Welcome To My Journey!
Welcome to my journey of obtaining a $40,000 passive income dividend portfolio starting with just 2k. Yes, you read that right. FORTY THOUSAND DOLLARS OF PASSIVE INCOME PER YEAR.
For the past few years, I have been dreaming of what it would be like to actually have something of value to my name. Something that I can lean on when things get tough and something that will help me live the type of lifestyle I desire.
While my ultimate goal is to generate enough passive income that allows me to be financially independent and travel the world, building a dividend-oriented stock portfolio is my first step to reaching that goal.
If you’re reading this I suspect you to be one of three people.
1.) You are looking to start investing in the stock market and want to discover a good strategy.
2.) You already invest and are genuinely interested in the art investing
3.) You just want to see an average guy go on an awesome journey and achieve his goals.
Whichever you are, I promise not to let you down. Sit down, buckle up, and get ready for an amazing ride.
My Investment Strategy
- Invest for the long run
- Don’t let emotions take over
- Invest as much as I can as early as possible
- Prioritize blue-chip stocks that offer dividends
I play the long game. What does that mean exactly? It means I don’t day trade. It means I don’t focus on returns of one week, one month, or even one year.
My focus is to invest in a diversified portfolio comprised of 100% stocks that generate average returns while also producing dividends.
Diversified means I will invest in a multitude of companies in different industries and keep my investment to one particular company around 5-7% at the maximum. I truly believe this strategy to be the best and it is my hope you will see why based on the results.
Before we move on, there are a few key things I want you to understand.
- This is my preferred investing strategy and it may not be yours. We each have our own financial goals and are in different situations. Only you can properly decide what investing strategy you want to take on.
- I don’t mean to show off my money or say how smart I am. The objective of this is to show you the power of investing in a diversified manner for the long-term. I want to give everybody information that can truly benefit their lives and in my opinion, the best way to do that is by showing real-time results.
Current Value: $2,000
Investing Platform: M1 Finance
Date: January 21, 2020
My first date of investment was on January 21, 2020. I have started with an initial amount of $2,000 and plan to invest at least $500 every month from the income I get at my job and side hustles.
The platform I will be using is M1 Finance because it allows me to invest in fractional shares rather than whole shares. This is important because some companies have share prices in the hundreds of dollars that are very appealing to me and I don’t want to put all my goods in one basket.
Apple for example has a share price of just over $300 at the time of writing this article.
If I was to invest my initial $2,000 and hold just one share of Apple, 15% of my investment would be in the hands of one company. While I love Apple, I am not willing to put a majority of my worth on one company no matter how much I like it.
With M1 Finance, however, I can purchase a fraction of a share which is much more reasonable given my strategy. Let’s take an in-depth look at my portfolio.
Currently, I am invested in only 17 different stocks. As you can see, most of my stocks are set at 5% of my investment total which allows me to feel secure about the fluctuations in each company.
While one stock may have a good day, another may have a bad day but I know that in the long run I will have have a good return. At the top, you’ll see I have invested 10% in two different stocks.
I have been preaching about diversification and how I will only do a maximum of 5-7% so why the hell do I have 10% in two stocks? Those aren’t individual stocks, those are exchange-traded funds (ETF’s). In each of those ETF’s is a diversified portfolio of stocks.
Realistically I have way more than 17 stocks and even more so, I have added more weight to those ETF’s to mitigate some risk from the individual stocks I already have.
Starting to make a bit more sense?
Why I Chose These Stocks
The main reason is for choosing these individual stocks is because they are large companies that have historically seen growth and have offered dividends for a long time (40+ years in some cases).
For all you beginners out there, there are two types of income from stocks. The first is known as capital gains. Capital gains are simply the difference between what you bought and sold the stock at. If you bought a share at $100 and sold at $150 this would be a capital gain $50.
The other form of income comes from dividends.
Dividends are a small fraction of each share which is paid out to shareholders during certain times throughout the year. Typically dividends are paid out quarterly but some are paid out monthly.
It’s pretty common to see companies offer anywhere from $1 – $3 per year. It doesn’t sound like a lot now but just think down the road when you have hundreds of shares that pay dividends.
Seeking Alpha is a great source to check the dividend for each company. Please note, however, companies aren’t required to pay any dividends and can stop at any time.
Don’t worry though, many large companies will go through great lengths to keep paying dividends because it gives confidence to shareholders.
Companies that don’t pay dividends are ones that want to grow quickly. Typically technology firms don’t pay dividends because they must invest as much as they can back into the company to keep developing technology in order to stay ahead of the competition.
First Day Performance
As mentioned earlier, I never take one day into consideration as I only look long-term. But since this is my first blog post on this topic (and first day with the portfolio open) I figured I would just show you the dashboard. I am up $6.14 today with a return of 0.31%.
I’ll ride out this portfolio for a long time and keep investing money to see how it performs. I will most likely add more stocks as I keep adding funds to further add to my diversification but for the time being, I feel confident this will be a good starting point to a $40,000 dividend income portfolio.
I hope I didn’t bore you with a bunch of facts/ideas about the stock market and my portfolio. My goal is to give you as much transparency into investing as possible so you can use the information to your own benefit.
I am just an average 24-year-old guy who is looking to follow his dream of earning passive income while traveling. If I can do it I promise you can too.
Stay tuned for next month’s update on the portfolio to see how it is performing! And let me know in the comments below what your investing strategy is and how it is working out!