September 17, 2024 by Angelo Santitto

To start, I should mention that I’m interested in both real estate and stock purchases. My strategy for both is pretty much the same: I aim to buy cash-flowing assets that I can reinvest into themselves to take advantage of compound interest over time. Right now, I don’t have enough money to buy real estate, so I’m trying to figure out where I stand financially. In the meantime, I’m focused on stocks and looking for any opportunities to invest.

I’m treating stocks like real estate, meaning I’m looking for something that will give me a decent dividend right away—around $100 per month. When I buy real estate, I want each unit to generate at least $100 in positive cash flow, and I’m applying the same mindset to stocks. I’m asking, “How much stock do I need to buy to make $100 per month?” I’m not too concerned with stock appreciation, because just like buildings, stocks can go up or down in value. My focus is on the cash flow they produce.

What I like about stocks is that you can set up a “DRIP” (Dividend Reinvestment Plan), where you reinvest dividends to buy more shares. When evaluating a stock, I look for a couple of things: Does the asset increase in value over time? If it does, great, but I prefer gradual growth. I don’t want it to shoot up 25% or more in a year, because that means when I reinvest my dividends, I’m buying at higher prices. Ideally, the stock’s value stays the same or even drops while I reinvest and collect more shares for free. When I decide to sell, that’s when I hope the value shoots up.

If the stock goes up in value while I hold it, that’s fine too—I’ll just get fewer shares through reinvestment. All I have to do is my initial research to earn those dividends.

As I look at one stock, I see that in 2020, including dividends, I would have made a 25% gain if I bought at the year’s open price. In 2021, there was a 28% gain. While most of that is based on appreciation, I’m also noticing the dividends keep increasing year over year, which is a good sign. In 2022, the stock gained 1%, and in 2023, it gained 15%. So far in 2024, it’s up 1%. For me, this stock looks promising because its appreciation seems to be slowing down, but the dividend keeps rising.

Now, I need to decide between two or more stocks that seem like good choices. I’ll have to think through the data and ask myself some important questions to feel comfortable before buying. I need to know this because if a stock no longer meets my criteria and another one comes along, I may want to exit. That’s my next step in this journey of making money through stocks.

Happy Investing-Angelo