From Basic Investing to Real Wealth: Your Path to Financial Freedom part 3

 


3. Advanced Investment Strategies

Investing is more than just buying stocks and hoping for the best. Advanced investment strategies help you grow your money more efficiently, manage risk, and save on taxes. Let’s explore four key strategies with simple explanations and examples.

1. Dividend Investing

What is Dividend Investing?
Dividend investing involves buying stocks that pay dividends — regular cash payments from a company’s profits to its shareholders.

Why Dividend Investing?

  • Provides steady income

  • Often less risky because dividend-paying companies tend to be stable

  • Allows reinvestment of dividends to grow your investment faster (compounding)

Example:
If you buy 100 shares of Company A, which pays $2 per share annually, you receive $200 in dividends each year regardless of stock price changes. Reinvesting these dividends to buy more shares helps your investment grow faster over time.

How to Start:

  • Look for companies with a history of paying and increasing dividends (e.g., Coca-Cola, Johnson & Johnson)

  • Consider Dividend ETFs to spread risk by holding multiple dividend-paying stocks

2. REITs and Real Estate Investing

What are REITs?
REITs (Real Estate Investment Trusts) are companies that own or finance income-producing real estate. You can buy shares of REITs on the stock market like regular stocks.

Why Invest in REITs?

  • Gain access to real estate income without owning physical property

  • Receive dividends from rental income collected by the REIT

  • Diversify your investment portfolio

Example:
Investing $1,000 in a REIT with a 5% dividend yield would earn you about $50 in dividends annually.

Direct Real Estate Example:
Buying a rental house for $150,000 that generates $1,200 monthly rent ($14,400 yearly) could net you about $10,000 annually after expenses, plus potential property appreciation.

3. Options and Derivatives (Intro Level)

What are Options?
Options are contracts giving you the right to buy or sell a stock at a set price before a certain date.

  • Call option: Right to buy stock

  • Put option: Right to sell stock

Why Use Options?

  • Protect your stocks from large losses

  • Generate extra income

  • Speculate on stock price movements (higher risk)

Simple Example:
Stock B is priced at $50. You buy a call option with a $55 strike price for $2 per share, expiring in one month.

  • If Stock B rises to $65, you can buy at $55 and sell at $65, earning $10 per share minus the $2 option cost.

  • If it doesn’t reach $55, you only lose the $2 per share paid for the option.

4. Tax-Advantaged Investing (IRAs, 401(k)s, ISAs, etc.)

What is Tax-Advantaged Investing?
Special accounts that reduce or delay taxes on investments, helping your money grow faster.

Common Accounts:

  • 401(k): Employer-sponsored retirement plan, contributions reduce your taxable income now

  • IRA: Individual Retirement Account available to anyone

  • ISA (UK): Tax-free savings account

Example:
If you earn $50,000 annually and contribute $5,000 to a traditional 401(k), your taxable income is reduced to $45,000, lowering your tax bill now. Your investment grows tax-deferred until retirement.

Comments

Post a Comment

Popular posts from this blog

How I started and why I want to to help you invest better

Image
  Welcome to PocketPlanIO – Let’s Build Wealth Together! Hey there! I’m Adisa Olusegun Isaac, and I’m thrilled you’ve stumbled onto my little corner of the internet, PocketPlanIO. If you’re here, chances are you’re curious about investing, money management, or just looking for some real, no-fluff advice on how to make smarter financial decisions. Well, you’re in the right place—because that’s exactly why I started this blog. Why This Blog Exists (And Why I’m Not a “Guru”)  Let’s get one thing straight upfront: I’m not a financial expert. Nope, not even close. A few years ago, I was just like you—maybe even more clueless. I made some bad money moves, fell into a few financial traps (oh, the stories I could tell!), and realized I needed to figure things out before my wallet staged a full-blown rebellion. What changed? I got tired of feeling lost. I started reading books, listening to podcasts, and—most importantly—learning from my own mistakes. And guess what? The ...
Read more

Why investing is important

Image
  We all know that saving is important — but saving alone may not be enough to build the kind of financial future you dream of. That’s where investing comes in. It not only grows your wealth but also helps you take control of your life, support others, and make a meaningful impact. Here are four compelling reasons why investing is essential 1. Make Money on Your Money One of the most straightforward — yet powerful — reasons to invest is to make your money work for you. When you invest, your money has the potential to grow over time through interest, dividends, or capital gains . This means that instead of just sitting in a savings account earning minimal interest, your money is actively increasing in value. For example, investing $100 a month with an average return of 7% could turn into over $120,000 in 30 years. That's the power of letting your money earn more money. 2. Achieve Self-Determination and Independence Investing can give you something far more valuable...
Read more

You have started investing... Now what??

Image
  First off — congratulations! You've taken the first (and often hardest) step toward financial growth: you started investing. That alone puts you ahead of the curve. But now you're probably wondering... what’s next? This is where strategy meets discipline. Whether you're aiming for financial freedom, a dream home, or a comfy retirement, here’s how to take your investing to the next level: 1. Know Your Goals Are you investing for financial freedom, a house, or retirement? Your goals shape your strategy — and this is crucial for sticking to your plan. Short-term goals (e.g., buying a home in 5 years): Go with a moderate risk approach. Long-term goals (e.g., retirement in 30 years): Focus on long-term growth . Building wealth: Prioritize compounding over chasing quick wins. 2. Diversify Smartly Never put all your eggs in one basket. Mix it up — stocks , maybe real estate , and other asset types. Your asset mix matters more than picking the “bes...
Read more