Saturday, March 23, 2013

DGI Case Study - $5K to $100K In Three Years

Wow. I did it. On March 13, 2013 my total portfolio value (including cash) exceeded$100,000. That's six-figures folks. And I did it before my 31st birthday.

How did this happen?

Well, let's take a look back. In January 2010 I found myself with $7,000 in my checking account and over $25,000 in student loan debt. I realized that I was worth more as a baby ($0) than I was at 27 years old (-$19,000). That's a problem. Something had to change. And change it did.

I decided to radically change my life. I mean right down to the core. Fundamentally, everything had to shift.

I adapted a frugal living doctrine. I started cutting unnecessary expenses. I moved to a cheaper apartment. I sold my car. I started riding the bus. I ate my fair share of ramen noodles and PB&J sandwiches. I made it a goal to save at least 50% of my net income on a mid-$40k salary.

But saving money only gets you so far. Sitting on a bunch of cash in your checking account won't get you very far as inflation slowly eats away at your purchasing power.

Enter investing.

I initiated a brokerage account in January of 2010 and started it with a seed fund of $5,000 from my available capital. I initially invested with a mutual fund and a couple of stocks that "sounded good". Sounds like a strategy destined for failure, right? You betcha. Luckily I realized this fairly quickly too.

So I sold everything and went back to cash. After two months of in-depth research I found dividend growth investing to be the best strategy for me. Companies that have long streaks of paying dividends tend to have good balance sheets, are well capitalized and are also mature. They tend to be intelligent with their use of capital and very shareholder friendly.

And let's not forget about the dividends themselves. They're tangible - it's actually cash hitting your account. But, once an investor is no longer in the accumulation phase and actually needs to live off of their asset base, dividend growth investing is a superior strategy to anything else I can find. One can simply live off the income the stocks provide through dividends as the companies one is invested in sends a portion of the profits their way. No need to sell off assets and no need to worry about the market's sways up and down. Dividend income is typically very stable, and even better it's rising over time and usually exceeding inflation in its rate. What more can I ask for?

So, I signed up. 

I used my seed money and the new, fresh capital I was saving at a rather ample rate from my day job and purchased shares in some of the great American companies that have long, excellent track record of increasing dividend payouts. The Coca-Cola Company (KO) was one of my earlier purchases. Johnson & Johnson (JNJ)was also one. I knew that I could count on the income these companies send my way for many years to come. 

And I did this over and over again. I lived frugally and saved. Then I used said savings to invest in high quality companies that I wanted to be a part-owner of. I now have 30 companies that I'm personally invested in. I plan on staying invested with most of these companies for the next 20-30 years and more. As long as they continue to produce products or provide services that people need and are willing to pay a premium for, and as long as they continue to send me a rising portion of those profits, I'll gladly stay a part-owner of these companies.

I am now aiming to earn at least $3,500 in dividends this year. And what will I do with those dividends? Fund a trip to Thailand? Go for a big shopping spree? Buy a new TV? Nope. I'll continue to reinvest them back to into high quality companies as I have been over the last three years. The dividends that these companies pay me will be used to buy even more shares back into these companies, which increase the amount of shares I own and the dividends I'll lay claim to in the future. All the while, these companies will also continue to raise their payouts year after year, effectively supercompounding my wealth!

And so there it is. I'm no genius. I never claimed to be such. I'm a regular, everyday guy earning a middle-class income working at a car dealership and funding my way to financial independence and all the wonderful things that come with it. I don't know how to build rockets or perform heart surgery. But, what I do know is what's important to me in life: freedom and time. My time is precious, and it's a commodity that is dwindling with every second that passes by. And freedom is the most basic right in life, yet most of us are slaves to our material possessions and the work required to pay for them. 

So there you have it. My manifesto and road map all in one.

Thank you to everyone who has stopped by Dividend Mantra over the last two years. I started this blog in March of 2011 and after two short years I have built myFreedom Fund into a respectable portfolio of high quality companies that I'm confident will pay me a rising source of passive income for the rest of my life.

Please continue to follow my journey as we mutually inspire each other to our individual aspirations!

Full Disclosure: Long KO, JNJ. 

This article was written by Dividend Mantra. If you enjoyed this article, please subscribe to my feed [RSS]


  1. I'm really impressed with your writing skills as well as with the layout on your weblog. Is this a paid theme or did you customize it yourself? Anyway keep up the nice quality writing, it's rare to see a nice blog
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  2. So the question is, how much capital did you invest vs. how much did you earn in dividends and capital appreciation?

    Dividend investing is a wonderful thing, but it's not going to get you from 0 to 100k in three years without serious upfront funding.


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