My Passive Income Journal

Getting Started With Income Growth Investments

What are Income Growth Investments?

Income growth investments are assets where the income from these investments grows steadily over time.  This is an important factor to ensure that income keeps up with and ideally exceeds inflation over the long term.

Some examples of income growth investments might be:

  • Dividend Growth Funds (both traded and untraded)
  • Individually picked companies that show a long history of dividend growth
  • Closed ended funds dedicated to steady reliable income growth
  • Selected real estate investment companies and funds
  • Certain infrastructure companies and funds

All these above examples are designed to capture underlying assets whose income increases over time and whose capital value remains steady or also grows too. Of course, doing your own due diligence on these products prior to investing is an absolute necessity to ensure the fee structure, underlying assets, liquidity, historic performance, transparency and product structure is sound and the issuer and management is reputable. You need to be able to be sure of this based on facts.

Start Small and Add Regularly

Nobody needs lots of money to start income growth investing.

Start small by deciding on an amount to invest each month.

For example, start with just $1000 and buy into your first investment holding using a low-cost reputable brokerage platform. Keep a note of when dividends or distributions are paid and ensure these are ether paid into the brokerage account or automatically reinvested (thus compounding your initial investment).

The next month, do the same with your next preferred investment holding.

Rinse and repeat this monthly until you hold all the holdings you desire in your portfolio (I suggest holding no more than 10-20 diversified holdings for ease of administration).

Then it is simply a matter of adding to each holding one by one each month.

If you can automate this process this via your brokerage platform, all the better.

Tracking your Investment Income

Most people track the gyrations of the market. Up, down, up, down, correction, crash, rebound, bull market, bear market ….. ugh not useful.

Instead, I suggest you track your actual income from your investments each month – after all, you are now an income growth investor, not a gambler.

Each month you will see your income increase little by little. It will start small, but over time your income will eventually outstrip what you are investing each month. Amazing but true.

There is nothing quite as satisfying as watching dividends and distributions quietly drop into your brokerage cash account each month. This feels good because it is good. This is passive income providing you with a stream of real cash.

You can use a spreadsheet or simply a notebook to jot down your total income each month. Make it your task each first day of the month to look this up and document it. Take a moment to be proud of yourself before heading off to the day’s business.

The end game here is the most delicious. One day you will open your account and realise that the steadily growing income is enough to replace your wage. When this happens, this is financial independence in its purest form.

My Passive Income Journal

Staying Motivated With Income Growth Investments

The amounts you will earn from distributions and dividends in the early days will be obviously quite small. So how do you stay motivated?

I always used to look at the monthly amount and identify in my mind what it could theoretically pay for. Initially, the small distributions and dividends might only pay for a coffee. Over time, this will certainly snowball.

Identify meaningful theoretical goals for your monthly dividends and distributions and play the following game with yourself.

For example, here is a list of things that your monthly investment income could theoretically pay for – getting bigger as time goes on:

  • A coffee
  • A coffee and a sandwich
  • A coffee and doughnut each working day
  • Cell phone monthly bill
  • Your electricity bill
  • Car payment
  • Mortgage/Rent
  • A vacation
  • Child’s college tuition
  • Equivalent to ½ your wage
  • Equivalent to ¾ your wage
  • Your entire wage
  • You and your partner’s wage
  • The sky is the limit if you leave it compound long enough!

Obviously, make the list meaningful to you to stay motivated.

Journaling this monthly is important. For example: “This month my investment income could have paid for my morning coffee and my monthly cell phone bill”. Notations like this each month make it real and personal to you.

The market will gyrate, there will be investment noise all around and prophets of doom will wax and wane ….. however you will be steadfast and motivated to stay the course.

Good quality income investments tend to pay their distributions no matter what is going on with the market. The more diversified your portfolio the smoother and truer this will be.

FINALLY:  Find people who are on the same path and encourage each other to stick to the program over the long term. One day, you will look at each other and say “we did it!”.

There is no better reason for getting started with income growth investments.


Hugh Walker

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