When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.
How to create a dividend portfolio?
You’ve got to start your dividend investing career somewhere. An attainable starting point for many new investors is one thousand dollars.
$1000 is a nice round number. If you’re from the UK then £1000 also works. It should be enough money to start a portfolio but a smaller amount than you one day hope to have invested.
Investing with small amounts presents some challenges, which we aim to help you overcome.
$1000 is a nice round number. If you’re from the UK then £1000 also works. It should be enough money to start a portfolio but a smaller amount than you one day hope to have invested.
Investing with small amounts presents some challenges, which we aim to help you overcome.
Big ideas
- Before you even think about which stocks to add to your portfolio, you have to think about your goals. One important consideration is income vs wealth-building.
- Investing in fractional shares gives you access to high-priced stocks in a small portfolio because it allows you to buy less than one share of a company.
- Diversification can be achieved by selecting stocks from each of the 11 major sectors as well as by using ETFs.
What is a dividend portfolio?
A dividend portfolio is a collection of dividend-paying stocks that altogether aim to be well-diversified and give you the best chance of earning a consistent income. It’s fine to own stocks for other reasons but they just won’t be involved when making a dividend portfolio.
Watch our video
How to start a dividend portfolio
Having such a portfolio allows you to earn some passive income and generate wealth for the long term. You can adjust your dividend portfolio strategy to suit your own purposes.
Do you want a regular monthly income? You can do that by owning a portfolio of stocks that have payment dates every month.
For example, with 12 stocks in your portfolio, you can make sure each stock pays its dividend in a different month. With 52 stocks in the portfolio, you can get paid weekly.
You can build a diversified portfolio effortlessly when trading in the UK and Europe with Pies, and automate your investments with Autoinvest. You can also enjoy the peace of mind that comes with 24/7 support, ensuring you receive assistance whenever you need it.
You can take this a step further by changing the weighting of each stock within your portfolio to make sure your monthly payouts are the same.
Do you want a regular monthly income? You can do that by owning a portfolio of stocks that have payment dates every month.
For example, with 12 stocks in your portfolio, you can make sure each stock pays its dividend in a different month. With 52 stocks in the portfolio, you can get paid weekly.
You can build a diversified portfolio effortlessly when trading in the UK and Europe with Pies, and automate your investments with Autoinvest. You can also enjoy the peace of mind that comes with 24/7 support, ensuring you receive assistance whenever you need it.
You can take this a step further by changing the weighting of each stock within your portfolio to make sure your monthly payouts are the same.
Example
Say you invest in 3 stocks:
- Stock A pays a dividend of $20 in February
- Stock B pays $30 in March
- Stock C pays $40 in April
To even out the monthly income, you can buy more of stock A and less of stock C.
- Stock A pays a dividend of $20 in February
- Stock B pays $30 in March
- Stock C pays $40 in April
To even out the monthly income, you can buy more of stock A and less of stock C.
Instead of using the cash for income, you can reinvest to increase the value of your portfolio and grow your wealth over time. When focusing on long-term growth, you can attach more importance to the size of payments. When focusing on income, you can focus more on the timing of the payments.
How to build a good dividend portfolio with $1000
One of the first questions on your mind is likely: How many stocks should I have in my portfolio?
The best answer is KISS - keep it simple stupid!
Starting a dividend portfolio with $1000 can be done with 10 stocks with an average of $100 invested in each. You might think it is not enough, but you can have a lot of variety in the size of the company and risk profile among 10 stocks. Also, there are 11 major sectors, so it means you come close to covering all corners of the stock market.
The best answer is KISS - keep it simple stupid!
Starting a dividend portfolio with $1000 can be done with 10 stocks with an average of $100 invested in each. You might think it is not enough, but you can have a lot of variety in the size of the company and risk profile among 10 stocks. Also, there are 11 major sectors, so it means you come close to covering all corners of the stock market.
You only need to look at Warren Buffett’s Berkshire Hathaway to see that the top 10 stocks make up the bulk of the money invested.
Berkshire Hathaway's biggest investments
Source: Yahoo! FinanceKeep in mind that $1000 is just your starting point. Adding to your portfolio with deposits and dividend reinvestments over time is a prerequisite for building long-term wealth. For commission-free investing in the UK, Europe and around the world, simply apply the sample principal but with a starting point of £1000.
An allocation of $100 per stock for the portfolio sounds simple enough, but what if one or more of the stocks you want to buy is priced over $100?
An allocation of $100 per stock for the portfolio sounds simple enough, but what if one or more of the stocks you want to buy is priced over $100?
Buying a suitable cross-section of large well-known stocks is a challenge for any beginner dividend portfolio. You might wish to invest in Apple shares, but how do you know which other stocks could fit alongside it and stay diversified?
Take Warren Buffet’s Berkshire Hathaway as an extreme example - at the time of writing, the stock price just ticked over $500,000. Just one of those shares, let alone nine others are too pricey for a beginner’s portfolio. Thanks to fractional shares, this is no longer a problem.
A fractional share is less than one whole share. Owning fractional shares allows you to buy less than one share of a company. Let’s say you have £10 to invest. How can you invest in Apple stock from the UK when each share is worth about $100? You can buy 0.1 ( a 1/10th fraction) of a share for $10 (which is worth a bit under £10).
To illustrate how fractional stocks can work for our theoretical $1000 portfolio, here's an example of five well-known stocks, including Apple (AAPL), for those thinking about an investment in Apple from the UK.
Take Warren Buffet’s Berkshire Hathaway as an extreme example - at the time of writing, the stock price just ticked over $500,000. Just one of those shares, let alone nine others are too pricey for a beginner’s portfolio. Thanks to fractional shares, this is no longer a problem.
A fractional share is less than one whole share. Owning fractional shares allows you to buy less than one share of a company. Let’s say you have £10 to invest. How can you invest in Apple stock from the UK when each share is worth about $100? You can buy 0.1 ( a 1/10th fraction) of a share for $10 (which is worth a bit under £10).
To illustrate how fractional stocks can work for our theoretical $1000 portfolio, here's an example of five well-known stocks, including Apple (AAPL), for those thinking about an investment in Apple from the UK.
Example
Apple - 1 Share = $165
Microsoft - 1 Share = $279
Visa - 1 Share = $211
McDonald’s - 1 Share = $252
Johnson & Johnson - 1 share = $181
Buying a single share of these 5 companies would cost $1088. By using fractional shares, you can reduce that to less than $500, leaving room for the next five shares in the 10-stock portfolio.
AAPL - 0.6 Shares = $99
MSFT - 0.2 Shares = $83.70
V - Shares = $105.50
MCD - 0.4 Shares = $100.80
JNJ - 0.5 shares = $90.50
Using fractional shares, the cost of this portfolio is now $479.50.
Microsoft - 1 Share = $279
Visa - 1 Share = $211
McDonald’s - 1 Share = $252
Johnson & Johnson - 1 share = $181
Buying a single share of these 5 companies would cost $1088. By using fractional shares, you can reduce that to less than $500, leaving room for the next five shares in the 10-stock portfolio.
AAPL - 0.6 Shares = $99
MSFT - 0.2 Shares = $83.70
V - Shares = $105.50
MCD - 0.4 Shares = $100.80
JNJ - 0.5 shares = $90.50
Using fractional shares, the cost of this portfolio is now $479.50.
Using fractional shares, the cost of this portfolio is now $479.50. It has become possible to invest in Apple shares as well as these other big international companies listed on the New York Stock Exchange and Nasdaq, all for under $1000.
With the Trading 212 app, it is even easier than that. Instead of selecting the number of shares, you can just select the amount you want to invest, and the app automatically calculates how many fractions of shares that will be. With this approach, commission-free investing can be done from the UK when buying big stocks of big American companies.
With the Trading 212 app, it is even easier than that. Instead of selecting the number of shares, you can just select the amount you want to invest, and the app automatically calculates how many fractions of shares that will be. With this approach, commission-free investing can be done from the UK when buying big stocks of big American companies.
Fractional shares help you to fit your desired portfolio within your budget and let you invest in more companies over a diverse range of countries, industries and trading instruments.
How To Balance Your Dividend Portfolio
Balance is important when investing. Making sure that your portfolio isn’t overly reliant on one particular stock or industry will make your portfolio durable.
Sectors
Spreading your risk over multiple sectors of the economy will ensure industry risk is reduced. This is a list of the 11 major economic sectors:
- Information Technology
- Health Care
- Financials
- Consumer Discretionary
- Communication Services
- Industrials
- Consumer Staples
- Energy
- Utilities
- Real Estate
- Materials
Finding one company in each industry is the ideal way to protect a portfolio against adverse economic conditions. The logic is that when one sector may be struggling, another might be thriving.
Dividend yield
A simple way to diversify risk is to choose stocks with different size dividend yields. Yield correlates well to risk. That is because riskier companies generally have to offer higher yields to compensate investors for the higher risk than investing in ‘safer’ companies.
Flooding your portfolio with high-yield stocks means flooding it with risk. On the flip side, a portfolio of very low-yield stocks is going to have less-than-impressive returns.
One strategy is to have a base of lower yield stocks for safety, with a small allocation to some higher yield stocks for higher potential returns. Using the Trading 212 app, you can select the weight of each stock in your European or UK trading account by using Pies (more on this below).
Flooding your portfolio with high-yield stocks means flooding it with risk. On the flip side, a portfolio of very low-yield stocks is going to have less-than-impressive returns.
One strategy is to have a base of lower yield stocks for safety, with a small allocation to some higher yield stocks for higher potential returns. Using the Trading 212 app, you can select the weight of each stock in your European or UK trading account by using Pies (more on this below).
Creating a dividend portfolio with ETFs
One way to supercharge the diversification of your beginner dividend portfolio is by adding an index ETF or an index fund.
An exchange-traded fund (ETF) is a basket of stocks that trade on an exchange just as if it were a single stock. It’s a great way of investing in many different stocks at once with built-in diversification.
If you are mostly investing in American companies, you might opt for an ETF based on the S&P 500. If you’re investing in the UK it might be the FTSE 100, or in Europe the Euro Stoxx 600.
An exchange-traded fund (ETF) is a basket of stocks that trade on an exchange just as if it were a single stock. It’s a great way of investing in many different stocks at once with built-in diversification.
If you are mostly investing in American companies, you might opt for an ETF based on the S&P 500. If you’re investing in the UK it might be the FTSE 100, or in Europe the Euro Stoxx 600.
How to grow a dividend portfolio with Trading 212
To help your portfolio grow, you can reinvest the dividends received, giving you more stock from which to earn higher future payouts. As an example, there is a way to invest in Apple shares in the UK through the Trading 212 app, and reinvest dividends automatically even if your account is denominated in British pounds. This can be done using Pies and Autoinvest. You can buy AAPL stock as a percentage weighting in a Pie and automatically add funds to the Pie every month. Regular deposits into your portfolio are paramount, especially if you are investing for the long term. For your $1000 portfolio, adding $100 per month would be a great start if possible.
Recap
There are a few different ways that you can start a dividend portfolio. One way is to invest in 10 different stocks, which can be a mix of large and small companies. Another way is to invest in a balanced mix of stocks and ETFs. And yet another way is to invest in fractional shares of stocks.
No matter which method you choose, the important thing is to start investing in a way that best suits your needs and goals.
No matter which method you choose, the important thing is to start investing in a way that best suits your needs and goals.
FAQ
Q: How to set up a dividend portfolio
To set up a dividend portfolio, you'll need to choose a brokerage account, select the stocks or ETFs you want to invest in, and set up a regular schedule of investing. Trading 212 offers a wide range of UK, US and global trading instruments to invest in, with the option to use fractional shares.
Q: How to start a dividend portfolio
There are a few things to keep in mind when starting a dividend portfolio. First, it is important to choose stocks that have a history of paying out dividends. These stocks are more likely to continue paying in the future. Second, it is important to diversify your portfolio. Diversification will help to reduce risk and ensure that you are not too heavily invested in any one stock. Finally, it is important to monitor your portfolio regularly.
Q: How many dividend stocks to start a portfolio
There is no hard and fast rule for how many dividend stocks to start a portfolio, but a good starting point is to aim for a minimum of 10. This will give you a good mix of different companies and sectors and help to diversify your risk. Of course, the number of stocks you ultimately hold will depend on your investment goals and risk tolerance.
Q: How to start and build a dividend income portfolio
One popular method is to start with a small portfolio of high-yielding stocks. This can provide a solid foundation for future growth and help you to start earning a significant income from dividends. Another option is to focus on building a diversified portfolio of stocks that offer a moderate yield. This approach can help to reduce risk and provide a steadier income stream.
