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An Amateur's Journey in Search of F.I.R.E.

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an-amateurs-journey-in-search-of-fire

I decided to chronicle my journey to F.I.R.E., which stands for Financial Independence Retire Early. In early 2021, I received an inheritance of approximately $275,000 and wanted to see if I could use that money to make investments that would allow an early retirement.

I'm currently in the second month of making those investments and after seeing the start of dividends at the end of May of $57.17, June ended up being much better with a dividend haul of $1,490.96. Here is how I got there.

The Early Days

When I first started, I went with what I knew - long term growth stocks. I opened an account at Vanguard and began investing in some of their higher growth funds such as Wellington and Windsor. This took place from January until early May.

After some further research about what people were doing, I came across dividend investing and the two strategies that existed there - Dividend Growth Investing and Dividend Income Investing.

With Dividend Growth Investing, many people search out safe stocks that provide long-term growth and a moderate dividend yield that they can reinvest when businesses pay out that money on either an annual, quarterly or monthly basis.

The second option, Dividend Income Investing, is investing in higher yielding stocks that supply an income that a person can live on immediately. As I wanted to reach retirement as soon as possible, this type of investing was what I was looking for. It would allow me to use my lump sum inheritance and receive enough monthly income to cover my living expenses.

So in early May, I shifted out of the long-term growth funds and into Dividend Income stocks and funds.

In my research, I found a free online brokerage I liked call M1Finance.com and set up my account and linked my bank account to allow easy access for sending over deposits. I imported my Vanguard account and kept adding money.

M1Finance allows you to set up auto-investing in something they call pies. You select the stocks you want to invest in and the percentages you want in each and they automatically break up any money you deposit into your account and distribute it accordingly.

an-amateurs-journey-in-search-of-fire

My Initial Investments

I had read about a few companies that I liked and after determining that they fit my goals, I decided to put 90% of my investments into three monthly paying dividend stocks: Global X NASDAQ-100 Covered Call ETF (QYLD), Orchid Island Capitol (ORC), and Cornerstone Strategic Value Fund, Inc. (CLM).

With gas prices skyrocketing in early 2021, I put an additional 10% into high yielding gas shipping companies: Frontline Ltd (FRO) and DHT Holdings, Inc. (DHT).

I had read that all of these had a yield of over 10% and that was what I was looking to gain per year on my investments, with Cornerstone the highest at around 16%. DHT paid quarterly and FRO yearly, but both were seeing the types of gains in growth that offset some of the volatility I was seeing in the monthly payers.

DHT did end up cutting their dividend in the second quarter and I became antsy not to see the monthly benefit from their ownership, so I ended up selling both it and FRO in late June, netting a $2,000 profit on a $16,000 initial investment.

I tried some more speculation in tech stocks, namely biogenetics and an Alzheimer's research company, but got in just after their peaks and ended up giving back about half of the gains I made from FRO and DHT in a few days and vowed to never do that kind of speculating again.

When I sold my tech stocks, I moved them into RiverNorth/DoubleLine Strategic Opportunity Fund (OPP) which was another monthly payer with about a 12% yield.

So as of this moment, CLM, QYLD, OPP and ORC are my four holdings.

June 2021

In June of 2021, I started to see the benefits of my investments as the monthly dividends really started to roll in.

QYLD ended up paying out at the beginning of the month and the end of the month. With an investment around $35,000 and around 1665 shares, the company offered a monthly payout of twenty-two cents a share early in the month ($322.97) and after a slight dividend cut to nineteen cents in the middle of the month, a $309.58 payout at the end of the month. The payout should stay at the end of the month for July, but that was a $632.55 gain for me.

ORC was paying out six and a half cents per share, and with a stock price of just $5.45 when I purchased, that got me just over 7,000 shares on a $38,000 investment. Their first monthly dividend payment of $358.23 came through at the end of June.

CLM was my biggest position with around a $40,000 investment and nearly 3,600 shares. They paid just over sixteen cents a share per month and that came out to $501.77 in a dividend payment.

I started investing in OPP too late for the June dividend, so I expect to see their first one in late July.

All together in June, I was able to bring in $1490.96 in dividends, which I reinvested since I continue to work my full-time job and can let the investments snowball by buying more shares. This nearly $1,500 haul was based on an investment of around $122,500.

One other thing I did was to open a free account at Trackyourdividends.com. With this account, I can see annual earning projections and they also provide a beta rating that shows how much volatility your total portfolio has compared to the market. A rating of 1.0 means it's as volatile as the market in general. Above a 1.0 and that indicates higher than average. My holdings have a beta of a 0.53 according to the site.

The Dividend Money Tree

The Dividend Money Tree

Going Forward

With half of the inheritance invested currently after an added deposit in late June, I have begun a dollar cost investing strategy to spread out further investments in case the market corrects, which many are predicting. This will allow me to invest at different price points to offset that volatility.

I originally planned to ship around $15,000 in each month, plus reinvested dividends and an extra $200 that I was able to free up when I paid off my car with some of the inheritance.

It quickly became apparent that patience was not a strength I possessed when it comes to investing, and decided to break up the $15,000 and the $200 into weekly payments of $3,800 so I could see more frequent changes to my account.

Hopefully, that would prevent me from wanting to do any more speculating if the dollar cost spending would keep me busy making updates. I read that the market tends to drop a bit on Monday as bad news tends to come in just after the weekend, so I set my weekly deposits to hit my account on Tuesdays to take advantage of the Monday slide.

Also, ORC began to lose some share price and I read they were a bit overvalued at $5.45, so I moved my pie percentages around and set more to go into CLM and OPP which seemed less volatile. With CLM being my highest yielder, I have them set to receive close to 38% of my total investment and ORC only 18%. Both OPP and QYLD are set at 22%.

The Goal

The goal is to have the full inheritance invested by May of 2022, and by my calculations if I continue investing along these lines, I will be bringing in a monthly dividend of just over $3,500.

With a modest salary of around $48,000 in my current job which allowed me to do what I loved for over twenty-eight years, my take home pay after New York's deductions was just over $2,600 per month.

So those dividends will allow me to have a net of $900. I plan to discuss options for staying on my current insurance after a retirement with my employer, as I have heard of others in my profession doing just that at a reasonable rate.

But after living expenses, that amount in dividends should allow the option to continue reinvesting a small portion per month in order to continue to increase the monthly dividend haul.

To that end, I have been investigating a few other high yielding stocks and funds to add some additional diversity to the portfolio and spread out some of the risk I'm incurring during this first year with those future reinvestments. An article at MarketBeat lists the full 432 monthly paying stocks with the ability to search by yields.

One Last Consideration

One last consideration I'm debating is whether to cash out my workplace retirement account and take the early 10% penalty in order to move that money into these higher yielding stocks.

That will move my monthly dividend haul closer to $5,000 per month and really allow me some reinvestment options to build up the portfolio at a quicker pace, as well as spread out into different market sectors to offset any times where a company might cut a dividend payment.

The account will be taxed whether I wait or take it out now, so I figure why not do it right away and get past the taxes and into the profits. That likely wouldn't be done until after retirement, but it's something I'm certain weighing.

an-amateurs-journey-in-search-of-fire

So that's my early July update on my journey in search of financial independence. I've started to do a monthly update, so keep an eye out for my early August review of my accounts and where my monthly dividend haul ends up reaching. Thanks for reading!

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Comments

JOC (author) from Syracuse, NY on July 03, 2021:

This is where I go to search for dividend information in terms of when a company declares what they will be paying and when:

https://www.nasdaq.com/market-activity/funds-and-e...

Then I update an excel spreadsheet I have and then double check my figures against an account I opened at trackyourdividends.com.

JOC (author) from Syracuse, NY on July 03, 2021:

As to where I found the yield, in M1Finance, they have a pretty nice research option that allows one to search by sector and then yield for certain stocks and funds.

JOC (author) from Syracuse, NY on July 03, 2021:

The yield will fluctuate based on changes in the price. It's calculated by taking the amount paid per share over the year and divide that by the current price. So for QYLD, they are estimating that it will end up paying $2.32 over the year based on what they have already paid, and then divided by the $22.48 current price as of Friday.

Kyler J Falk from California on July 03, 2021:

Where is the best place to look for the actual yield in percent, is it in the prospectus, and if so, where in the prospectus? I've come to realize I don't understand the dividend-yield numbers that are offered in decimals, because QYLD is at 0.14 right now. I'm not even sure how to Google these questions, either.

JOC (author) from Syracuse, NY on July 03, 2021:

It was sitting at a 12% yield when I bought in, but is down to just over 10%. It seemed pretty stable and at 12% was a nice diverse option to round out my holdings considering ORC was 14% and CLM 16%.

Kyler J Falk from California on July 03, 2021:

Just realized QYLD is an ETF, but it looks like it has a low yield. What's the attraction?

Kyler J Falk from California on July 03, 2021:

What's your take on ETFs? I'm liking the look of PowerShares S&P 500 High Dividend Low Volatility ETF (SPHD). Do you have any investments in ETFs?

JOC (author) from Syracuse, NY on July 03, 2021:

Day trading is bold, but if you do good research, as it sounds you do, and hit companies when they are down, you can do very well.

JOC (author) from Syracuse, NY on July 03, 2021:

Yeah, they can be volatile for sure, but I'm not planning to sell them any time soon. I'm more worried about ORC being a dividend trap, that they pay out from the investments made into them and the value keeps on dropping then. QYLD and CLM seem very stable and I think CLM will be very good in a crash as they are required by law to pay out a certain percentage of the rent income they generate.

Kyler J Falk from California on July 03, 2021:

I have to admit I'm going to be watching your progress with great intrigue, and you were the inspiration for my playing in the stock market. Granted I'm playing it safer, and with a less serious account under Robinhood, but I've already seen that I may just have the knack for not only day trading, but also for long-term speculations.

I put in twenty bucks just to see what I could do, and thus far I'm up around $40 USD in profit after one week. I've set my days to watching, and once I get payout here I'm putting everything in my brokerage account. These Dividend Income investments you do scare me, though, because everything I read from "top investors" says that they are extremely volatile, and not diversifying outwards from them is an enormous risk.

Nonetheless, my first investment was into Banco Bradesco (BBD) because I liked their history and they were coming out of a down trend, up over 40% since then and I'm going to hold for some time. A long-term stock I just did was Waitr (WTRH), and I liked their current goings on with their CEO and settling a lawsuit while still posting profits for the quarter and foreseeable future.

All this being said, a thank you for these articles you're doing. You're under my magnifying glass!

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