Do You Earn Interest On Stocks?

Do You Earn Interest On Stocks?

Do you earn interest on stocks? As a beginning investor, you are trying to understand what you should invest in and how you can really grow a retirement with buying stocks. So a good question to figure out is how do you make a return on investment.

Now to answer the question revolved around this blog post, you don’t earn interest on stocks. There are two ways in which you grow that initial investment.

1) Stock Goes Up In Price

When you buy any stock at the price you purchased, it is most likely going to trail up and down. But for this little scenario, let’s assume that the stock you buy just keeps going up. You bought at $10 and now it is at $20 per share. This means that your total return is +$10. If it keeps going up then so does the return on your investment.

Now let’s add that all of a sudden the market takes a hit and the stock drops to $12. You still have a return on investment, but just not as much. Basically, you’re not earning interest in that stock because it’s always going up and down (mostly up) and the gains earned are always fluctuating.

Instead of earning interest on stocks, you actually earn Dividends.

2) Dividends

When you buy stocks from a company, ETF, or REIT they will pay out something called dividends for holding a share. You can make a couple of cents to a dollar-something for each share that you own. They will pay you every month, quarter, or annual.

For me, I get about $1.30 in dividends each month and that is then reinvested into more dividend stocks to make me more passive income compounded over time.

Below is a story from a couple on Reddit that makes around $4,000 a month in dividends with $650,000 invested. This is a goal to strive for but also make sure that you diversify outside of dividends.

I’m happy I found this community! There’re other posts just massacring dividend stocks as an investment strategy for cutting or suspending payments due to COVID19.

The husband and I earned approx. $4650 a month on dividend payments. The investment portfolio value is approx 650k with a yield of an average of 8.5% (a combination of income funds, ETFs, REITs, regular stocks). we use the dividend payments to pay all our living expenses and continue to invest with my husband’s salary. I quit my corporate job in 2019 and he works for a major Airline (btw we’re in Canada)we’re obviously worried about how all of the shutdowns to business would affect this situation. living off of passive income from dividends is something we work towards during our GRIND phase and now it was all put into question!! We know an 8.5% yield is a bit risky, but we’re still young and practicing the passive income investing strategy of buy and hold.At it’s worse our total investment value dropped 30%!! but the good news is that surprisingly almost all our dividends paid out and we’re still living off dividends. The dividend cuts we experience represented 18%, ($VET -Vermilion Energy, was the biggest chunk)

Therefore, returning us approx $3850 in dividend payouts instead of the $4650.

Anyway, just wanted to share a personal story of living off of Dividends during the COVID19 pandemic. The husband and I created a Youtube channel during the two-week quarantine about Passive Income Investing. In the videos, he shares our complete portfolio and talks on each investment, since he’s been in research mode the entire time we’ve been working and saving. Every month we’d look forward to which fund or ETF, or REIT to invest in. We’d do the research and really understand their business. This is mainly because early on we were with our parent’s financial advisors, who made the simplest safest investment and charged a hefty management fee. A bit of light reading made us understand how we could do it ourselves for a fraction of that management fee AND get comfortable with a little higher risk tolerance. We’re both noobs to creating videos, but passionate about reaching people to help them get comfortable and knowledgeable about passive income investing don’t want to self promote on the post so DM me if you’re interested in the link to the Youtube Channel.

Edit: Thanks for all your interest. I wasn’t sure if I could self promote the link on this post, but I saw someone else post their link so I figure I can post mine:

Want to know everything that they’re investing in? below is a list of 50 stocks where they have money invested in.

This is the first 50 from my spreadsheet. You can download the entire portfolio spreadsheet on the link in the video

Canoe Financial – EIT Income Fund

Middlefield Funds – MINT Income Fund

Middlefield Funds – Global Dividend Growers Income Fund

Middlefield Funds – European Dividend Income Fund

Middlefield Funds – Pathfinder Income Fund

Brompton Funds – Blue Ribbon Income Fund

Brompton Funds – Canadian High Income Fund

Brookfield – Global Infrastructure Securities Income Fund

Brookfield – Select Opportunities Income Fund

Brookfield Renewable Partners

Brookfield Property Partners

Harvest – Brand Leaders Income Fund

Harvest – Global Telecom & Utilities Income Fund

Strathbridge – Canadian Utilities & Telecom Income Fund

Quadravest – Income Financial Trust

PIMCO – Global Income Opportunities Fund

Manulife – Floating Rate Senior Loan Fund

CI Investments – Precious Metals and Mining Trust

CI Investments – Sentry Select Primary Metals Corp

BMO – Canada High Dividend Covered Call

BMO – U.S. High Dividend Covered Call

BMO – Europe High Dividend Covered Call

BMO Global High Dividend Covered Call

BMO – Covered Call Utilities

BMO – High Yield U.S. Corporate Bond

BMO – U.S. Put Write

Horizons – Enhanced Income International Equity

Horizons – Marijuana Life Sciences Index

Horizons – China High Dividend Yield Index

CI First Asset – Tech Giants Covered Call

CI First Asset – Energy Giants Covered Call

Brompton Funds – Global Healthcare Income & Growth

Middlefield Funds – REIT Indexplus

Hamilton Australian Financials Yield

Quadravest – Dividend 15 Split Corp

Quadravest – Financial 15 Split Corp

Quadravest – Canadian Banc Corp

Quadravest – TDb Split Corp

Quadravest – Canadian Life Split Corp

Quadravest – M Split Corp

Brompton Funds – Life & Banc Split Corp

Brompton Funds – Split Banc Corp

Brompton Funds – Global Dividend Growth Split Corp

Strathbridge – Premium Income Corp

Middlefield Funds – E Split Corp

Harvest – Big Pharma Split Corp


Closing Thoughts

Do you earn interest on stocks? no. The way you make your money investing in the stock market is through stocks going up or dividend payments.

Thank you for all that are supporting The Finance Starter and don’t forget to send this blog post to someone else that could benefit from reading it.

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