all stocks frequently to make sure they are still great fits and rebalance if necessary. As time goes by and your capital increases, you can slowly add new stocks to the portfolio.
What Are Your Thoughts And What Has Been Your Roadmap in building your own dividend portfolio?