Former UBS asset manager Helmut Jonen earned a salary of over $322,000 (£253,818) annually over a decade ago. However, he quit the bank once his passive income from investment dividends reached north of $257,000, or 80% of his UBS salary. He achieved this milestone at the age of 52.
"This year, I will probably earn over EUR 300,000 (£248,497) in dividends for the first time," the 63-year-old told Business Insider in 2023, adding that his best month was pocketing in over EUR 35,000 from dividends. The ex-banker was planning to survive on earnings from investments early in his career and began investing in the stock market in 1982.
"If you want to live off dividends, you have to start in your mid-20s. If you don't start until you're 40, it gets pretty darn expensive," he explained.
Jonen Invests In Four Dividend ETFs
Jonen's portfolio includes 97 individual stocks and investments in four dividend-yielding exchange-traded funds (ETFs). Initially, he would dedicate two hours daily to working on his portfolio. "It takes a bit of work," the investor said. His first pick was the Vanguard FTSE All-World High Dividend Yield (VHYL.AS), which "covers almost everything worldwide that pays dividends."
The ETF returned over 19% in the past year and 29.27% in the past five years. Jonen's second pick is the iShares STOXX Global Select Dividend 100 (ISPA.DE), which tracks 100 "promising stocks" from companies in Europe, North America and the Asia Pacific region and has returned over 15% in the past one year. His next ETF choices are the iShares Asia Pacific Dividend (NYSE: DVYA) and the iShares Emerging Markets Dividend (NYSE: DVYE), which returned over 13% and 5%, respectively, in the past year.
His last two picks focus on dividend-paying stocks in the APAC region and developing nations. It is important to know that dividend stocks often garner a reputation for distributing consistent returns as passive income to investors but might lead to less capital appreciation than individual growth stocks. Jonen plans to grow his ETF positions in the future, given that they only require a little effort and charge lower fees relative to mutual funds.
ETFs Can Work For Those Who Don't Have Time To Track The Market
The former banker recommended that beginners invest in individual stocks only if they "enjoy it" and have sufficient time to follow market trends and conduct in-depth research. People who cannot allocate hours every day to fine-tuning their portfolios can choose ETFs, which he believes could "turbocharge your income" without you having to "waste time analysing stocks." ETFs diversify your investments across different companies, each with its unique strengths, management experience, and offerings.
Hence, these investment instruments help lower the impact of market volatility on your portfolio, which becomes difficult to manage in case of high concentration in a particular stock. "In the 1990s, Apple was almost bankrupt. Today, it's the most valuable company on earth," Jonen explained, adding that even the most robust companies can face dire challenges. Overall, he believes an individual stock should make up less than 4% of a portfolio, and diversification is necessary right from the beginning of one's investing journey.
Having A Long-term View Is Crucial In Stock Investing
When Jonen used to manage the assets of wealthy clients at UBS, he learned it is crucial to think long-term when investing in stocks. "I've been an investor for a long time, looking at stocks as a long-term investment," he said, but working with clients taught him he needed to plan much further into the future. While many stock investors "think overnight" and get nervous when shares tank by 5%, Jonen's experience at UBS helped him learn to hold stocks for a minimum of five years. "I've learned that the most successful entrepreneurs are the ones who think in terms of generations. Thinking extremely long-term is the key to a successful stock-market career," he said.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
