A New Year is right around the corner, and you know what that means:
Time to start thinking about your resolutions for the next year.
It’s a tradition in many parts of the world to make pledges and resolutions for the next year when the old one passes into the history books. Common resolutions include weight loss, smoking cessation, and cutting back on drinking.
The above resolutions are good ones, but one shouldn’t overlook financial resolutions. Saving and investing are just as neglected as weight loss and sobriety, yet don’t make it into New Year’s resolutions anywhere near as frequently as those two.
What kind of financial resolution should you set? That’s a personal matter, but a commitment to investing a set amount of money each month is a good one. Academic studies show that investing a little bit month in and month outperforms better than timing the market. With that in mind, here’s how investing $500 per month could lead to $335 in dividends in 2025.
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The investment strategy most experts recommend
The investing strategy that most experts recommend to retail investors is what’s called “dollar cost averaging.” It means taking a small chunk of your monthly earnings and investing it into the markets, rather than trying to time the market with lump sums. By dollar cost averaging, you gradually reduce the cost basis of your investments in bear markets. You also sometimes pay too much in bull markets, but the overall effect over a long period of time has been shown to be an immensely beneficial one.
The above is why I decided to write this article about the passive income that can be earned with a $500 monthly investment, instead of a lump sum. Lump sum investing is usually not well recommended. With that out of the way, let’s see how you can make $335 in passive income by investing $500 per month.
How you could get $335 per year in passive income by investing $500 per month
You could get to $335 per year in passive income by investing $500 per month in a high yield stock like First National Financial (TSX: FN).
$500 per month works out to $6,000 per year. If you invest $6,000 at a 5.6% yield, you get about $335 per year. Here’s how the math on that works out.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| First National | $44.87 | 137 | $0.204167 per month ($2.45 per year) | $27.97 per month ($335.67 per year) | Monthly |
As you can see, it doesn’t take much money invested each and every month to get some passive income coming in. With high yield stocks like FN, it doesn’t take much at all!
That’s not to say you should go out and invest all your money into First National stock of course. It’s subject to certain risks, such as interest rates, which are presently falling due to the Bank of Canada’s rate cuts. However, this example goes to show what could be achieved with a diversified portfolio yielding the same as FN. And at any rate, some small exposure to FN within a diversified portfolio wouldn’t hurt.
