Pennies

Loyal3 Is Shutting Down

Prioritize Your Finances to wind up with a suitcase of money
You won’t be maximizing your money with Loyal3 any more.

Back in 2015, I learned about a relatively new investing platform that allowed users to invest in increments as low as $10 per purchase. Additionally, you could buy partial shares, which made the opportunity even more attractive. This platform was Loyal3.  This actually got me to start investing. Unfortunately, after having used this online brokerage for about two years, I got an email that Loyal3 is shutting down.

Loyal3 Is Shutting Down

This email that I received from the company was a bit of a surprise, but not too big of one. The company did not charge any fees, claiming to make money from marketing the stock of the 60 or so companies that it provided for investors as well as the interest from holding onto cash that was not yet invested in an interest-bearing money market fund.

Loyal3 is shutting down.
Loyal3 is shutting down.

This did not seem like the most sustainable of business models, but because Loyal3 was a member of SIPC, I figured at the time that my investments were safe. I enjoyed the chance to build my investment holdings in small increments over time.

Many in the investing community advocate buying stock in increments of $1,000 or more because of fees that hurt long-term returns. This can make it difficult for small-time investors to begin the process of investing. It can also make diversification a very slow process. With Loyal3, I had as many as eight holdings at one time, built up with purchases that ranged between $10 and $200 for any single transaction.

This was a pretty cool deal.

But now it’s done.

What To Do Now?

Now that Loyal3 is shutting down, what is the small-time investor to do? There are some investing options that might work. RobinHood is one that comes to mind. I’ve not used this platform, but I’ve read about it. RobinHood requires investors to buy full shares, which makes the minimum investment a bit higher.

The email from Loyal3 indicated that those who choose to leave their holdings alone would automatically have them transferred to a new brokerage called FolioFirst. This new brokerage, according to the email, is just for Loyal3 clients. The offerings for FolioFirst accounts will grow to around 200 companies and funds, which is good. Then comes the bad news.

There are still free trades( at least up to 2,000 a month), but the new outfit is going to start charging a $5 monthly fee per account. The minimum investment will now go up to $25 from $10. $5 a month might not sound like much, but it would add up to $60 a year.

Let’s say that a new investor has $50 a month to invest. This fee would mean that the investor would go from paying $0 with Loyal3 to paying $60 with the new FolioFirst platform. That’s a fee that would take up 10 percent of the total investments for the first year. Admittedly, the fee would go down over time as more money gets invested, but it would slow down the growth process quite a bit.

Investors with Loyal3 also have the option of instigating an account transfer to the brokerage of their choice. Option 3 involves selling all shares and then cashing them out.

What Am I Doing?

After getting the email that Loyal3 is shutting down, I decided that I’d opt for the third option. My account has some modest gains. I figured that my $100 in gains would cost me about $20 in taxes at most. Not too bad.

Furthermore, I also took into account the fact that I’m investing for dividend income. With the current size of my account, I’d have to pay about 4 percent of its value in account fees over the next year. That’s more than the roughly 3 percent yield that I’m earning on my holdings.

I’m planning to take the proceeds and invest them into my IRA account with TradeKing. This will provide a positive tax effect because I’ll be able to cut my current-year income by the amount I invest and then save 15 percent of the investment in deferred taxes.

I am planning to make one major purchase or two smaller purchases with the proceeds. This will not have me as diversified as I was, but it will cost me a max of $9.90 in trading fees, which is much less than the $60 I’d lose when looking at the monthly fees that FolioFirst would charge.

I can also buy REITs, telecoms, and utilities that pay higher dividend yields, so my overall dividend income for the next 12 months will probably go up with the purchases.

Conclusion

Loyal3 is shutting down. This is sad in one regard. Small-time investors who are getting started will have one less option when it comes to making small purchases and not having to pay major fees.

I’m cashing out and cutting my current-year taxes by putting the proceeds into a traditional IRA. I should also see a bit of a bump in my annual dividend income as a result.

Pennies

Using Dividends to Buy More Dividends

One of my long-term goals is to build up a decent amount of wealth that can produce a nice level of passive income over the long haul. While I’m not likely to get to the $1 million per year in passive income, I believe that several thousand, if not tens of thousands in annual income, is definitely doable over the next couple of decades. When trying to earn money in pajamas, one of the best ways to make this happen is through dividend income. This is passive income that accumulates as a return on capital from allowing great companies to use said capital to operate and grow their businesses.  As I’ve said before, passive income is the best income.

Earning more money is always a good thing. The bad thing about earning more money is the time that it usually takes to do so. There are, however, some strategies that can be used to make more money without putting in any additional effort. Investing for dividends is one such strategy. Here is an article that lists three great reasons for investing in dividend paying stocks. The final reason is key. Even stable dividends pay out more over time. “How can this be?” you might be wondering. The answer is simple–COMPOUNDING.

There is one step and one step alone that is required to compound the your gains, provided that the dividend is left stable by the company paying it out. This one step is reinvesting. There are a couple of different avenues that can accomplish the reinvestment of dividends. The first is through a DRIP program. The DRIP stands for Dividend ReInvestment Program, and in this situation, an investor automatically reinvests the dividend into additional shares of the company that originally paid out the dividend. This will basically increase the dividend payout by the annual yield. A dividend yield of 3 percent that gets reinvested will see the annual dividend payment raise by about 3 percent over the course of a year because the number of shares that our hypothetical investor has should increase by about 3 percent. This is an increase in income that’s more than inflation has been over the past few years–all without lifting a finger.

Several brokerages, such as TradeKing, allow you to automatically DRIP your dividends into companies that permit dividend reinvestment. TradeKing is currently offering a $50 bonus for new signups under my referral link listed above.  You would get $50 for meeting the requirements, and I would also get $50. You don’t have to sign up with my link to invest through TradeKing, but I greatly appreciate any support you might feel like giving. This bonus could be used to buy a share or two of many great dividend-paying stocks.

Automatic reinvestment is one strategy, but there is another. I use the DRIP in my Tradeking account, but I have to use the other strategy in my Loyal3 account because DRIPing is not an option. This involves stocking up on dividend payments until a certain minimum amount of cash is reached. The minimum investment through Loyal3 is $10, and I pay no fees for my investments on this site. You can check out my review of Loyal3 here.  Those who invest through a TradeKing, Scwhab, or any other investment account can also pool dividends to diversify. It’s probably best to pool until a decent amount of money is available so that you can keep the transaction cost to a minimum. For example, a share of AT & T costs around $40 a share right now. Through TradeKing, if you were to purchase only one share, you’d pay $4.95 in transaction fees, which effectively adds about 12 percent to your purchase price.  It would also eat up more than the $1.92 in dividend income you’d get in the first year. It would be year three before dividend income would exceed your transaction cost. If you were to hold off until you could buy 10 shares, the transaction fee would drop to slightly more than 1 percent of the purchase price, which will definitely help long-term returns.

loyal3-logo

I decided in January to use my dividends from my Loyal3 account to diversify. Any additional purchases would come from new funds, while dividend income would just sit until I reached $10 in the account. During the first week of April, I reached the requisite level to make my first purchase from my dividend income stash. I decided that I would buy shares of Unilever (UL), which is a massive international consumer goods company that produces everything from butter to deodorant. I again started to pool the dividends after making this small $10 purchase, except now, I would be adding the small dividend from Unilever into the equation. My first payment came in June, and added $0.08 to my account.  Admittedly, this was a very small amount of money, but it allowed me to inch toward another purchase a little bit more quickly.

I hit $13 worth of dividends in my account by the first week of July, as my payment from Coca-Cola pushed me across the necessary $10 threshold. Again, I put the accumulated dividends toward more UL. Last week, I got my second payment from Unilever, and it was up to $0.17 over the course of a quarter, still not a huge amount, but an increase over the course of three months that allows me to edge ever closer to another purchase. This morning, I awoke to find that a dividend payment of nearly $4 from McDonald’s had posted into my account. This brought my account total $11.49, and I made my third purchase of Unilever stock for $11. If all goes according to plan, I will see a payment of around $0.25 for the fourth quarter in December.

I admit that I’ve put more capital toward my account with Loyal3 over the past nine months, but it’s been great to see that my dividends are growing and allowing me to purchase additional dividends. Even if I never added any additional capital to my account, I should be able to grow my dividends as companies decide to give dividend increases and I reinvest my dividends. This is the power of compounding. Of course, I’m hoping to have enough capital available to pay my bills and to invest each and every month going into the future, but seeing additional dividend income come in without doing more than making a few clicks and keystrokes is positive reinforcement. It’s exciting to see my dividend payments going higher and higher over time.

Disclaimer: I am not a financial advisor. This article is not a recommendation to buy any security. It is intended only for educational/entertainment purposes.

I am long all stock listed in this article.

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Pennies

I’m Making More Money with No Effort!

Last week was a great week on the earning money in pajamas front. As I preach over and over again, the best income is passive income, because it’s the me of today benefiting from the decisions that the me of ten years ago or a few weeks ago made. Not one, but two, companies in which I hold a small stake decided to increase their dividend payouts–on the same day, no less. This was a doubly great day. Now, I don’t profess to have a massive stash of income-producing stocks, as I’m just getting started on this dividend income journey, but regardless, any time that I get a raise for any reason whatsoever, I’m pretty happy.

Most of my raises have come from doing a good job as an employee or because I’ve changed jobs. This raise came from doing basically nothing other than investing in companies that have done a good job of building up massive cash flows that are enough to pay off a portion of the cash flow to their investors on a regular basis. My hope is that over time, I can build a growing stream of dividend income that allows me to work less as I get older.

Here are the dividend increases that I got last week:

Coca-Cola increased its quarterly dividend from $0.33 per share to $0.35 per share. This will add $0.58 to my annual forward dividend income based upon the slightly more than 7 shares that I currently hold. This is not a massive increase, but should I be able to add capital on a regular basis to where I have say 100 shares, this would be compounded to a much bigger benefit. The goal is small additions to my passive income stream compounding into a much larger income stream in the future.

Wal-Mart also announced a dividend increase. This one was only about 2 percent, as it was $0.01 per quarter. This added $0.18 to my annual dividend income based upon the ~4.5 shares that I currently hold. Many people would look at 18 cents and think whoop-de-doo. That’s nothing. They would be right, but 18 cents this year added to more capital, buying even more stock, and paying more dividends that increase by another penny or two on a quarterly basis can really add up over time. Warren Buffet did not start out a billionaire. I just read last week that he’s amassed 99 percent of his net worth after the age of 50. That’s pretty amazing to say the least. I’m hoping to amass quite a bit more than 99 percent of my net worth after age 40.

I have some money in the hopper that’s ready to buy some more stock through Loyal3, and I’m about to reach enough Swagbucks to get $25 more through PayPal that I can then use toward another stock purchase. I usually make my money with Swagbucks by letting videos play while I’m vegging out. It’s not a massive pile of cash, but it’s added up to nearly $1,000 over the past 3 years at a rate of about one $25 PayPal increment each month. You, too, can sign up for Swagbucks with my referral link and start earning toward cash through PayPal.

I’m letting my dividends grow in my Loyal3 account until they reach $10, and then I’m going to open another position with only my dividends. I’m also planning to add capital on a regular basis to increase my dividend payouts. It’s pretty exciting stuff to say the least. The only question is what new company to start investing in. Onward and upward as I attempt to make more passive income.

Disclaimer: I am not a licensed financial professional. This post is intended only for entertainment/educational purposes. Please consult with your financial advisor before purchasing securities.

Pennies

Stock Purchases and More Dividend Income

I had a bit of capital that came in over the past week, and as I’ve noted before, passive income is the best income. It really allows me to earn money in pajamas–day after day, week after week, month after month. The people who work for the various companies that I hold work around the world, and their products are sold 24 hours a day. This permits me to increase my capital over time as the dividends pay out and slowly grow. I put $21 to work in each of my Loyal3 holdings. I do not have to pay out any trading commissions when purchasing stocks through Loyal3 my total purchase was $105. My capital bought me the following partial shares and additional dividend income:

Company                                    Shares Purchased                            Additional Dividends

McDonald’s (MCD)                            0.1906                                                  $0.68

Kellogg’s (K)                                       0.3153                                                   $0.63

Coca-Cola (KO)                                  0.5013                                                  $0.66

Apple (AAPL)                                      0.1863                                                  $0.39

Wal-Mart (WMT)                                0.3675                                                  $0.72

I’ve decided that these were all good companies when I started investing earlier this year, and I’m sticking with my decision even with the recent concerns over Wal-Mart. I’m planning to be in this for the long haul, so I’m not planning to sell unless a dividend is cut. My goal is to get about $500 in capital invested in each of my companies before adding another (although I might diversify more if I find another company that’s a great deal). When adding up the additional dividend income that I’ve added with this latest purchase, I come up with $3.08 in additional dividend income. Apple has a lower yield, but with the massive amounts of cash that the company produces and has on hand, I’m of the opinion that they should be able to grow this dividend extensively over time. Otherwise, I would have had a few more cents.

This additional $3.08 on an annualized basis brings my estimated yearly dividend earnings for the next 12 months to $73.53. Considering that I had an estimated $0 coming in just about four months ago makes me reasonably happy with this big increase. I’ve already set another record for monthly dividend income this month, and I hope to see it grow so that I’m earning more and more in pajamas every quarter (because the income is a bit uneven based upon when my companies pay). Have you made any investments lately? How much passive income have they provided?

Pennies

Recent Stock Purchases

Last week, I decided to use some money that I’d come into to buy some more stocks with my Loyal3 account.  I had a total of $75 to invest, along with my first $2.62 in dividend income.  I’ve decided to reinvest dividend income so that I can keep the dividend snowball adding additional dividend income, which is a great way to passively earn money in pajamas. As I’ve stated many times before earning money from home is a great thing. The more dividends I can amass over time, the more money I will make in pajamas.

Because you can only purchase whole dollar amounts from Loyal3, this meant that I had a total of $77 to invest. I have positions in five companies through Loyal3, so I decided to pretty much invest an equal amount in each. The exception to this was my position in Kellogg (K), which I just opened with a $25 investment. Therefore, I had $15 going to McDonald’s, Wal-Mart, Apple, and Coca-Cola. I decided to reinvest my dividend income into Kellogg to help this investment catch up in terms of my total capital outlay. My purchases added the following amounts to my positions:

Loyal3 91815 purchase

While this might not seem like I’ve added a great deal to any of these stocks (and that would be a correct assessment), it nonetheless is just another brick in the dividend wall that should help with my expenses as I age. My goal is to supplement any pensions, 401k accounts, and social security payments that I might get. My additional estimated annual dividend income from each of these purchases are:

WMT: $0.46

MCD: $0.52

K: $0.50

KO: $0.50

AAPL: $0.27

Therefore, these small purchases of additional fractional shares of five large cap, blue chip companies add a total of $2.25 to my annual dividend income. My total expected dividend income from my Loyal3 and TradeKing portfolios is now up to $48.53. While this might seem like a pitiful amount of money, it takes time and invested capital to get this income up. Were I not to put any more capital to work in the next year, I should see a bit of an increase from dividend increases. As of now, I’ll average just over $4 in dividend income each month. However, my goal is to add to this as funds become available so that I can earn more money in pajamas because passive income is the best income.

Pennies

Earning Money in Pajamas with Dividends on Loyal3

Note: Loyal3 is closing down in May 2017. Therefore, this platform will no longer be available. It will be a good idea to choose another brokerage.

As I wrote in my last post, passive income is the best income. One of the best ways to get passive income that I noted in that article was through dividend stocks. These stocks are issued by companies who have created enough income and built up enough equity through their business operations to return some of the profits to those who invest in their endeavors. While reading up on dividend growth investing over the past few weeks, I stumbled upon recommendations for a website that allowed for fee-free investing. This site Loyal3.com allows investors to put in as little as $10 toward a number of quality stocks–without having to pay any commissions. I was intrigued to say the least.

I have some money that I’ve had laying that’s come from birthday and Christmas gifts over the last few years, so I decided to open an account and put it to work because it’s basically been earning nothing. I decided to buy $100 worth of WalMart stock last week to see how the site worked. The transaction went through today, and that $100 investment bought me 1.398 shares of ownership in Wally World. WalMart currently pays an annual dividend of $1.96 per share, which is split into four quarterly payments, so this will give me about $2.70 in dividend income over the next year. I chose WalMart because it’s the biggest retailer in the world, it makes lots of money, it pays a solid dividend that’s increased every year for around four decades, and it trades at a relatively low price-to-earnings ratio. As this went through pretty easily, I have decided to buy some more stocks on Loyal3 with the funds that I have available.

The Loyal3 site is pretty easy to navigate, and it only took a few minutes to go from creating an account to linking a bank account and telling the site what to purchase. The transfer of funds from my bank took from Saturday to Tuesday, and the purchase went through on Tuesday morning. The site only makes purchases in a couple of batches each day, so this is something to consider if you’re looking to purchase at a specific price as you can’t totally control the purchase price. I chose this “broker” because most other low-cost brokers are quite expensive if you don’t have a fairly large sum to invest. For example, I considered TradeKing with its $4.95 fee per trade, but for a $100 investment, I’d be starting about 5 percent in the hole before the stock moved up or down at all. It would take a purchase of $500 to make TradeKing or Scott Trade worth it, in my estimation. If I get a good nest egg going, I’ll probably open an account with one of these sites to further diversify without paying heavy fees. With Loyal3, I can buy fractional shares for as little as a $10 investment and it costs me nothing, as most well-established stocks are not going to shift in price by 5 percent on the vast majority of days.

There are some negatives that come with the Loyal3 platform. One is the afforementioned fact that the site utilizes batch trading, rather than up-to-the-minute trades. This can lead to some fluctuations in price, but as noted above, I don’t think that’s going to wipe out any advantage gained by avoiding paying a fee on a smallish trade, at least the vast majority of the time. Another negative is the fact that the site only has a relationship with slightly more than 60 companies, but some of these are among the biggest names around. Included are stocks like: WalMart, Apple Computer, Intel, Microsoft, Coca-Cola, Kellogg’s, PepsiCo, and others. Each of these pay a good dividend that’s grown in recent years (sometimes for decades straight). Energy and healthcare companies are not get included.

However, for my current level of investment ability, I think that the Loyal3 platform should work well for my purposes.  I plan to spend the rest of the money I have available, purchase additional shares with some other passive income, and then reinvest any dividends that I get. The goal is to increase dividend income year-over-year to where I have a nice cash flow supplement when it comes time to retire. Dividends are definitely passive income, and WalMart is active in many countries around the globe, so this company is literally providing income (albeit a very small amount at the moment) while I’m in bed, which is one of the best ways to earn money in pajamas.

Disclaimer: I am not an investment professional. Therefore, this article is intended only for entertainment/informational purposes and is not an actual recommendation to buy any specific security. Stocks go up and down, and investors can and do lose money.