July 4 marked the United States’ 248th Independence Day. While the holiday brings to mind fireworks, barbecues, and family gatherings, it is also a reminder of the principles of independence, self-reliance, and freedom that have shaped the United States. I believe in the power of dividend growth investing to build rising passive income – and asset-reliant financial independence – over the long-run, explains Ben Reynolds, editor of Sure Dividend.
The concept of independence extends beyond national sovereignty to individual autonomy. And individual autonomy is all-but-impossible without financial independence.
(Editor’s Note: Ben Reynolds is speaking at the Powerful Investing & Trading Strategies Virtual Expo, which runs Aug. 20-22, 2024. Click HERE to register)
Financial independence, much like the independence celebrated on July 4, represents freedom from external control (to a large degree) and the ability to make choices without undue constraints. There are two forms of financial independence: Self-reliance and asset reliance.
1. Self-reliant financial independence is when you can support yourself through your work. You are able to trade your time and energy to create economic value for yourself.
2. Asset-reliant financial independence is when the passive income from your assets exceeds your expenses. You no longer have to trade your time and energy to support yourself.
Regarding the latter, dividend growth investing can help you achieve it – and it offers several advantages:
- Passive Nature: Unlike managing real estate or running a business, dividend investing requires minimal ongoing effort. Once investments are made in quality dividend-paying stocks, the income flows with little active management required.
- Income Growth: High-quality dividend growth stocks tend to increase their dividends over time, helping to combat inflation and maintain purchasing power. This contrasts with fixed-income investments that may lose real value due to inflation.
- The Power of Compounding: Dividend growth investing has a “double compounding” effect. The number of dividend-paying shares you own grows over time if you use dividends to buy more shares. And the dividend payment from each share is likely to grow over time when investing in high-quality dividend growth stocks.
- Stability and Reliability: Dividend growth stocks, particularly those with a long history of dividend growth, often have solid financials and durable competitive advantages. This stability can provide peace of mind, knowing that your investments are likely to continue generating rising income even during economic downturns.
Financial independence is one aspect of a lifelong pursuit of true personal freedom. To practice dividend growth investing in the pursuit or maintenance of financial independence is to honor the principles of freedom and self-reliance that are at the core of what the United States represents.
