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Reliable passive income is the surest ticket to financial freedom and buying your time back. However, building a dependable passive income portfolio is not easy; there is no such thing as a free early retirement. In this article, we will share 3 high yielding top picks that offer dependable income and trade at a compelling value to help get you started on the path to financial freedom.
Dividend Stocks: Your Golden Ticket To Passive Income
While there are many methods to approaching financing an early retirement, we believe that living off of a steady stream of passive income from a diversified dividend stock portfolio is the best path.
Rental property investing is a popular method that has worked well for many over the past decade’s housing boom. However, it is not really a passive investment since you either need to hire an expensive property manager (which can potentially skew the risk-reward against you) or you need to put in a lot of time on your end to effectively manage the investment. As a result, you are essentially buying yourself a part-time (or even full-time depending on your tenants and the location, type, and quantity of your property portfolio) job and are not truly retiring in this case.
Furthermore, housing in the U.S. is at its lowest level of affordability in modern history right now and cap rates in many places are equal to or even less than mortgage interest rates, so it is very difficult to cash flow these properties unless you can buy them with all cash. However, even then their yields are often lower than what you can get from dividend stocks and purchasing properties with all or even mostly cash can make it very difficult to properly diversify a portfolio.
Investing in low-cost index funds like the SPDR S&P 500 Trust ETF (SPY), the Vanguard S&P 500 ETF (VOO), and the Invesco QQQ ETF (QQQ) is another very popular approach and it is truly passive investing. However, the downside to this approach is that the dividend yields are typically far too low – or even volatile – to reliably and reasonably fund a retirement lifestyle with passive income. Instead, retirees are forced to sell shares on a regular basis to fund retirement. While this may work fine in a bull market, when we experience steep and prolonged downturns, this can cause rapid and permanent principal erosion that can ruin one’s sleep at the very least and potentially even ruin an early retirement.
Instead, we advocate for building a diversified portfolio of 20-30 high quality, high yield dividend stocks that can fully fund your desired retirement lifestyle. …….
