Full transcript
0:00Let's say you make $70,000 a year from
0:02your job. If you wanted to quit and
0:04travel the world or do whatever you
0:05wanted to do, you would need to be
0:07making $70,000
0:10a year passively from your investments
0:14in order to be able to do that and not
0:16worry about money. Now, I know there's a
0:18lot of content on the internet about
0:19creating passive income, but 98% of what
0:22you see is garbage. If you want to have
0:24enough income coming from your
0:25investments to fund your lifestyle, it
0:27is not going to be easy. It is not going
0:29to be cheap because you have to have the
0:30money to actually invest first. You
0:32don't have to have all the money first,
0:34but you have to put that money aside.
0:35It's not going to happen fast. It's
0:37going to take years, if not decades.
0:39It's not going to be easy. It's going to
0:40require sacrifice. It's going to require
0:42hard work, and it's not risk- free.
0:44Investing has risks, but it is possible.
0:47So, now, if you're still sticking with
0:49me through this part of the video and
0:51say, "Hey, I understand this stuff is
0:52not easy." Well, let me show you how you
0:54can actually do it. That way you can
0:56replace your active income with passive
0:59income using strategic ETFs that will
1:01pay you with income year after year
1:03after year. And I'm going to do that by
1:04breaking this video up into three
1:06different parts. I'm going to start by
1:07laying the foundation of how you can
1:09actually create income from your
1:10investments to actually make this
1:12happen. Number two, I'm going to talk
1:13about the specific ETFs that you can
1:15consider investing your money in. No, I
1:17can't tell you what to do. I'm not a
1:18financial adviser. I'm just a random guy
1:20on YouTube. Investing has risks. You're
1:22never guaranteed to make money when you
1:23invest. In fact, you will lose money at
1:25some point. So, make sure you always do
1:26your own due diligence and never blindly
1:28trust a random guy on YouTube. And then
1:30number three, I'm going to show you how
1:30you can actually execute. That way, you
1:33could see the returns and maybe even
1:35faster. Let's start with the foundation
1:36so we're on the same page. The
1:38difference between an ETF and a stock is
1:40when I go out and invest in an
1:41individual stock like say McDonald's.
1:43MCD is a ticker symbol of McDonald's. If
1:46I buy one share of McDonald's, I own a
1:49piece of the McDonald's corporation.
1:51Now, I don't have to go and work at the
1:52McDonald's company, but I get to get a
1:54piece of the profits that McDonald's
1:56has. And the way that I get that is
1:57through two things. Number one is
1:59appreciation. So, McDonald's stock goes
2:01up by, let's just say, $100 a share.
2:04Well, now I just became wealthier
2:06because my investment went up in value.
2:08The other way that I can get paid is
2:10through dividends. A dividend is a cash
2:13payment that McDonald's gives out
2:15because they have such big profits. This
2:17is one of the things that McDonald's
2:18does. So when a company has billions of
2:20dollars of profits at the end of the
2:21year, there are three things they can do
2:23with that cash. They can save that money
2:25for an emergency. They can take that
2:26money and reinvest it back into the
2:28company. Meaning McDonald's can go and
2:30create new burgers, open new franchises,
2:32do a bunch of other things, or they can
2:34take that money and just give it away to
2:35the shareholders with a cash payment
2:38deposited into your account. That's what
2:40a dividend is. Now, the nice thing about
2:43you investing in McDonald's is if
2:45McDonald's now takes over the world,
2:47you're going to see the value investment
2:48go up and you're probably going to see
2:50bigger profits and bigger dividends and
2:51you're going to make a lot of money. But
2:53the downfall is if McDonald's burgers
2:55get really disgusting and people stop
2:57eating it and then they get sued and
2:59then they declare bankruptcy, not only
3:01do you lose the income that you were
3:02getting from the dividends, but now the
3:05company is going to go bankrupt and you
3:06lose everything. So, that's the risk,
3:08more risk for more potential gain. And
3:10not every company pays a dividend. And
3:13the time I'm recording this video,
3:14McDonald's does pay a dividend. The
3:16alternative to a stock is investing in a
3:18fund. What type of fund? Well, what I'm
3:20going to be discussing today is an ETF.
3:22An ETF is an exchangeraded fund. These
3:25are funds that trade just like stocks on
3:26the stock market. And now, instead of
3:28investing in one company, I might be
3:30investing in dozens of companies,
3:31hundreds of companies, or thousands of
3:33companies depending on what type of fund
3:35I'm investing in. And now this ETF might
3:37invest in companies like McDonald's,
3:39maybe invest in Apple, maybe invest in
3:43Amazon and hundreds of other companies.
3:46That way now I have some diversification
3:48and some protection that I don't have to
3:50worry about managing myself. So if
3:51McDonald's does go bankrupt, this fund
3:54will then remove McDonald's and replace
3:56it and I don't have to do anything. So
3:58lower risk for lower potential return,
4:01but you don't have to worry about
4:03managing the actual stocks inside of the
4:05ETF. That's the benefit of it. With
4:07these ETFs, you can still invest for
4:09dividends. You can still invest for
4:11appreciation. What we're going to be
4:12focusing on today are dividend paying
4:15ETFs because the goal for today's video
4:17is how can you create enough income from
4:20these funds to potentially replace your
4:22job income. And let's do a little bit of
4:24math to make this sink in. If you wanted
4:26to replace your $70,000 income tomorrow
4:28and you could get a 1% dividend on the
4:30ETFs you invest in, you'd have to invest
4:32$7 million. If you could get an average
4:352% return a year, you'd have to invest
4:37$3.5 million to get the $70,000 a year.
4:40If you get a 3% return, $2.33 million.
4:43If you could get a 4% annual return,
4:45$1.75 million. If you can get a 5%
4:49return, now you just need $1.4 million.
4:52And if you could get a 10% annual
4:54return, you would now just need
4:56$700,000. Now, I know what you're
4:58thinking. Just pri just need a million.
5:00Do you not know how much a million
5:01dollars is? Look, I know it's a lot of
5:03money, but this is why so many people
5:05fail at this process because they look
5:08at these numbers and say, "Oh my god,
5:10Josh B, I am never going to be able to
5:12replace my income because I don't have a
5:13million dollar or $7 million to be able
5:15to do this." But here's the part that a
5:17lot of people forget. You don't need
5:19this money today. In fact, you actually
5:21don't need all of this money really ever
5:24because if you invest in the right
5:26funds, what will happen is number one,
5:28you're going to be growing how much of
5:30this fund that you own. But then number
5:31two, if the fund starts to grow in
5:34value, your investment starts to grow in
5:36value. And if the dividends also
5:37increase, the income that you're getting
5:39is also increasing. Not just because
5:41you're putting more money in, which you
5:42are, but also because the companies are
5:45making bigger profits, so they're paying
5:46out bigger dividend checks. So, as you
5:49get more shares of the ETFs, each share
5:51starts to pay out bigger dividends. This
5:54is how much money you need in order to
5:56get that income today. But this is not
5:59how people actually achieve this income.
6:01But people look at this and say, "This
6:03is why I'm never going to invest for
6:04dividends." So, now that you understand
6:06this, let's actually jump in and talk
6:08about the different types of ETFs you
6:09can consider investing in. And then I'll
6:11show you how you can actually execute on
6:14it to make it work. I'm going to break
6:15these dividend ETF categories into five
6:18different sections. I'm going to talk
6:19about broad United States dividend ETFs.
6:21I'm going to talk about international
6:22ETFs. I'm going to talk about growth
6:24ETFs, but not what you think of when you
6:26think of growth stocks. I'm going to
6:28talk about growth dividend ETFs that are
6:30actively working to increase their
6:32dividend payments. I'm going to talk
6:33about REIT ETFs, real estate ETFs. And
6:35then we're going to talk about something
6:36a little bit weird for number five. Not
6:38dividend paying ETFs, but interest
6:40paying ETFs. So, let's jump right into
6:42this. I want to remind you that for
6:43those of you that are investors, my team
6:45at Briefs Media publishes a free daily
6:47report called Market Briefs, where we
6:49break down what's happening in things
6:50like the stock market, housing, crypto,
6:52global markets, and our own economy into
6:54a fun, witty, and easy to read
6:56newsletter. It's completely free. It's
6:57read by hundreds of thousands of
6:59investors every single morning. And if
7:01you want to join, all you have to do is
7:03click the link below. And when you join,
7:05you're also going to get access to a
7:06complimentary investing master class
7:08that I put together just as a little
7:10bonus for joining market briefs.
7:11Starting with category number one, the
7:13broad United States dividend paying
7:15ETFs. I'm going to talk about SCHD and
7:17VYM. As a disclaimer, I am personally
7:19invested in both of these and I don't
7:21recommend what I do to anybody else.
7:23SCHD is an ETF created by Schwab. VM is
7:27an ETF created by Vanguard. These are
7:29two of some of the largest asset
7:31managers, money managers in the world.
7:33But the whole idea behind both of these
7:35ETFs is very similar is that these are
7:37investing in United States companies
7:39that are paying out dividends and
7:40they're working to specialize in these
7:43funds invest in those United States
7:45companies that are paying out dividends
7:47and will hopefully be working to grow
7:49the dividends and their profits over
7:50time. And at the time of recording this
7:52video, SCHD is paying around 2.4% a
7:55year. VM is paying around 2.6% a year.
8:00So, this is giving exposure to the
8:01United States companies that will
8:03hopefully grow in value, but are also
8:04paying out dividends. There's also an
8:06international version of both of those
8:08ETFs created by Vanguard and Schwab.
8:10Vanguard's international high dividend
8:12ETF is V Y and Schwabs is SCY. And as a
8:17disclaimer, I'm personally invested into
8:19this ETF right here. Now, international
8:22funds and stocks are interesting because
8:24a lot of companies outside of the United
8:25States don't just benefit when the
8:27company grows, but they can also benefit
8:29when the country is growing. And so,
8:31there are certain countries and
8:32companies around the world that have the
8:34potential to grow a lot faster than
8:36those inside the United States. Because
8:37not only is the country growing, but the
8:40companies also working to innovate
8:42inside a fast growing, fast developing,
8:44emerging market, which can create more
8:46potential opportunity, but that also
8:48means it comes with more risk. So you'll
8:50see that these funds have higher yields,
8:53higher dividends, but there's also more
8:55risk associated with it, but more
8:56potential upside. You can see the value
8:58of the fund grow even faster and the
9:00dividends grow faster, but it also has
9:02the same risk to fall just as fast. So
9:05VYMI is paying out around 4.1% a year.
9:08SCHY is paying around 3.9% a year at the
9:11time of me recording this video. Then we
9:13have dividend growth ETFs. And this is
9:15an interesting one because when most
9:16people talk about growth stocks or
9:18growth ETFs, they're generally talking
9:20about those smaller companies, the
9:22smaller stocks that are working to grow
9:23the value of their stock, the stock
9:25price, as fast as possible. Here, we're
9:28talking about something a little bit
9:29different. We're talking about investing
9:31in the companies that are working to
9:33grow their dividends, their income
9:35payments faster. And I'm going to go
9:37over a couple of ETFs here. One is N O L
9:40Noble. The other is Reg L. And these are
9:43focused on companies that have been
9:45working historically to increase their
9:47dividends in the past. So N OL invests
9:50in S&P 500 dividend aristocrats. What
9:53that means is NOBL is only investing in
9:56dividend paying companies that are in
9:58the S&P 500, meaning they're part of the
10:00500 largest companies in the stock
10:01market, but they must have also paid out
10:04and increased their dividend every year
10:08for the last 25 years or more. So, it's
10:11a pretty exclusive club here, but you
10:13can start to see that they're focused on
10:15the companies that have been regularly
10:16increasing their dividends. The
10:17alternative is Regl. This is an ETF
10:20that's investing in the Midcap 400
10:23dividend paying companies that have
10:25increased their dividend for at least
10:26the last 15 years. Meaning, it's one of
10:29the 400 midcap companies in the United
10:31States on the stock market. These are
10:33now not the biggest, but kind of those
10:35medium-sized companies. So they have the
10:37potential to grow a little bit more
10:38faster, a little bit more risky than the
10:40largest companies, but now each one of
10:43these companies has worked to pay out
10:44and increase the dividend for the last
10:4715 years. So these are companies that
10:50have worked to find those companies that
10:51are more of an exclusive club that have
10:53been consistently increasing the
10:54dividends and have the potential for
10:56more dividend growth. Now, let's talk
10:57about REITs because if you've been
10:59following my channel, you know that I
11:00like talking about real estate and real
11:02estate is a great investment for cash
11:03flow. The problem is it takes more work.
11:05It takes more capital. it takes more
11:06headache to actually go out and buy
11:07rental properties. If you don't want to
11:09do that, one alternative is to invest in
11:11a REIT. A REIT stands for a real estate
11:13investment trust. And essentially what
11:15you're doing is you're investing in a
11:17company that has exposure to real
11:19estate. So instead of actually investing
11:21in the real estate, you're investing in
11:22the company that's buying the real
11:23estate. And I'm going to go over two
11:25different examples here. SCH and MT.
11:28They're two very different style of
11:29read. So I want to talk about them
11:31differently. SCH is an ETF that invests
11:34in United States property owning REITs.
11:37Meaning, this only invests in companies
11:39that are investing and buying property
11:41in the United States for income. Now,
11:44REITs are unique because they follow
11:45something called the 90% rule, which
11:47essentially says that the REIT has to
11:49take 90% of the taxable income,
11:51essentially their profits, and give it
11:53away to the shareholders in the form of
11:54dividends. And that's why some people
11:56like to invest in REITs for that income
11:58because well they're generating rental
12:00income. They pay for the property
12:01expenses and then they distribute 90% of
12:03the income in the form of dividends. So
12:06this is investing in companies that are
12:07actually buying those rental properties
12:09whether they're office or apartments or
12:11anything in between. Mort is a little
12:14bit different. MT this is investing in
12:16mortgage rates. So this is not investing
12:18in the companies that are buying the
12:20properties or buying the land. This is
12:22investing in the debt on those
12:24properties. Very different. This ETF
12:27doesn't invest in the companies that are
12:28owning the real estate. They're only
12:29owning the debt. And this is paying a
12:3112% dividend at the time I'm recording
12:33this video. Now, you might hear that and
12:34say, "Oh my god, Jos, 12%. That's crazy.
12:38Why don't I just dump all my money into
12:39that? That's going to give me some great
12:41returns." Well, more return comes in
12:43more potential risk, right? Well, and
12:44that's what's going on here. Mortgage
12:46rates are much more risky. They're much
12:48more volatile. you see them go up and
12:50down, which is why whenever you do your
12:52your investing analysis, make sure you
12:54don't just look at the dividend number
12:56because it can be extremely deceiving.
12:59Now, for some people, this might be good
13:01investment for their portfolio. For
13:02others, it will not be. I want you to
13:04understand that when you do your
13:05analysis, looking at the dividend number
13:07by itself is never ever ever enough to
13:11decide if it's good for your portfolio
13:12or not. Always look at the underlying
13:15asset. What are the actual companies
13:17that you're investing in? and see if
13:19that's actually a business that you'd
13:20want to be a part of or want to own. And
13:22number five are interest paying ETFs. So
13:24these are going to be the most different
13:26than everything above because these ETFs
13:28are not actually investing in stocks or
13:30companies. These ETFs are giving you
13:31exposure to interest and more
13:33specifically what's happening here is
13:35these are short-term treasury ETFs,
13:38meaning you can lend money to the United
13:40States government and in exchange the
13:42government will pay you with interest.
13:43And the nice thing about that is that
13:45the United States government is
13:46considered a risk-free investment
13:48because the United States government
13:49will always pay their bills. Now, that
13:51doesn't mean they always have the money
13:52to pay their bills because they generate
13:54money from taxpayers and tax dollars,
13:56but they have the ability to pay their
13:58bills because if they don't raise taxes,
13:59they can just get that money printed
14:01from the Federal Reserve Bank. So, they
14:02have the ability to pay their bills. And
14:05with these ETFs, you're getting exposure
14:08to the short-term treasuries and you get
14:11the interest without actually having to
14:12go and lend money to the United States
14:14government. Because these are ETFs, you
14:16can trade on the stock market like any
14:18other ETF. You can buy and sell it
14:19whenever you want. And the other benefit
14:21is with the interest from these ETFs,
14:24you are generally not subject to any
14:27state or local taxes because it's
14:30interest from the United States
14:32government. So, a couple benefits there,
14:35but the way it works here is you have SG
14:37OV and B I L. Both of these are
14:40short-term treasury ETFs. And now you're
14:43not actually going to see any
14:44appreciation in the value of your
14:46investment because with all of these,
14:48the goal is number one, you're going to
14:50see the value of your investment go up,
14:52but also the dividends would go up.
14:54Ideally, that's how it would work in the
14:56best case scenario. With these, it
14:59doesn't work like that because the price
15:01of these ETFs doesn't change. The only
15:04times it changes is when it pays out the
15:06interest and it pays out the interest
15:08monthly. And so you'll see the value of
15:10the ETF drop by the amount of the
15:12interest because you're really just
15:14buying something that's paying you
15:16interest and the value of investment is
15:18not changing because it's backed by
15:19treasuries. And if the United States
15:21government were to default, then yes,
15:23the price of these would probably drop,
15:25but that would create a whole lot of
15:27other problems. So the prices of these
15:30are backed by United States Treasuries.
15:32You're generating interest. The value of
15:33investment is not going to go up, but
15:35the interest rate that you get can
15:37change and it's going to vary depending
15:39on where interest rates are. So if we do
15:42see interest rates get cut, then the
15:45interest that you're going to be paid
15:46would also go down as well. But if you
15:50wanted to generate some interest and you
15:51don't care about the value of your
15:52investment going up or down, this could
15:54be a way for you to generate some
15:55interest and not actually have to go
15:56through the hurdles of lending your
15:58money to the United States government.
16:00So now we started by laying the
16:01foundation of how this can work. Then we
16:03talked about the different types of ETFs
16:05that you can invest in. Now let's talk
16:07about how you can actually execute
16:08because there's a couple of things that
16:09I want you to understand. The first
16:11question that many people ask is, well,
16:12how much should I be investing into
16:14these ETFs? And the thing that I like to
16:15talk about is not trying to time the
16:17market, but rather when it comes to
16:19these types of funds, follow ABB. This
16:22is what I talk about. ABB means always
16:25be buying. And what that means is your
16:27goal isn't to sell these funds now for a
16:30big profit. Because the goal is income.
16:32And the way that you get income out of
16:34these ETFs is if you own a lot of these
16:37funds. And the way that you can own a
16:39lot of these funds is by always be
16:42buying. Every time you get paid, money
16:45should be going into these funds. And so
16:47now you need to set up an automatic
16:49cadence where money is automatically
16:52going into these funds every week, every
16:54two weeks, or every month. And this
16:56should happen whether markets are going
16:58up or down. I don't care what is going
17:00on. People always freak out when markets
17:02are crashing, but that's the time you
17:03should be buying more, not the time you
17:05should be selling. And even when markets
17:07are going up, you keep buying because
17:08the goal is now to keep accumulating
17:11more shares of these ETFs because as you
17:13accumulate more shares, each share is
17:15going to pay you an additional amount of
17:17dividend. And your goal is to maximize
17:20this, the amount of dividends that
17:21you're getting. And the way that you can
17:23maximize that is by owning a whole lot
17:24of shares. So you have to be
17:26consistently buying these funds. And if
17:28you try to time the market, well then
17:30your money is just sitting on the
17:31sidelines and you need to keep
17:32accumulating more shares of that fund.
17:35The second thing I want you to
17:36understand is that as this fund starts
17:37to pay you money, this can be an
17:39additional source of income to buy more
17:42shares of these funds. This is called
17:44DRIP, dividend reinvestment plan, where
17:47now every time you get paid with the
17:49dividend, many brokerages will allow you
17:51to reinvest your dividends, your profits
17:54back into the fund. But you do have to
17:56understand that even if you reinvest
17:57this money, you still have to pay taxes
17:59on the dividends that you did get.
18:01Something for you to keep in mind. But
18:04now, if you want to actually succeed, it
18:06is a long-term game. I call it a decade
18:09of sacrifice to really start to see
18:10those types of returns that you're
18:12looking for, which is where now you put
18:14in the sacrifice for 10 years to spend
18:16less and earn more so you can invest
18:18like crazy. And if you can do that,
18:20invest like crazy to invest in the
18:23income, well, in 10 years, you'll have a
18:26solid stream of income coming out. And
18:28then you can start to decide, do you
18:30want to keep reinvesting this dividend
18:31income or do you want to start using it
18:33to help pay your bills or maybe
18:35depending on how aggressive you were to
18:37potentially replace the income that you
18:39have? Now, sometimes it can happen in 10
18:41years, sometimes 20, sometimes 30,
18:42sometimes 40 years depending on how
18:44aggressive you are and the funds that
18:46you're investing in. But the whole idea
18:48is you keep investing into this until
18:50this can replace this, your active
18:53income. When your passive income
18:54replaces your active income, now you are
18:57financially free because you can quit
18:59your job tomorrow and you still got the
19:01money coming in from investments to fund
19:03your lifestyle. And the other nice part
19:04about this, the investment income is
19:06taxed at a lower tax rate than your
19:08active income. So with that, now we have
19:10talked about the foundation which ETFs
19:12and how do you actually execute? Again,
19:13if you want some additional resources,
19:15you can check out market briefs. I have
19:16the link for you down in the
19:17description. And the best thank you if
19:19you got value out of this video is to
19:21share this video with a friend or a
19:22co-orker. America is entering a debt
19:25death spiral.
19:26>> When debts rise relative to incomes on a
19:29chronic basis, right now for the US
19:31government, it's almost a trillion
19:33dollars a year that goes to interest
19:35payments. When you run a large deficit,
19:37you have to sell debt to do that. And
19:39when I calculate it, the quantity of
19:41debt sold to be sold is