I’ve been a steadfast dividend growth investor since the early part of 2010.
It was after taking a look at every potential long-term investment strategy that led me to settling on dividend growth investing as the strategy that, I believed, would take me to the “promised land” of financial independence and early retirement.
Things worked out really well.
My FIRE Fund, which is the result of a lot of saving and dividend growth investing, now generates the five-figure and growing passive dividend income I need to cover my basic bills in life, rendering me financially independent.
I was able to quit my job at 32 years old. And I live halfway across the world as a dividend expat, where every day is full of unique experiences and a lot of happiness.
Hindsight is great, but there were a number of key reasons that allowed me to make the choice to focus on dividend growth investing from 2010 onward as I built out my wealth and passive income on my way to FIRE.
Now, there are plenty of different ways to go about building wealth, passive income, and freedom in life. Each individual should pick a strategy that works best for them.
But I want to share the reasons why I believe dividend growth investing is the best long-term investment strategy of all for those who want to FIRE at a relatively young age.
This post was partially inspired by the recent passing of David Fish, who steadfastly provided incredible resources for dividend growth investors (including me) for years. I’m going to honor him and the strategy he championed by sharing some valuable and inspirational thoughts on how it’s changed my life (and how it might be able to change yours, too).
Predictable Dividends Form An Excellent Foundation For An Independent Life
My FIRE is underpinned by the dividend income my portfolio generates on my behalf.
As of the writing of this article, the dividends I’m expecting to collect over the next 12 months adds up to over $12,500.
While I collect some other passive income, like royalties from my best-selling book on how to become financially independent, the dividends form the vast majority of my ability to live a life independent of financial concerns and/or needing to have a job/source of active income.
Growing dividends are an excellent foundation for an independent life because of their predictability.
They’re predictable because decades of proven dividend payments sets you up for an unlikely failure to get paid.
Procter & Gamble Co. (PG), for instance, has paid a dividend every year since 1891, and they’ve been increasing their dividend for 62 consecutive years. Billions of people consuming Procter & Gamble Co’s various products aren’t going to stop doing that anytime soon, nor is Procter & Gamble likely to stop paying and increasing its dividend.
An object in motion stays in motion. We know that from our elementary school science class. Well, a dividend in motion tends to stay in motion, too. The forward momentum that is many decades of growing dividend payments means it’s unlikely that motion will discontinue.
You want predictability when it comes to your passive income source, because bills will surely continue to come your way.
Rent is predictable. You’re predictably going to eat, transport yourself around, and do whatever else it is you do in your life. Spending money is a reliable outcome in life.
Well, you want that kind of predictability and reliability when it comes to your passive income, too.
And this predictability is great when you’re marching toward financial independence, because you can actually see the growing dividend income line up against your expenses. You can see freedom inching closer, day by day. It’s like watching your ship come in.
This makes it easy to plot your “crossover point” – the point in time in which your passive income will exceed your expenses, rendering you financially free. You can see that foundation being poured like you’d see a foundation poured for a skyscraper. And since the sky is the limit with this strategy and the FIRE lifestyle, it’s an apt analogy.
It’s About As Passive As It Gets
Guess what I have to do to collect a dividend?
Zero. Zip. Zilch. Nada.
No 1-800 number to call. No letter to write. Nobody to bother, and nobody to bother me.
I wake up, my expected dividends are in my account, and I go about my day. This process plays out, on average, every day of the year.
Once you actually buy a dividend growth stock, there’s basically no ongoing “maintenance” at all.
This is a different dynamic compared to most other strategies that are designed to build wealth and income, where at least some of your resources (time, energy, presence, etc.) will be required on at least a semi-regular basis.
Sure, you should keep a loose eye on your investments, but high-quality businesses (which are the type you should be investing in for the long haul) don’t need Jason Fieber (or you) to babysit them. Likewise, I don’t need to worry about PepsiCo, Inc. (PEP) bothering me if/when the proverbial toilet leak develops (or some such other problem arises).
It’s very tough to get more passive than collecting growing dividends, but it’s very easy to get less passive.
It Forces You To Focus On High-Quality Businesses For The Long Haul
A lengthy track record of dividend raises is in and of itself a fairly solid initial litmus test of business quality, as it’s nigh impossible to pay out increasing dividends for many years, or decades, on end while simultaneously running a terrible business that doesn’t turn a profit. Those two events are practically mutually exclusive.
You can turn to your capital structure (debt and/or equity) for a bit to bridge a temporary gap in funding, but that can’t and won’t last indefinitely, especially if the gap is sizable (which would almost certainly be the case if you are indeed running a terrible business).
As such, looking at stocks with many years of dividend raises limits your universe of available businesses for investment. Looking at only dividend growth stocks for investment practically forces you by default to focus on high-quality businesses.
For example, Johnson & Johnson (JNJ) didn’t grow its dividend for 56 consecutive years by running a poor business. It was able to do that because it’s running a phenomenal business that has the free cash flow available to sustain that practice.
Now, limiting yourself like this could also cause you to occasionally miss out on a great business that happens to not pay a growing dividend (or a dividend at all). But that opportunity cost is more than offset by the benefit of largely avoiding low-quality investments.
Moreover, because of the nature of building out a dividend growth stock portfolio that’s designed for FIRE, you’re by default also compelled to stick with these companies for the long term. It essentially exorcises out bad habits like trading in and out of stocks by the very nature of the strategy.
If you have the growing dividend income in place to become FIRE, or if that income already covers your lifestyle, there’s no reason why you should want to do anything other than let those businesses go to work for you and pay you your rising dividend income.
You’ll almost certainly be happy to let your snowball roll. And there’s no good reason to be phased by market volatility, either, other than to see short-term volatility as a long-term opportunity.
Protection Against Rising Costs
Most stuff will be more expensive in ten years than it is today. We all know that.
And so even if you have enough passive income to cover your expenses today, you have to ensure that’s still the case tomorrow, ten years from now, and 30 years from now.
Well, inflation protection is built right into dividend growth investing.
After all, it’s the very nature of rising prices that forms part of the dynamic that allows these great companies to log higher profit, which more or less translates to higher dividends.
A bottle of Coca-Cola cost a nickel back in the 30s. Try going down to your grocery store and paying that much today. It can’t be done.
The Coca-Cola Co. (KO), for example, can and will routinely (albeit slowly) increase the prices of its products because it has the product quality, breadth, and demand to do so. And inflation works as a protection mechanism for that process to play out, which means it’s a tailwind of sorts for profit increases over time.
After all, if everything goes up, who’s to notice one particular product or service that’s more expensive tomorrow or a year from now? When everything goes up over time, that becomes the expectation.
And so high-quality companies that pay growing dividends become the ultimate hedge against inflation, as the very nature of inflation means dividends are almost certain to also increase over time.
That’s on top of whatever pricing power a company has, which can be significant when talking about a world-class business with sought-after brands. It’s not like you’re going to switch to an inferior product because the cost of your usual brand increased in price by an amount that slightly exceeded inflation.
This means that dividend growth investing not only protects you against inflation, but it tends to actually increase your purchasing power over time. The dividend growth rates from almost every business I’m invested in has exceeded inflation over the last 10 years. So bring on the inflation!
It Beats The Broader Market
I saved this one for last for personal reasons. But it’s certainly not least.
I’m not all that interested in the broader market. I honestly don’t get the fascination with what other funds/people are doing, but human beings have this innate need to compare themselves.
My FIRE lifestyle has nothing to do with what a particular fund or person is doing relative to me. I don’t wake up at a different time, eat different food, exercise with less intensity, or somehow enjoy my amazing life any less because someone out there might be making money at a faster rate than me (nor would I be happier to know I’m doing better than someone else). I don’t get my “FIRE Card” rescinded because I don’t beat something or someone over any particular period of time.
For those who are keen to compete against the S&P 500 and beat it, however, dividend growth investing is an awfully attractive investment strategy.
Between 1972 and 2016, dividend growers and initiators outperformed an equal-weighted S&P 500 index. That’s per Ned Davis Research, as discussed in a Hartford Funds white paper. And it wasn’t just a little outperformance. The performance difference was massive.
This shouldn’t be surprising.
After all, reinvested dividends account for the great majority of the market’s total return over the long term. That same white paper just linked to above shows that reinvested dividends account for 82% of the S&P 500’s total return since 1960.
And since many high-quality dividend growth stocks feature yields higher than the S&P 500, this effect ends up magnified.
Thus, buying stocks that don’t pay or grow dividends means you’re severely missing out.
Sure, you might be able to pick out a great growth stock (that doesn’t pay any dividends) or two and do really well with those specific investments. But when talking about building a diversified portfolio of high-quality businesses, dividend growth stocks are the best game in town.
When you look at the performance of some of the highest-quality dividend growth stocks out there (including those noted throughout the article), you’ll see that they do very well when stacked up against the broader market over a long period of time.
Of course, this is discussing a long-term viewpoint, which relates back to my third point.
Getting Started
If you’re ready to take advantage of dividend growth investing, you won’t need much to get started.
You’ll first need a brokerage. I personally use Schwab due to the unbeatable deal they gave me when I moved my assets over, but any major brokerage (that gives you the best deal) will do. Once you have a brokerage account opened and funded, you can easily go about buying (and selling, if you so wish) stocks (after, of course, you do your due diligence).
Tools that help you get the most out of your journey to FIRE will also greatly help. Personal Capital aggregates portfolio data, and it allows you to manage your spending and wealth from one spot – for free!
I use Seeking Alpha’s portfolio tracker to track news (dividend announcements, quarterly results, etc.) related to the companies I’m invested in.
And for more thoughts on how to implement this strategy, I’ve written a best-selling book on how to use dividend growth investing to become financially independent.
Finally, if you’d like to blog about your journey to FIRE via DGI, I even offer free coaching to those who use my Bluehost affiliate link to start a blog!
See the bottom of this article for further resources to get you started.
Conclusion
I find dividend growth investing to be a phenomenal long-term investment strategy.
It’s so phenomenal, in fact, that I literally bet my life on it.
I set aside a six-year chunk of my life and dedicated it almost wholly to aggressively investing in high-quality dividend growth stocks to the best of my ability. And that focused intensity led to going from below broke to financially free in that six-year time frame.
Even now, the strategy forms the foundation of my life.
The growing dividend income my portfolio generates on my behalf underpins everything I’m able to do. Being a pretty rational and reasonable person, I wouldn’t use this strategy if I had any doubts about it.
There are many reasons I love this strategy. I didn’t discuss all of them. The low barriers to entry (buying a stock costs almost nothing in terms of time and money these days) is another fantastic aspect of this strategy that compares very favorably to other avenues for building wealth and passive income.
But these five reasons are my top reasons why I’ve wholeheartedly believed in this strategy – and continue to believe every day.
However, it doesn’t take a big leap for me to believe. I wake up just about every day to a fresh dividend in my account. That real-life cash flow is the concrete “proof in the pudding” that reinforces my belief. And I suppose every person or company that collects money from me on a regular basis as I go about spending my money also believes, since it’s cold, hard cash hitting their hands when I pay for their products and/or services.
This article wasn’t designed to talk anyone into this strategy. You should find and take advantage of a strategy (or set of strategies) that make the most sense for you and your goals.
But if these aforementioned dynamics appeal to you, dividend growth investing is about as good as it gets.
Full disclosure: I’m long all aforementioned stocks.
What do you think? What are some of your favorite aspects of dividend growth investing?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
P.S. Make sure to check out some amazing resources related to dividend growth investing, all of which I’ve personally used on my way to achieving financial freedom in my early 30s. Many resources are listed above, but there are a number of books I’ve also included that are extremely valuable.
Yo Jason,
Great article there my friend. You make a good case for dividend growth investing and I’m sure a lot of people find inspiration from you and your writing.
Best regards from Sweden.
petrusko
petrusko,
Dividend growth investing has been wonderful for me. The least I can do is write something like this occasionally, expounding on why it’s so incredible. I’d be remiss if I didn’t do my part to spread the message that others before me (like David) spent time doing.
That said, it doesn’t behoove me to “convince” anyone to invest this way. If anything, it’s better for me if others go out and buy real estate or whatever. Keeps my shares cheap for me and my companies.
But that’s just not how I operate. It’s a pleasure and an honor to inspire others who are interested in this. 🙂
Best wishes!
I couldn’t have said this better even if I tried really, really hard. I’m drinking the same Kool aid. I think a dividend payer – KraftHeinz owns that brand. Tom
Tom,
Thanks so much!
I think we’re drinking the same stuff. 🙂
Cheers.
Jason,
Great post. I am glad I started with DGI myself early 2015. While it hasn’t changed my life as fundamentally as it did yours, each day is one step closer to FIRE for me.
My favorite part of DGI is the predictability and frankly ‘boring’ aspect of it.
I don’t have to worry about how my cryptos are doing, whether geopolitical tensions are affecting my oil futures or how my speculations on the Turkish lira are panning out. Reason being… I don’t speculate at all on any of these asset classes. I just do my research, and then ‘buy and forget’ my dividend growth stocks.
Cheers
Tall Investing
TI,
I’m with you all the way.
I spend very, very little time consuming content/information related to investing, finance, or even the businesses I’m invested in. If I weren’t writing about FIRE, I would have no clue whatsoever what stocks are even doing. I enjoy investing, but I never wanted to be (nor was I or am I) one of those guys that sits on forum boards, the SA comment section, Reddit, and whatever else all day long looking at, thinking about, and discussing stocks/business/macroeconomics/whatever. The whole point of this is to free you up. The best investing is boring investing, which is one reason why DGI is so great. It’s so boring and predictable, it frees me up to go and look at or do more exciting stuff. If my passive income required my constant input/attention, FIRE would be a lot less fun.
Best regards!
Great post Jason.
Without a question, DGI is a wonderful retire with pure passive income. I am very glad that I decided to go the strategy to reach my financial goal. After I purchased the piece of wonderful business, I rarely spend time watching them. I receive my payments, even if I forget about it.
I always get amazing feeling when I see cashes filing up in my accounts for the past work I did. Even though we are in different countries, we have lots of similar holdings. I am very happy to be as a follow investor 🙂
Best Regards,
FJ,
It’s a special feeling one gets when they see a fresh dividend roll into the account. To know you’re making money for nothing, it’s pretty amazing. 🙂
It’s changed our lives. We’re very fortunate!
Cheers.
Hi Jason,
I love this sentence:
Sure, you should keep a loose eye on your investments, but high-quality businesses (which are the type you should be investing in for the long haul) don’t need Jason Fieber (or you) to babysit them.
I sometimes had discussions why I only invest in shares, not in ETFs. I like it to own the businesses directly and I like to decide, which business will support me on passive income. I don´t spend much time in the companies I own shares and yes, this is my strategy. Like you I get dividends this month on every workday. This is it and I don´t understand who could not like this.
The article tells the key features to get financial independ.
Thanks Oliver
Oliver,
I’m glad they don’t need me to babysit them. I wouldn’t be any good. 🙂
I’m with you, though. I don’t know how you couldn’t love to get paid every day just for waking up and going about your life. It’s a pretty sweet deal!
Thanks for the support.
Best regards.
Great article, Jason. I agree with all points.
I can also add that it’s addictive in a way that’s fun, as you can win when the market goes up (sell overvalued cyclicals and buy stuff on sale) and you can win when the market is down (invest the cash flow from dividends). The rate of growth in dividend income is inexorable. I started the journey in 2014 and it looks like I will cross $90k in dividends and distributions this year. That is a huge chunk of passive income and compared to the effort and pain associated with earning a high income, the passive income is a real gift that can be shared with others throughout the different stages of life.
The steadiness of it all makes it boring and interesting at the same time.
-Mike
Mike,
Absolutely. There were probably another 15 points I could go over, with the win-win scenario (winning in up and down markets) being one of them.
To know that I’m free to live my life however I want, for the rest of my life, is a feeling that’s practically indescribable. I couldn’t imagine still being tied to my old job.
Congrats on the success over there!
Cheers.
Hi Jason,
I call DGI investing my “secret double life” nowadays, back when I started out I used to think I could help friends, colleagues and relatives escape the jobs they hated by explaining to them how DGI worked, using my portfolio as an example. They would invariably say nothing or come back weeks later and say something like “I see the market dropped, I bet you’ll be in all kinds of trouble now” whereby my response would be “so you never really listened to what I said then?” It’s a pity but in the end I eventually gave up trying to convince the very people who could have probably benefited most.
Blogging and talking DGI is exciting and awesome but it’s kinda sad in a way that it’s become my own little world that everyone else I communicate with offline has no clue about.
No worries though…still love watching those dividends roll in!!
Regards,
DN
DN,
I totally hear you. I gave up on the “convincing” thing a long time ago. And not just in the real world. I spend no time with people who email me or comment to dispute things and look for me to change their minds. To each their own, I say. I’m enjoying life immensely. The proof is in the pudding. 🙂
Perhaps a disappointment for me has been that I haven’t actually met anyone over here in CM that invests this way, or invests in any way I’d consider rational or reasonable. There’s very much a yogi/bitcoin/vegan/FBA/dropship/course thing going on over here. Few people I’ve met know anything about investing. And the few who do “invest” believe they’re doing so with/in bitcoin (which I would obviously disagree with). But it’s still all a big step up from the US, where I didn’t even have an opportunity to talk with people who had made the jump to building some kind of online presence.
That’s the power of the Internet, though. You’re free to build a community. Build it, and they will come. I’ve been super fortunate to put my message out there and inspire so many other like-minded people. Even if we never meet in person, it’s still a pleasure for me.
Best regards!
“I personally use Schwab due to the unbeatable deal they gave me when I moved my assets over, but any major brokerage (that gives you the best deal) will do.”
Pretty sure Interactive Brokers is by far the cheapest broker out there. Did they really give a better deal?
I remember you once wrote an article about different brokers and I was wondering why you didn’t pick up IB
James,
Yes. They gave me a better deal. I don’t pay commission fees any longer:
https://www.mrfreeat33.com/why-i-moved-most-of-my-assets-from-scottrade-to-charles-schwab-and-why-you-may-want-to-do-the-same/
That same link is included in the article. Clicking on it would move over to that article, explaining this.
Cheers.
Hi Jason,
I have several views on the benefits of Dividend Growth Investment:
1) It eliminates the hassle of one monitoring the value of the shares as one is inclined to focus on the dividend generated from owning the shares.
2) One can focus on doing the things which he/she is interested in, without the worry of expenses which is covered in full or not in part by the dividends.
Ben
Ben,
I’m with you all the way! 🙂
Best regards.
Owning part of businesses and receiving dividends!!. I do not receive a call from Scotia Bank about a broken toilet in the bank. I walk by a Tim Horton’s Restaurant (parent company is Restaurant Brands International ) and see big line ups both inside and through the drive thru. Do not have to talk to anyone to receive dividends.
The stock market allows a quiet guy like myself, a viable and less stressful way to participate in investing. The bonus of receiving dividends just adds to it and increases the returns I receive.
Aside, I try to send a comment before and my computer restarted when I clicked “Post Comment”.
IP,
I love it. I don’t really want to be bothered by anyone at all. I just want to collect my money and go about my day. Works great! 🙂
Not only do I not have to work for my money, but it’s also a completely hassle-free source of income. Just doesn’t get any better than that.
Best wishes!
You are living proof of this Jason. 🙂 And living on less than you make and keeping lifestyle inflation is what will get you their sooner! As always, great read my friend.
Best wishes and continued success on your personal journey! AFFJ
AFFJ,
Thanks so much! 🙂
I’m incredibly blessed. I truly am. It’s easy to take it all for granted, but I try to remain present and aware.
Much of my good fortune is owed to this amazing strategy, which gives a regular guy like me an opportunity to live out his dreams. I’m so grateful for that.
Wishing you and yours continued success, too!
Cheers.
I retired to the Philippines at age 35 a few years ago with dividend investing. I’ve told some buddies about it but most don’t believe me or invest in some crappy investment like Bitcoin. I’ve met one or two people in person here, mostly old timers that did invest in dividends stocks. They are wealthy but live frugally, we could talk for hours. If you meet another dgi investor in person in Thailand you will most likely get along great.
The downside for me retiring early is that I miss working on technology and building things. I’m planning now to work a few months on/off or possibly start a business that I enjoy more to keep busy then for the money.
Frank,
Bitcoin is all the rage here. It’s like a cult or something. To each their own on that, I suppose.
I think I’d miss my job if a lot of things had been different. For example, actually liking my job might have made me miss it somewhat (although I can’t think of anything I’d like doing for 50+ hours/week). Or if I didn’t move over into writing, meaning I weren’t currently productive. I think the whole idea of “early retirement” doesn’t exist in terms of taking on the traditional idea of retirement decades early – or it’s at least not a very good idea. If I didn’t have the writing/blogging, I’d have to do something else. Not having any productivity in my life, not feeling like I was contributing and moving forward and growing, would suck. Moving back into something for yourself sounds like a great idea!
Best regards.
Jason, I’m very to new to this, but you have inspired me. I built a business of selling ebooks at a young age of 28. I started making 120,000+ a year, but then BLEW IT on bitcoin investments. Yes, a rookie dumbie move. But I have learned, and now I’m reading.
Can you tell me how much you’ve invested into dividend stocks on a whole to achieve retirement? I’m investing in companies I’ve been researching, but the amount I put in is a small fraction of each paycheck I receieve (to be on the safer side). I’m also a touring musician, so I tour around the world doing that but that only pays some of the bills. I’d love to eventually do that for a living without having to worry as much, but I’m just not sure how much that takes. Cheers!
J
J,
Hey, sorry to hear about the bitcoin troubles. Although “investing” in cryptocurrency isn’t interesting to me, I certainly don’t wish losses on anyone else. But I’ve made my fair share of mistakes in life and money. You learn from them and become wiser and stronger for it. 🙂
As for your question, I’ve publicly tracked the vast majority of my investments over the years. I did this so that people could actually see what that journey (for me, at least) looked like in real-time. That said, this is all for me and my lifestyle. My exact numbers likely will have little to do with you and your lifestyle. The best thing to do is to draw up a lifestyle and expenditure number for yourself and then reverse engineer your way there. That’s what I did. I just kind of added up what I’d be happy getting by on, then I figured out the best way to get to that portfolio and passive income.
But if you’re really interested in looking at the investments I’ve made over the years (which includes all the capital and dividends and everything), you can pop over to Dividend Mantra (which is a blog I founded and ran) and see the archives for approximately five years’ worth of investing and money management.
Cheers!
Great overview, and as someone that’s just built a new dividend portfolio in May I can say that many of these reasons were why I decided to get started. It’s something I thought about for awhile but was always too timid to pull the trigger. I believe I’ve built a good starting portfolio to mitigate the concerns I had, and am looking forward to building up those dividends.
DD,
Thanks so much. Glad you enjoyed the overview.
Exciting times ahead for you as you build out the portfolio and passive income! 🙂
Best wishes.
Nice article Jason! And David Fish will be missed provided an amazing resource for free and from reading other forums sounded like a nice guy. Dividend growth investing is an amazing tool to achieve financial success. I am reminded of it all the time. a fun calculation to do is take the current dividend payment per share muilply by 40(quarterly dividend) or 10(annual dividend) That’s 10 years worth of dividends (also assumes no dividend growth which of course we know it won’t remain stagnant) but even with zero growth it’s buying the stock at a huge discount. For example take jnj current dividend in a year is about 3.36 per share per year. So in ten years (with no growth assumed). Is 33.6 so another way to look at it jnj is trading around 122 and I can reduce the cost basis down to about 90 bucks if I’m patient and do nothing but wait. But wait it gets better each year jnj finds a way to increase its dividend. So that number is Much better. Beating the market is hard but you can see a good DGI can likely beat the market. As a small trader/investor we only have one advantage to wall street and that is patience and let these dividends compound for us.
Richdividendguy,
Yeah, definitely. Focusing on the long term (looking at your long-term income stream) really puts things into perspective. It’s something I do every single time I value a stock (I’m discounting all future dividend income back to today). In the end, any stock is simply worth the sum of all aggregate dividend income, discounted back to today. And when you do those calculations, it’s pretty amazing. 🙂
If you get a great business and hold long enough, you might end up owning the stock for free (getting the full investment/cost back via dividends). That’s powerful stuff.
Thanks for dropping by!
Best wishes.
Very well written Jason. I’m a big fan of the DGI strategy, especially how passive it really is and how much it actually does work. It’s a simple strategy that can work for anyone who has time on their hands to let the dividends compound and work their mathematical magic. Great post.
DP,
Thanks a lot!
I’m with you all the way. I set out years ago to prove it works. I feel like I did that. I mean, I was broke. And then I was living off of dividends six years later. Didn’t happen by magic. Well, maybe a little bit of that compounding magic. 🙂
Best regards.
I guess that it’s the matter of time that DGI will reap the dividend that will cover the expenses sooner or later. This can be achieved by any one of us. The secret to success is to keep on ploughing the money from the full time employment into the investment portfolio on a monthly basis. As time goes on, we will rely less on the full-time employment to cover the expenses due to the compounding effect of the investment portfolio fuelled by the fresh fund as well ad the generated dividends.
I think that one can start to focus on doing the things he/she likes during the journey. There is no need to focus on the end result i.e. dividends covers the expenses fully, which is after many years. Such approach is guranteened to succeed eventually as long as one diligently execute the plan whilst keeping the expense constant or reduced if possible. Time is of essence and one should enjoy the current moment instead.
Ben
Ben,
Agreed. Too many people focus way, way, way too much on the money. It’s very small part of the big picture. That’s why my writing has shifted so much in recent years. I mean, the money just isn’t that hard to figure out. It’s everything else.
If you don’t start taking the time to figure out what your real purpose is (because it probably ain’t your job), you’re going to be in for some real disappointment and shock when you quit your job and find your life empty and adrift. I’ve written extensively about this, but I fear too many don’t take it seriously. To each their own on that, but I’m very glad I figured this out pretty early on. I’m fortunate.
Cheers!
Hi Jason,
I agree with U. Frankly, it’s only recently that I started to realise this. I guess that it’s better late than never. I used to be fully focused on the end part i.e. reach the amount which is 25 times my annual expenses. I foresee that I should be able to reach it within five year’s time. Initially, I can’t wait for the time to pass and hope to reach the target in five years’ time. I realised that such approach is wrong. I alreasy achieve some form of FI (about 11 years my current annual expenses). This is excluding my retirement fund which can be withdrawn at about 70 years old in the place which I reside.
I no longer have such thought. I focus on making the best use of the present moment. I have no debt. I believe that I will be more content and happier through such approach. Though I still have a full-time job, I am not stressed of losing this job if the retrenchment occurs. I feel that I can take it easy in my workplace with the knowledge that I can still survive for at least a decade without a full-time employment. I know that I will not idle around if the retrenchment axe comes. I can always find a part-time employment which is of my interest. Now, I am working on few side hustles which are of my interests. If the side hustles succeeds and become my work, great. If no, it’s alright and I continue to explore on my sude hustle. I take time easily and make it a point to enjoy life to my liking.
I continue to invest the fund derived from my full time employment inti my investment portfolio and also rechannel the generated dividend back into the investment portfolio. I do not have a car, property and expensive hobbies. Hence, the expense ia quite low. I lead a minimalist lifestyle.
Ben
Hi Jason, after a colossol $225,000 life-savings-loss in 2014 at the age of 40,
(Read “what-not-to-do” here: http://www.awolgeordie.com/2014/10/how-i-lost-250000-with-centaur.html)
it’s late 2019 and at 45 I’ve managed to cobble together $154,000 split between the following:
HYLB 43%
SPHD 27%
DIV 15%
BTC 15%
85% monthly-dividend-paying ETFs and 15% BTC. In the last 5 years I’ve gone from zero knowledge about stocks, ETFs, CEFs, bonds, Schwab, Saxo, IB etc to a rudimentary understanding thanks in no part to your blog along with the likes of MMM and ERE.
The 3 ETFs generate north of $500/month which is sufficient to live a simple life in Cambodia. I’ve been living off that amount my whole life so it’s no biggie. A small room, a bicycle, the odd massage and some healthy eats ….. what more does a man need?
Anyhoo, was wondering if you might have any comments?? I’m not too happy with the expense ratios but, then again, I am not willing to pour over financial details for hours either – I’d rather stare at some palm trees. Your 125-company-portfolio looks terrifying but hats off to you 🙂 It clearly works.
I quit my math teaching job last week. It’s wonderful having the time to relax and pen comments like this.
Cheers
Geordie
Geordie,
Hey, man. I admire your ability to take the licks and keep on ticking. You’ve come roaring back. Kudos!
I think adaptability is such an underrated personality trait. If you can adapt to anything in life, you can persevere through it all. This is what allowed me to get through all of my challenges in life (including growing up in a crack house), and it clearly allowed you to move past some of your challenges. You’re stronger and wiser for it. 🙂
Yeah, I don’t see why ~$500/month won’t be enough. I’d personally prefer something closer to $1,000/month for my own personal lifestyle desires, but I’m assuming your income will grow organically over time. Plus, there’s no reason why you can’t scrounge together at least $100/month online. So many opportunities nowadays.
My portfolio might look intimidating at first glance, but keep in mind that most ETFs are constructed similarly in the sense that there are hundreds of issues in them. When you buy, say, the S&P 500, you’re actually buying ~500 stocks all in one go. It’s just that it’s one ticker. So it looks less intimidating to the casual observer. If I simply presented my Fund on my portfolio page as ticker “JASO”, everyone would think it’s fine and dandy. Just a psychological thing, really.
If I were to go down the fund route, I’d either buy the S&P 500 or the whole world. The fund that I’ve seen that most closely mimics what I do is SCHD. But I can get a far higher yield and pay no fees by buying the stocks myself, so it’d be silly for me to consider otherwise.
Hope that helps. Good luck to you!
Best regards.
Thanks for your considered reply Jason,
I actually owned SCHD but switched in favour of monthly-payers. There’s no feeling like seeing those monthly divs roll in! Begrudge the ERs though.
I do intend to supplement the passive income once settled. Likely teaching English online for a few hours each week. Nowt too serious.
If we used M1 Finance I could simply emulate your “JASO” pie. However, in light of Schwab going commission-free perhaps I can build my own SPHD without the 0.3% ER? Something to consider going forward. Stroke chin.
What I love about this blog are your humble beginnings and the hurdles you’ve overcome. I too started out from modest beginnings having joined the military at 16 with few other options. If we were to map our life trajectories on a Venn diagram, I suspect there’d be a considerable intersection. Incredible that we’re in CM – the same point in time and space.
Finally, looking back through the comments I see we’re not big fans of BTC. Fair enough. I started buying it in Nov 2013. What a ride. Still DCA-ing in. HODLing and wondering Wen Moon? Will probably be driving a Lambo in 2021 lol.
All the best
Geordie
Geordie,
Thanks!
I’m actually grateful for growing up poor and having all of these challenges in life thrown my way. It’s like a psychological armor you build for yourself when you toughen up and learn how to adapt. It’s really quite priceless. I mean, it’s not fun to go through those challenges in real-time, but you do come out better for them on the other end. I’m sure you feel the same about it. Losing that money was a bitter pill to swallow at the time, but now you know even more about yourself and what you’re made of. You know you can dig deep when the time comes. That gives one a certain sense of fearlessness.
As for collecting monthly dividends, I’ve already upped the ante by averaging “a dividend a day”. 🙂
https://www.mrfreeat33.com/a-dividend-a-day-keeps-the-unwanted-job-away/
Sounds like a solid plan over there. Some part-time teaching would nicely supplement what you already have. When the numbers are small like that, every additional dollar makes a big relative difference in percentage terms. Even just an extra $100/month is a 20% boost on $500/month. I have yet to meet anyone who’s actually fully content to sit around all day long for the rest of their life, so I’m sure you’ll stay busy and collect a few bucks.
Best regards.