So, in this video today, we are going to be building
a mock dividend portfolio in M1 Finance,
just so you guys can understand, how does that work,
and why are there a lot of dividend investors flocking
to this free investing app?
Now, that being said, if you guys, at the end of this video,
do decide that you want to signup for M1 Finance,
I do have a link in the description below to do so.
It is an affiliate link, so if you do use that link,
at no additional cost to you, I do earn a commission.
So, if you feel like giving back to me
for putting this video together,
that is very much appreciated,
but it is not required if don't want to.
And then, one other thing I wanna mention really quick,
I just finished up a completely free
30-minute video training outlining
how to use M1 Finance as a complete beginner.
So, it walks you guys through the entire process,
step-by-step, of opening an account with them,
funding the account, everything in between,
and everything you need to know
to get started with M1 Finance.
That is also going to be linked up
down in the description below.
But that being said, let's go ahead
and open up my M1 Finance account.
We're gonna build a mock dividend portfolio,
and then we're gonna talk about what exactly happens
as this portfolio earns dividends.
Okay, so here we are inside the M1 Finance app.
This is my simple portfolio that I put together here,
starting with $100, just for demonstration purposes
for the app, but it's definitely not a dividend portfolio.
A couple of these stocks do pay dividends,
like Microsoft, Apple, and the Vanguard 500 Fund,
but they're not high-dividend stocks.
So, if you're looking to earn dividends through M1 Finance,
you basically have two options.
Number one, you can invest in one of the Expert Pies
or Expert Portfolios that have a high dividend yield,
or option number two, you can build a portfolio from scratch
with high-dividend stocks, and I'm gonna show you guys both
of these right now.
So, let's assume, for example,
you just want to invest in a pre-built portfolio
that pays a high dividend.
Well, M1 Finance offers over 30 different Expert Pies
that are completely free to invest in,
including Income Earners right here.
That's a category right here.
Income Earners, choose a portfolio focused on dividends
and income returns.
So, if we open that up here, there are a number
of different options here as far as dividend earners.
You have some bonds as far as a more conservative approach
to income, you have Bank Balance Sheet.
I'm actually not familiar with this portfolio,
what this one entails.
But then you also have a Domestic Dividend ETF,
or blend of funds, or you have a global dividend blend
of funds here.
So, let's say, for example, you want Domestic Dividend.
You could select this right here,
and it's gonna tell you exactly what this portfolio is.
So, it says here, the M1 Domestic Dividend Pie
provides exposure to U.S. companies
with larger than average dividend distributions.
The Pie was built for people seeking
continuous dividend income from U.S. companies.
Dividends provide income investors with cash flow.
So, as we can see here, the total expense ratio
of these funds is going to be 0.11%,
and if you click on Targets here,
we can see exactly what they're investing in.
It looks like 83% is in a Vanguard Dividend Fund,
and the other two, I'm not familiar with.
It's another ETF out there.
And this, overall, pays a dividend yield of 1.84%.
We'll take a look at another one here.
Let's say you want global exposure here.
This is the Global Dividend fund for income earners.
This one has, it looks like five different funds in here,
and the dividend yield for this fund
is significantly higher, at 3.37%,
with a slightly higher expense ratio.
So, there are Expert Pies built into this app
specifically designed for people looking
for dividend income.
And so, this is where you would find that,
primarily under the Income Earner section of this app.
Now, option number two is to build a dividend portfolio
from scratch, where you pick your investments,
you pick the stocks or ETFs, and then we'll talk about
what happens as that portfolio earns dividends.
So, now we're going to go ahead
and build a dividend portfolio from scratch on M1 Finance,
and we're gonna do so right over here.
And essentially, what we're going to do is pick
five dividend stocks to add to this portfolio,
just for demonstration purposes.
So, there's a couple of stocks I have in mind
that pay high dividends, and we're gonna add them
to this portfolio.
And obviously, guys, I'm not telling you
to invest in these companies or not invest.
Do your own due diligence, for sure, on these companies
and do your own research.
I'm simply just throwing them in here
for educational purposes to show you
how the app actually works.
So, first of all, AT&T is one of the biggest companies
out there for dividends, so we'll add that one
to the portfolio.
They have a very consistent dividend.
Altria, that's a tobacco company,
some people don't like investing in them,
I personally wouldn't, but they do pay high dividends,
so we'll throw them in here as well.
Next, we'll add Southern Company,
which is a utility company,
and then we're also going to add Wells Fargo,
which is a bank, obviously, and they pay a high dividend.
And I'm purposefully trying to grab companies
from different industries as well
for some diversification here.
And then, fifth and finally, we're gonna add ExxonMobil
to this portfolio so we have you know a couple
of different industries here, and then we'll go ahead
and click Done.
Now, automatically, they're going to split the money evenly
across these five stocks, and that's exactly
how I'm going to leave it.
Let's say, for example, I was looking
for an individual stock dividend portfolio,
I have done my research on these five investments,
I've decided I want to invest in them,
then I would have 20% of my money going to each
of these five stocks.
So, that's exactly how I want it,
and I'm gonna go ahead and click Save,
and now this has created this dividend portfolio for me
and we'll go ahead and name it as such.
Now, what's gonna happen at this point,
if I actually funded this portfolio and added some money,
it's going to just be split up
across these five investments.
So, let's say, for example, I funded this with $1,000.
Well, about $200 would go into each of these five stocks,
and the reason you're able
to do this is because of a feature called fractional shares,
where you're not purchasing whole shares of AT&T
or ExxonMobil or Wells Fargo, you're purchasing as little
as 1/10,000 of a share, which allows you
to have a diversified portfolio
without worrying about that share price.
And then, if you guys are curious
what the yield is of this portfolio,
you just jump over to the Details tab
and you can see right here,
this would have a dividend yield of 5.13%.
Now, that's a pretty high dividend yield,
and obviously, you'd want to do more research
on these companies before you invested in this portfolio,
but I just wanted to show you what it looks like
to actually build a portfolio,
and it'll show you right here
what your dividend yield across
that entire portfolio is going to be.
Now, that being said, what actually happens
when you earn dividends?
Now we're gonna jump back to my actual portfolio
and I'll show you guys what happens.
So, like I said, a couple of these investments here
in this portfolio actually do pay dividends,
and we can see that by going over
to the Activity section of the app.
So, as you can see here, I've earned dividends from Apple,
as well as Microsoft and the Vanguard 500 ETF,
and those dividends have gone towards my cash balance
held on the sidelines, and that is viewable
by looking at your portfolio right here.
So, this is a portfolio worth $116.30.
Like I said, I started with $100,
and if I click on the arrow right here,
it shows my cash balance of $1.10,
with Auto-invest turned on.
And so, what that means is that, as I earn dividends,
those dividends go towards the cash balance held
within my account, and with the Auto-invest feature
turned on, once that cash balance exceeds $10,
it's going to be spread evenly across my portfolio
and they're going to try to bring me back
to my target allocations.
So, that is how that Auto-invest feature works,
and it's a little bit different
than a stock-level dividend reinvestment,
where the exact dividend goes back into the exact stock.
Instead, all of your dividends accumulate together,
and once that balance exceeds $10,
it's invested across your entire portfolio.
That is why I call it a portfolio-level
dividend reinvestment.
And the other thing M1 Finance is going to do,
as you add more money to your portfolio
or as your dividends are invested,
is they're going to do their best to attempt
to bring you back to your target allocations
because as you have money in the market,
each of these assets is gonna perform differently
at different times.
So, as you can see here, I've done exceedingly well
with Apple and Microsoft, and not so well with Amazon.
And so, as a result, I'm underweight in Amazon
and overweight in Apple.
So, my goal was to have 30% in Amazon, and I have 27.6,
and my goal was to have 10% in Apple, and I have 12.3.
So, if I were to add more money to this portfolio,
M1 Finance would try to bring me back
to that target allocation of 50, 30, 10, 10.
So, as you add more money to your portfolio
or as you earn dividends and that balance exceeds $10,
it's going to rebalance your portfolio
or they're gonna do their best to bring you back
to those target allocations.
But anyways, guys, that's gonna wrap up this video.
That is how dividends work on M1 Finance,
that is how to build a dividend portfolio,
and like I said, you have a couple
of different options there.
You can build your own custom portfolio from scratch
and choose your ETFs or stocks,
or you can invest in one of the pre-built portfolios
with an income-oriented approach.
Like I said, if you guys wanna check out
that completely free 30-minute M1 Finance video training,
that is linked up in the description below,
as well as a link to sign up
for M1 Finance if you decide to use it.
But thanks so much for watching this video, guys,
I hope you enjoyed it, and I will see you in the next one.
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