- How's it going today guys?
Welcome back to the channel.
So in this video today, we're gonna be going through
a step-by-step video explaining
how to actually earn income from stocks.
Now I know this is a pretty beginner topic here,
but it's always surprising to me, how many people out there
don't even fully understand ways that people derive income
through investing in stocks.
So we're gonna show you probably
everything you wanted to know about that
and then some here in this video.
Now, real quick guys, I do have a few disclaimers to make.
First of all, I am not a financial advisor.
This is not any sort of financial advice
and you should always do your own research and due diligence
above and beyond this video before investing.
Also, this video is sponsored by SoFi,
but more on that later.
So before we talk specifically about how to earn money
with stocks, I want to start off by talking about
the three most basic forms of income out there
that most people are familiar with.
But unfortunately,
most people are only earning income from one source,
which is typically this earned category here.
So earned income is the traditional form of money,
where you trade your time for money.
The problem with this, is when you stop working,
you stop earning.
Examples of this are W2 employees, freelancers
and independent contractors.
Beyond that, the next type of income is portfolio income.
Portfolio income is when money is made when an asset is sold
for more than it was purchased for.
This requires asset appreciation.
Examples of this could be stocks, real estate
or cryptocurrency.
And then the last category here is passive income,
which can be derived from stocks.
And this is when money is generated through
a created foundation.
An example of this could be dividends or royalties.
So most people just make money
in the earned income category.
But with the stock market, you can earn portfolio income
from asset appreciation and you can also earn passive income
through dividends.
And there are stocks as well that offer you the opportunity
to earn both.
So now, let's talk more specifically about portfolio income.
Before defining portfolio income,
let's understand appreciation by looking at a house.
So let's imagine you bought this house right here
for $160,000.
Well, we all know that real estate tends to
go up in value over time, something called appreciation.
So let's say five years later,
the house is now worth $180,000.
However, a house can also depreciate
or lose value over time.
So obviously over the last few years,
we've seen many assets appreciating in value,
but do understand they have the potential
to depreciate as well and that all investments,
including stocks, carry risk.
Portfolio income is built through
the collection of various investments, such as stocks,
bonds, real estate and other assets out there.
So basically you have this overall investment portfolio,
which is your different allocations
into these different types of investments.
This type of income is generated when the value of an asset
increases or appreciates.
The only issue with portfolio income,
is that to realize those gains, the asset must be sold.
So a lot of times they'll talk about that as a paper return,
where you basically have that,
a paper loss or a paper return,
which is what you've lost or made on paper,
but understand that you don't actually recognize
that gain or loss until you sell that underlying asset.
So with portfolio income, you have to sell the asset
to somebody else at a higher price
to earn that appreciation from the underlying investment.
Now we'll talk more about passive income.
So I have a question here.
What do the following terms have in common?
We have a crock pot or a slow cooker.
We have stocks and then we have a dishwasher.
Well, each of these three items teach us
how to value our own time.
After the initial effort,
these items may begin to work for us.
Society encourages the use of automatic machines
like slow cookers, the dishwashers, laundry machines, etc,
so that we can enjoy our most valuable resource,
which is our time.
Most of us today are not using a wash board
or doing our dishes by hand
because it makes more sense to get something
that you have to invest in or purchase, like a dishwasher
or a laundry machine to then get your time back
and have that happening without your active involvement.
So the question becomes, why not do the exact same thing
with our money?
And so that's basically like what passive income is.
It's the equivalent of having these things
running in your home, like your dishwasher
or your laundry machine, making your life easier
and doing something for you without your active involvement.
Passive income is income that requires
little to no work or time to maintain
after a foundation is built.
So you cut up all your food
and you put all these ingredients in the crock pot
that does take some active involvement,
but then for the next five, six hours,
without your time, without you being involved,
it is passively cooking that food for you.
And then you're gonna come home to a meal
because of your past efforts.
But the most important thing here guys, is that,
passive income requires initial effort.
If you don't chop up food and put it in your crock pot,
it doesn't matter if you have one.
It's not going to provide you with any value.
In the same token,
even if you just have a brokerage account
just sitting there.
If you're not actively adding ingredients to it,
it's not gonna be providing you with much of any value.
So passive income requires initial effort.
And an example of this is earning stock dividends.
So the most popular way to earn passive income
via the stock market is definitely earning income
from dividends.
Now dividends are the distributions of company profits
to shareholders.
We're not going to get into a tremendously
large amount of detail here,
but I do have a full one hour long video
about dividend investing.
If you're interested,
I will toss that video up in the corner.
So some companies out there offer dividends
while others do not.
And there's no set requirement out there or some rule
that says these ones have to pay dividends
and these ones don't.
Some large companies, even though they're billion dollar
or even trillion dollar companies,
still don't pay dividends because they'd rather
reinvest that money themselves.
Dividends are paid out on a set schedule,
typically quarterly or annually.
So here's a quick example here,
just to understand how to calculate dividends.
Dividends are expressed as a yield percentage
and represent the amount investors receive in a year.
And it's based on that current share price
of this moment in time.
So for example, let's say XYZ stock has a dividend yield
of 3.0% and a share price of $20.
You would take the dividend divided by the share price,
and that will give you the dividend yield.
And then if you wanna calculate the yearly dividend,
you just multiply the share price
by the dividend yield.
So in this case here, we would take that $20
underlying share price times that 3% dividend yield.
And that would mean that, the yearly dividend is 60 cents.
Most companies pay it quarterly.
So you would most likely be receiving a 15 cent dividend
every single quarter from XYZ stock.
So now we're gonna talk more about today's video sponsor,
which is SoFi and we're gonna cover how do dividends work
on the SoFi investing app.
So one of the features that SoFi offers
is automatic dividend reinvestment.
So let me tell you about how that works.
With dividend reinvestment, any dividends received
are automatically invested back into the stock
and with SoFi, they're going to be utilizing stock bits,
also known as fractional shares.
So you don't have to worry about saving up enough money
to buy a whole share of the underlying stock.
You can invest automatically those dividends into stock bits
or fractional shares.
And it's really quite simple to turn on.
You go to your account
and it's really quite simple to do this guys.
I'll show you later in the app,
but you basically click on your account, click on Manage,
and then select Dividend Reinvestment.
Without dividend reinvestment,
dividends are paid out and can be seen in your cash balance.
So if you're not automatically reinvesting them,
they'll accumulate in your cash balance.
You could withdraw them to your bank account
if you want to spend them
or you could invest them in other things.
Within SoFi, if you wanted to,
if you were using that app or if you want,
you could automatically just put it right back
into that underlying stock that paid the dividend.
So when making money with the stock market,
it's through two different means, you earn portfolio income,
also known as asset appreciation
and that is from buying low and selling high.
The only downside to portfolio income,
is that you're gonna have a paper gain or a paper loss
until you actually recognize it.
So that's the only thing, you have to sell it
in order to actually realize that gain or loss.
With passive income through dividends,
the advantage is that you don't have to sell
the underlying asset.
You actually get rewarded by holding onto it.
But that being said, there's always risks
with any investment out there, including stocks.
So let's talk about those now.
First of all, gains, you know, capital gains,
as well as dividends are not guaranteed whatsoever.
Like we said, there's no requirement or law that says
these companies have to pay dividends.
You know, and these ones don't,
there's nothing that says that other than with a REIT.
So that's something you have to understand.
And especially with some of the uncertainty we saw
in the market over the last two years,
many companies had to cut or discontinue their dividend
out of nowhere based on their cash troubles.
So understand that dividends are not guaranteed.
And you want to do a lot of research into dividend stocks
before investing in them because oftentimes,
high yield dividend stocks are very risky.
So also understand that stocks can lose value
in the same way that real estate could appreciate
or depreciate, stocks can also appreciate or depreciate.
So don't think that the stock market
is this guaranteed thing for making money.
It does go up and down and people like me who invest,
make money sometimes and lose money other times.
So why do people choose to invest with SoFi?
Here's a couple of reasons.
First of all, it allows you to trade with no commissions
with a $5 account minimum
and the use of fractional shares known as stock bits.
So if you're looking at stocks that trade
for a hundreds or thousands per share,
you can buy fractional shares on SoFi with no commissions
and not worry about having this big amount of money
to buy these very, very high shares.
And again, the actual price of the share
doesn't determine the value,
but there is a certain barrier to entry associated with $100
or even $1,000 plus stocks.
With SoFi, you have access to ETFs, stocks,
cryptocurrency and IPO's.
You can win up to $1,000 with a new account
by opening a account with the sponsored link down below.
It's not an affiliate link guys,
so I don't earn any sort of commission there,
but I do appreciate SoFi for sponsoring this video here.
So if you do decide that you wanna check them out,
you know, after doing some research
and then after this video,
feel free to use that sponsored link down below.
Very much do appreciate that.
In addition to that, if you're looking to learn
more about investing, they have a whole SoFi
learn aspect of the app,
where you can learn about investing.
Nearly 2 million members and a 4.8 star rating
in the app store from over 88,000 reviews
and tying in here to the whole earning income
from the stock market.
You can have dividend reinvestment
that may maximize your returns
by reinvesting those dividends automatically.
In addition here, guys,
you're going to find more account offerings
versus atypical brokerage
'cause it's kind of a one-stop shop
in terms of an overall financial app.
They offer IRA accounts, active or automatic investing.
They have a credit card with cryptocurrency rewards
and 2% unlimited cash back.
They have a cash management account with no transaction fee.
Early payday and a $100 welcome bonus,
above and beyond that, SoFi also offers
student loan refinancing, personal loans,
as well as credit score monitoring and budgeting.
So if any of the above interests you guys,
feel free to check out SoFi
via the sponsored link in the description.
Okay guys, so here we are inside of the SoFi app.
I'm gonna go ahead and give you a quick tour
and show you basically what this app has to offer.
So right up top here,
you can see that I have my invest account.
And if I click on that,
this is where any investments that you have are going to be.
So it breaks it up in between my individual stock investing,
as well as my cryptocurrency investing.
We talked about IPO investing earlier.
If you are interested in that, you could go to invest,
click on Go to IPO investing,
and then if you want to be notified of future IPO's,
you just click on that blue button right there
that says, Notify me.
It looks like right now they don't have any IPO's available,
but if you click on Notify me,
they'll update you anytime that changes.
So on the home tab, you can see your different accounts here
and you can see where the balance is
and how it's growing over time.
It also gives you performance of your different investments.
Now, if you do link up, you know,
with the different spending cards and debit cards
and link your accounts, you can also follow spending,
look at spending by category.
And this is all of the budgeting tools that SoFi offers.
They also do free credit score monitoring.
If you are interested, you can track the value of your home,
tag transactions.
So many really crazy things you can do within this app.
I'm actually excited to track my home value within the app.
I have two properties now,
so I'm probably going to add that in at a later date,
just cause that is helpful
rather than going on my mortgage statements,
to be able to track that automatically.
So beyond that here,
they also show you the performance of any stocks
that you've been keeping an eye on.
They also show you here are top movers.
They're gonna show you utilization of your credit cards.
If you in fact, link those here,
there's also the rewards section here,
where you can claim any reward points that you earn
and redeem them.
They also have sweepstakes oftentimes going on
and there's even a leaderboard here,
if you want to create a social account and, you know,
track your performance compared to other people on the app.
You'll also find, you know, news section here.
And I honestly really find that this reminds me a lot of,
you know, a newsfeed on a social media app
where you just scroll through here
and find interesting things.
On the money tab here,
this is where you could open up an account
for cash management here,
or if you want it to get a debit card
with them to track spending.
Here, we have the credit card and they also have
the ability to earn cryptocurrency as a reward
on your spending, if that interests you.
We already looked at the investing account here,
and then if you want, they also have loans within the app.
If you wanna look at personal loan student loan refinance,
or even purchasing a home,
everything right here within this app.
Anyways, guys, that's going to wrap up this video.
I hope you enjoyed it.
Once again, thank you to SoFi for sponsoring this video.
If you guys decide that you want to check out SoFi
after watching this video and doing your own research,
feel free to use that sponsored link down below.
You know SoFi did sponsor the video.
It allows me to provide content like this to you.
So your use of that link is always appreciated,
but of course never expected.
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