Shortly after graduating college and starting to work full-time, I was tired of being in debt and feeling like there was no light at the end of the financial tunnel. Around that time, I had come across The Motley Fool website and began pouring through the articles as well as the forums–and I credit that site for being the kick in the pants that I needed to learn how to eliminate my debt and start building a better financial life.
Even a Broken Clock is Right Twice Per Day
Once the debt had been eliminated, I began to focus on saving and investing my money but still didn’t really know what I was doing. I still remember the first time that I purchased a stock–and had to call into a broker, as the discount brokers we all know and love today were not yet around (I may not feel old, but I’m old enough to have traded before the boom of online trading). Needless to say, I lost a good amount of money; not so much because I bought the wrong stocks, but because I didn’t know when to sell them.
As I moved to a job that offered a 401(k), I began investing there and also opened up an IRA. Recognizing that my stock prowess was not the best and I still didn’t really know what I was doing, I turned to index fund investing and have been a big advocate ever since. To this day, my primary retirement accounts are all made up of index funds and I am encouraging my children to start building a foundation with index funds at an early age.
As I get closer to my target retirement age, I have taken a new appreciation for dividends and the idea of dividend growth investing as a portion of my overall portfolio.
Being invested in index funds means that I have been benefiting from dividends, however the yield and dividend growth rate of these index funds is not anything to get too excited about. By focusing a portion of my portfolio on strong dividend paying stocks that have a track record of not only paying a dividend consistently but also growing the dividend, I am looking to supplement the returns that I am getting from my index funds.
Fueling the FIRE Furnace
With a goal to retire earlier than a normal retirement age, I have been spending time preparing for how we will draw down our accounts to cover our living expenses. With the majority of our retirement savings in tax-advantaged accounts, there are certain caveats that one needs to understand and account for to avoid penalties and unnecessary tax.
Through this analysis, I began reading more and more about building a dividend portfolio that can be paying tens of thousands in annual dividends–and potentially even enough to fully cover one’s living expenses without having to sell any positions. Unfortunately I am getting a late start on focused dividend investing and therefore it will be unlikely to fully cover our living expenses. However, there is no reason that we cannot fuel the FIRE furnace by having a healthy dividend portfolio that can cover a percentage of our living expenses. As we are building this portfolio in a taxable account, we can use as the initial source of funds in our early years of retirement and thus limiting what we need to draw from tax-advantaged accounts.
The Divvy Dad Portfolio (DDP) will be available for review, as I strongly believe that being transparent benefits all parties and that true growth can be found in listening to and understanding different perspectives–therefore I encourage you to review and critique the DDP and let me know where you disagree.
2 thoughts on “Fueling the FIRE Furnace”
Who is your broker?
I use both Fidelity and Vanguard as my primary accounts–the former holds my 401k and new taxable account where I have built my DGI portfolio while Vanguard holds my IRAs as well as a taxable account where I hold VYM.
I was with Scottrade for years, but have not been overly pleased with the transition to TD Ameritrade (although like some of their research information). Therefore I still have my old Scottrade account with TD, but don’t actively trade there. Eventually I will likely move it over to Fidelity, or might possibly look at going to Schwab as they had / have an offer for free trades for legacy Scottrade customers. However, with Fidelity I was also able to get 300 free trades on for my DGI account.