Whether you invest in cryptocurrencies that you can stake or stocks that pay you dividends, there are multiple ways that your wealth will appreciate, and your passive income will compound. Let’s talk about the 4 ways your wealth grows with dividend investing.
Price Appreciation
Your asset goes up in value because it’s a good asset that you plan to hold for a long time. Invest in quality assets and they should appreciate and trend upwards over a long period of time.
Dividend Income
Various stakeable cryptocurrencies and dividend stocks will distribute funds to their holders giving you a stream of passive income that you can either use or reinvest.
Compounding Interest
When you choose to reinvest your dividends you will be able to compound your interest especially when you’re able to reinvest dividends automatically. The more often you are able to reinvest dividends, the faster it will compound. Keep in mind with stocks though that with trading fees it may make more sense to hold onto dividends a bit to offset the fees with less frequent purchases in higher quantities.
Dividend Growth
The number of dividends received may increase and thus lead you to earn more passive income. This is more common in the stock market to see increased dividends than it is for cryptocurrency however most cryptocurrencies tend to offer a higher APY than stocks.
Bonus (Save on taxes in Canada via the dividend tax credit)
Once you max out your contributions to your tax-free savings accounts aka TFSA, you can still save on your taxes via the Canadian dividend tax credit. Learn more about it here: https://turbotax.intuit.ca/tips/the-federal-dividend-tax-credit-in-canada-332
To summarize it, based on your income, your dividends can be taxed at a lower rate than your income or capital gains. This is particularly useful for when you retire and want to live off your dividends and pay no taxes.
What are you investing in? Do you invest in dividend stocks? Do you stake or lend crypto? How are you earning passive income? Let me know in the comments below and don’t forget to like, share, and subscribe as well!
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