When you invest in stocks, your aim is to profit from your investment in the long run, whether by earning dividend income or selling your stocks as they appreciate in value. This is the difference between value and growth stocks, where one focuses on returning profits to investors, while the other prioritizes reinvesting profits for business growth. Generally, it’s advisable to maintain a balance between both types of stocks, as it helps generate growth and consistent income for your investment portfolio over the long term.

To live off your dividend income, you will need to invest in stocks that consistently pay dividends to their investor or invest in companies that have dividend policies for their investor. You can use this link to search for the stocks based on your criteria, such as dividend yield percentage. From there, you can conduct further research by analyzing their dividend payouts over the past five years. If necessary, it’s best to read their financial reports before making an investment decision. Throughout this post, I’ll use a simple 4% dividend yield as a reference point for better understanding. 4% is also the average dividend yield that most companies offer.

You can gradually build your dividend stock holdings by reinvesting all your dividends to steadily increase your income. For example, if you’ve invested RM1,000 in Company A’s stocks and they pay you 4% annually, you’ll earn RM40 in dividends. This money can be reinvested in the company’s stocks (depending on the stock price). In the second year, you’ll earn another 4% from the same stocks, increasing your investment value to RM1,040. In the second year, your dividends would amount to RM41.60. This amount will continue to grow as you reinvest your dividends over an extended period.

This concept is based on investing in a single stock and reinvesting your dividends to grow your holdings. What if you add more stocks and invest more money over time? That’s the fundamental way to grow your investment portfolio over the years. You might start with just RM100, but by consistently investing and growing your portfolio, you can accumulate substantial wealth over time. Build My First RM100,000 Investment Portfolio In Less Than 3 Years.

You likely have a retirement timeline in mind, whether it’s at the age of 55 or 60. Imagine if you’ve amassed an investment portfolio worth RM500,000. With a 4% dividend yield, you can easily earn RM20,000 annually. You might think this is an arbitrary number, but consider starting to save at 25 years old and retiring at 55. That gives you 30 years to save RM500,000. Using a simple calculation, RM500,000 divided by 360 months (30 years) equals RM1,388 per month. To be more realistic, with an expected dividend yield of 4% per annum for 30 years, you’d only need to invest RM730 per month. This is quite manageable. The more you invest, the more you can earn over an extended period.

You might be thinking that RM20,000 annually won’t be sufficient for retirement. This is where you need to determine your monthly expenses to calculate the actual amount you need to invest in dividend stocks. For instance, if you require RM10,000 per month (RM120,000 annually), you’d need to have RM3,000,000 worth of dividend stocks that yield 4% annually. Is this achievable? It all comes down to your retirement planning and your commitment to sticking with your retirement goals.