So my first week has gone by and I’ve learnt alot!

I felt that my first task was to find a suitable broker to trade on, I was stuck between Hargreaves Lansdown and IG Trading. In the end I chose HL (Hargreaves Lansdown) after choosing HL I loaded £50 onto my account to get trading.

With the excitement of just wanting to own a stock I googled the best stock yields in the FTSE 100 – I clicked on the first page and saw Evraz. As I was so excited I looked no further and bought them anyway only 2 days after I found out that I had invested in Russian Steel!

Now that the novelty had mainly worn off of actually owning stocks I decided to do some research. Starting by ploughing through YouTube watching many videos on either the best stocks to buy, trading methods and types of investing. I came across a video of a guy basically talking through his portfolio and explaing why – his goal for investing was to create a passive income. I loved the idea of a passive income so I had decided my goal – to create a passive income.

After watching the video that had inspired me to create a passive income I then watched more videos on making a passive income. Funnily enough a blog was one of the ways to create a passive income which was then I thought to myself that I’m watching the wrong video – it was that video that gave me the idea to blog my journey on to becoming a successful investor! Now watching the correct videos I found some useful information and it was as follows:

  • Check the payout ratio – basically if a company has a high payout ratio of lets say 90% they only have 10% more to give towards their dividends. Hence I would now be looking at stocks with a 60% or lower payout ratio.
  • Check the debts – it is important to give the debts a look at because if for whatever reason a company comes across hard times if they have huge debts they’re going to find it difficult to recover.
  • Net Profits – generally you want to be investing in a company that is making more profits every year else at some point they may cut their dividends. Remember a company is not obliged to pay dividends so when investing for dividends you take the risk of the company not paying out.

All of the data that I look at for my stocks at this current time is either on Yahoo Finance or HL.


Investing for the future

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One thing that I definatley want to create is a scaling portfolio. To ensure this happens I will make sure that when my dividends are paid they will reinvest themselves to buy more of the same share. The best explanation I could find for a scaling passive income is not with stocks but video creators: There are two video creators lets call them Jimmy and Dave. Jimmy decides that he wants to create a video for a company and he gets £100 a video. Dave wants to create videos for himself however he earns a £1 a video each day. So lets say each creator creates a video a day for 365 days Jimmy will end up with £36,500 whereas Dave will end up with £66,795. How may you ask, well as Dave is creating a passive income on day 1 he earns £1 and then on day 2 he creates another video which leaves him with 2 videos both making £1 each that day so he has a total of £3 on day 2.

To work it out it would be 1 + 2 + 3 + 4 + 5 … + 365 = 66,795. And this is only one year so the next year if he made a video everyday he would have £133,590. With the idea of reinvesting your dividends into shares it will scale up earning you more the next time dividends are paid out.

Tell me what you guys think!

Oliver Moir-Andrews