5 Easy Steps to Start Earning Passive Income with $10

Who says it takes money to make money? For as little as a $10 investment, you can start building a passive income stream with almost no effort.

Just to be clear – the amount of income you are set to earn from a $10 investment may not be all that high. However, the point is that it hardly takes any income to get started – which is probably the hardest part.

For years, my wife and I have been building our main passive income stream – dividend stocks – one month at a time. The Money Sprout Index is a collection of stocks we own (over 25 and counting) that produce dividend income.

At last check, our portfolio was set to earn $1,568.19 in 12 month future dividend income. That amount is not going to let us retire anytime soon, but is certainly a good foundation of cash to build upon.

The good thing is that we have been able to slowly build this source of income – one month at a time. With limited funds, we have taken advantage of new opportunities available to invest – at times for as little as $25.

There are even opportunities for you to begin building your passive income stream with as little as $10!

Check out the 5 steps below to get started on your path to financial independence today by investing in dividend paying stocks.

5 Steps to Start Earning Passive Income

I have highlighted the 5 steps it will take you to start earning passive income with as little as $10. You certainly won’t earn a lot of passive income from $10, but you gotta start somewhere.

#1 – Find a Zero Cost Broker
The first step to start building your passive income stream is to find a zero commission broker. Remember, we are talking about building an income stream with a small amount of cash – $10. Opening up an account with a brokerage like Fidelity that charges commissions will not work in this case. These brokers charge anywhere from $5 to over $10 a trade – which is most of our initial investment.

The good news is that there are a couple zero cost brokers that you can leverage. My wife and I have opened up accounts with two of these brokers (within the last 2 years) and have had success with both.

The first zero cost broker that we opened an account with was LOYAL3. This broker allows investors to buy partial shares of stock with as little as $10! That’s right, you can open an account today and buy a portion of a share of Microsoft, Apple, or McDonald’s for 10 bucks.

LOYAL3 does come with some limitations as it does not offer all traded dividend stocks. For example, you won’t be able to purchase Johnson & Johnson (JNJ) or Procter & Gamble (PG) from the broker. But there are certainly some great companies that pay dividends that are offered.

The most recent zero cost broker that we are now using is Robinhood. Unlike LOYAL3, Robinhood offers investors the opportunity to invest in all U.S. traded companies. There are no limitations on the list of stocks you can invest in through Robinhood.

The one downside of Robinhood is that you will likely need a lot more than $10 to get started. They don’t offer partial share purchases, so you will at least need to buy one share of stock. Several months ago I purchased 1 single share of BHP stock for around $45+.

Either zero cost broker will work to get started.

Note – If you are just starting out and don’t have a lot of money each month, I would suggest opening an account with LOYAL3 first. While they don’t have a ton of dividend stocks available, you can still invest in some powerhouse companies like McDonald’s (MCD), Mircosoft (MSFT), and Walmart (WMT) for as little as $10.

#2 – Fund the Account
The next step is obvious but needs to be listed – funding your account. Depending on which broker you choose, you will likely need to link a checking account with your new broker. I have linked both our Robinhood and LOYAL3 accounts to one or more of our online checking accounts.

Another option if you choose LOYAL3 is setting up a monthly investment plan. Each month you can designate a set dollar amount (at least $10) be invested. Funds are automatically withdrawn from your checking account each month and used to purchase partial shares of stock. This can be a great way to slowly invest into a stock one month at a time.

We have used the monthly investment plan at LOYAL3 to slowly build up 40+ shares of Microsoft (MSFT) stock in under 2 years time. It may not seem like much each month but overtime it really does add up.

#3 – Screen for Dividend Stocks
Opening up and funding your account is the easy part. The next couple of steps is where things get trickier.

The next step involves screening for top dividend stocks that you can hold for many years. There are many different screening methods for finding quality dividend stocks to invest in.

For the Money Sprout Index, we use a set of criteria to narrow down potential candidates to add to our portfolio. At the beginning of every new month, I use an 8 step process to screen for dividend stocks. The criterion used to screen these stocks helps look for quality companies that have a long history of raising dividends. We consider several factors like – P/E ratio, dividend yield, payout ratio, dividend growth, and more.

It is up to you to set your filter criteria and do your own research. However, a good place to start your research could be the list of Dividend Aristocrats (updated annually) or the Dividend Champions list (updated monthly).

#4 – Place a Buy Order
By far the most important step in all of this is to actually take action. Too many investors try and time the stock market and leave money sitting idle being lazy. Others tend to get influenced by the overall market and media and make poor decisions on when to buy and sell.

The bottom line is that dividend investors don’t need to leave money waiting on the sidelines. If you are doing your due diligence in your stock screening process, then you should have confidence in putting your money to work.

The last I checked, my savings account is earning under .50%. That is not going to build wealth. I would rather make logical investments in quality dividend paying companies sooner rather than later.

We certainly don’t want to buy stocks that are way overvalued but a good screening process can help highlight those companies that may be fairly priced.

Take action and start putting your dollars to work earning more dollars as soon as you can!

#5 – Keep the Momentum
The second most important step (once you buy your first income producing asset) is to keep the momentum moving in the right direction. Don’t stop at just your first investment. Follow a monthly plan to keep investing – even if it is $10 at a time.

Like I mentioned before, over the course of almost 2 years my wife and I have accumulated over 40+ shares of Microsoft (MSFT) stock. At the time of this writing, those shares of MSFT stock will be responsible for $52+ in future dividend income. That is just in the first year.

And we are certainly not done investing in Microsoft or other great dividend producing companies – and neither should you.

By developing a solid investment plan and taking action each month, you will not need to worry about the overall market ups and downs. Instead, focus on the long term growth of your portfolio and the future income that it will produce.

Final Thoughts

It is common sense that a $10 investment is not going to make you instantly rich. Even earning a modest 5% yield on $10 worth of stock will only bring in $.50 of income in a year. That doesn’t sound very appealing at all.

However, building a solid passive income stream from dividend stocks takes time and patience. Keep investing $10 each month ($120 per year) and your income shoots up to $6 per year. Still nothing spectacular, but once it starts earning compounding interest over the course of many years, your income can explode.

All it takes is $10 to get started on your financial freedom journey. What is holding you back?

What was the smallest amount of money you invested at one particular time? My wife and I have invested $25 many times through our LOYAL3 account and realize every bit does count for the bigger picture.

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