How to make $1000 a month  - passive income 

How much stocks do you need to buy to make 40K a month When you think of the stock market, the first thing that comes into mind is this complicated world of the stock market. With so many confusing charts, its easy to get lost.

 But what everyone knows for sure is that you can buy stocks and sell them whenever their rise but there is another way that professional investors use to make a fortune. In 2018, warren Buffett received 3.8 billiondollars in cash from his 5 major investments. Don't get me wrong, 

he didn't sell his shares to earn that much. but instead, these 5 companies earned a ton of money during the year. Since warren buffet is an investor in thesecompanies, they had to share their profits with Buffett. 

That's called dividends. Simply put it, there are two types of companiesin the stock market, companies that have already matured and have profitable and sustainablebusiness models so whenever they make a profit, they don't know what to do with that money,therefore they end up sending it to their shareholders, on the other side you have companieswho are still trying to turn a profit like Tesla.

 They might report a profit, but the companyneeds that money to grow further, so here is a question we will try to answer in this blog, how many stocks you have to buy or how much you have to invest in the stock market so that you receive a one thousand dollars from your investments every month without sellingyour stocks? But before we do that, we have to understanda few key concepts. 

How dividends work? What are the best dividend stocks? And how to avoid the dividend trap that mightlead you to lose your entire investment? Dividends - The Real Passive IncomeSince the dot com bubble, the nature of investing has changed. Before that, investors' main concern was toinvest in companies that would turn a profit and share these profits with them 

since, as shareholders, they are entitled to the company's profits. But entrepreneurs such as Jeff Bezos steppedin and completely changed the game. The goal was no longer to maximize profitsbut rather to grow the company even if that means not paying a dime in dividends to shareholders. 

A company that only burns cash and isn't profitablelooks like a bad business, but the strategy is to keep operating at a loss until you dominatethe entire industry and then generate profit since you will be the only player in the market. And that's what Amazon did for the last 25years. Despite its 1.6 trillion dollar valuation,it never paid a dime in dividends to its shareholders. 

In fact, it avoided taxes for 2 decades sinceit was reporting a loss. In 2019, it turned 11.5 billion dollars innet income while its competitor Walmart generated 15.2 billion dollars and paid 2.16 dollarsin dividends per share, but at the end of the day, Walmart was valued at 1/3 of an amazon. Amazon might seem like a more promising stockin the future, but if you want passive income, Walmart looks like a better option. 

And the stock market is filled with such examples. There are just a handful of tech companiesthat pay dividends. The rest, especially the big ones, would ratherre-invest what they earn instead of paying you.

 2. High Dividends -The Perfect Scam To Attract Investors While to How to make $1000 a month  - passive income cks that pay high dividends are extremelyseductive, they aren't always the best choice. In fact, dividends sometimes are used to misleadinvestors and rip them off. 

The company might be on the verge of bankruptcy,or it might be barely surviving. Its stock is falling year after year, so oneway to make it's stock attractive to investors is by offering high dividends. Take Universal corporation or UVV. If you take a look at its dividend rate, youwill see a ratio of 7.16 percent. That is unimaginable high.

 You probably won't find anything like thatin the entire market. Even the world's largest company, apple, paysaround 2 percent in dividends. But I personally would not buy this stockand wouldn't advise anyone else to do that. The stock price was around 50 dollars 5 yearsago, and you might imagine that it might have grown slightly since then at least, but itdidn't,

itdidn't, the price fell to 43 dollars, and the company does seem to have a future, soit pays high dividends to keep its stock attractive to investors because who knows where elsethe stock price might be a few years from now. Compare that to apple that pays only 2 percentin dividends but the stock price rose by 337 percent in the same period. 

Cashflow is great, but losing your principleis bad. And the stock market is filled with such stocks. So, don't choose to buy a stock solely becauseit has the highest dividend yield. 3. Best Dividend Stocks Ever You might be wondering by now that are thereany good companies that are both growing and paying high enough dividends? 

The answer is Yeah, there are! Take Coca Cola, for example, the company existssince 1886, and it began paying dividend before you probably were born, it has quite a gooddividend rate of 3.2 percent. Of course, the stock price hasn't been growingas some of the tech companies because many believe that there aren't much left for coca-colato grow, but it is definitely not going to fall the next day. 

The home depot is another example. They have been paying a dividend yield of2.5 percent consistently. The stock price doubled in the last 5 years. Johnson & Johnson has been around since 1886and is regarded as the king of dividends. It's a big name in the pharmaceutical industry. 

It also plays a key role in developing thevaccine for the current pandemic. Its stock price might just boom once the vaccineis ready. The companies that don't usually pay dividendsare tech companies since the idea behind it is that, the company would be far better ifit re-invests that money back and grows faster. Companies such as Google, Facebook, and Tesladon't pay a dime in dividends, which is why investors love Apple.

 It's a tech company that both excels in hardwareand software. It has a built-in ecosystem that providesit with consistent cash flow. Its stock price rises as much as other techcompanies, but it also pays a dividend yield of around 2 percent.

 So let's try to answer the question. 4. How Much do you need to invest to make a thousanddollars a month? Well, since dividend yields are different from one stock to another and we don't want to invest in companies that don't seem todo great in the long run. We will take into account companies that aren'tonly paying great dividends but also would grow over time, such as apple, coca-cola,Johnson & Johnson, the home depot, and so on. It difficult to find an exact dividend yieldsince stock prices change every year, so does dividend yields. It also depends on the portfolio you build,but let's assume that you are going to get 2.5 percent annually. To receive a thousand dollar of passive income,you need to invest around 500 thousand dollars, that will provide with 12500 dollars a year,or slightly higher than 1 thousand dollars a month. And suppose you want to make enough from dividendsto retire complete. In that case, you need to invest at least2 million dollars to make 50K dollars annually. I guess you aren't impressed because investinghalf a million dollars in real estate, for example, would provide you a much higher passiveincome than 12500. 

And that's why investors are more concerned about the stock price than dividends. Amazon might not have paid a dime in dividends,but its stock rose by 522 percent in the last 5 years. 

Amazon investors have earned much more than any dividend investors could possibly imagine. Does that mean investing in dividend stocksis nonsense! Not really! If you have a big enough portfolio that'sinvested in wide variety of stocks, making dividend stocks part of your portfolio isa good decision. 

But you also have to consider that these stocksare growing as well so if you use these dividends to buy more stocks of the company, you willend up with a pretty good investment. The home depot's stock price increased by 26 percent last year and it paid around 2.5 percent in dividends, which makes it a pretty appealing investment. 

On the other side, if you are just starting out with a small amount such as a few thousand dollars, you can't afford to buy a property to rent it out, so starting with dividend stocks might be an option to consider for some.