LIVING OFF DIVIDENDS & PASSIVE INCOME

Did you know that you Money Market Account could have sub-prime mortgage exposure and thus you could your principle? Did you know that they are also not FDIC insured? Its true, MMA’s invest in RMBS (Real estate Mortgage-Backed Securities) and other SIVs (Structured Investment Vehicles). Both RBMS and SIVs can be used to invest in sub-prime or alt-A mortgages, both of which are a risky proposition right now. Maybe even prime mortgages are risky too. With such lax underwriting standards the past few years, it really isn’t a surprise that there are so many defaults occurring.

Another thing to consider is that MMAs are not covered by FDIC.

The fact that FDIC may not even have enough money to pay out all the investors if several banks go under is a separate discussion.

Also, stay away from savings accounts with banks that have significant mortgage exposure. If you have less than the FDIC limit of $100,000 you’ll get your money back, eventually, but its still a hassle.  Read more... (275 words, 8 images, estimated 1:06 mins reading time)

Since I decided to kick the old job (which was a hard habit to break), I’m going to be more reliant on my passive income. Part of my passive income comes from Canadian Income Funds, some of which pay out over 16% in annual yields. They pay out the dividends on a monthly basis and after tax (which the Canadian Government takes out at source) it still works out to over 1% per month. This is about 3 times what I get in my savings account!

Also, being enrolled in the dividend-reinvest program (also called DRIP) my dividends are used to buy more stock every month without paying a commission. Any best of all, some stocks offer a discount to the prevailing market price.  Read more... (349 words, 8 images, estimated 1:24 mins reading time)