Over the last few years I've been investing and looking into alternative and traditional ways to retire early. My Ultimate goal is within the next few years to make enough income passively that I can buy a large plot of land and build a tiny house on it and live a homestead type of lifestyle. But not only that I want to expand the homestead into a profitable business in itself through various means be it AirBNB, Wood harvesting, Growing crop and/or support local community. The best way I figure to be able to do that is to first hit a goal of what I would need in passive income that I could focus a vast majority of my time on it.
While some of this will come from a transition in my content in about 2-3 years when I expect to hit this goal some of that income made from hive will go into fueling this entire project. So rest assure any upvotes today will count towards my long term future goals with hive.
What Is F.I.R.E Investing?
This was a recent trend I've run into over the last week and it sounds interesting. I totally understand that it's very high risk but the risk tolerance can be small or large and depends on a number of factors. Many getting started often go the very high risk which I can understand as it's a way to leverage and build up investment funds faster. However no one ever knows what the markets will do so you should only be playing around with money you're ok with fully losing.
*This article is for entertainment purposes only and is not investment advice.
FIRE stands for Financial Independence, Retire Early
Now for those in the USA the retirement age would most likely be somewhere around 59 1/2 to 62 as 59 1/2 you can start to pull from your 401k and at 62 you can start collecting social security early.
It focuses on a few key principles and if taken to the extreme gives you a complete new mindset on how to invest which I'll be starting myself come Monday.
Core Principles
High Savings Rate (50% - 70% of income) Or extreme ALL of your income (not advisable at first but latter it will be possible).
Invest for Growth (high dividend paying stocks and growth stocks to build wealth fast and compound)
The smaller more trust worthy ETFs are normally on the backend think the dividends earned from your up front investments that are high risk all go into lower risk growth and dividend paying stocks.
The Goals
Fully retire early from your investments
The passive income from dividends will offset all of your bills so work becomes optional and not required this means you can fully cover everything bill wise allowing you to place your entire paycheck into investments and continue to build further out then just bill paying. Bill coverage is your first goal then keep going to set yourself up better.
Continue to grow for generational wealth
Bonus Tips
Using a tax haven account such as a ROTH 401k can have huge benefits as the money earned from these high dividend payers (normally not qualified dividends) will grow tax free in this account helping you reach financial wealth when you turn 59 1/2 and can start to pull funds out. Of course this is fully depended on when the government says you're allowed to start pulling out your funds but it can prove to be a nice little extra when you do hit that age if you max it out.
It's going to be very rocky at first so keep your emotions out of it as best as possible.
You may hear people talk about investing and margins etc. In everyday simple terms this simply means how much money is left AFTER you pay your bills. For example if you make $60,000 and $30,000 goes towards taxes, bills and other expenses then your margin is $30,000 that can be invested. The larger this "margin" the more likely you are to grow faster. Of course the market does have its ups and downs.
Some high end investors might do Margin accounts or borrowed money. However it is ill advised for this type of setup because it introduces debt to the system.
An example of some "stocks" that are used for this style of investment.
You want to keep a healthy mix going on. In most cases it will be
Growth Stocks (IBM, Amazon, NVIDIA, Alphabet, Tesla, Apple etc) These are to build solid groundwork of funds that grow over time but don't pay out a dividend or a very low one)
CEF's stands for Closed-End Fund it's a type of investment that often offers high yields but with it comes very high risks. Some of these pay upwards of 20% and others that might be a little more on the stable side might pay 6% - 9%.
CEFs are a closed loop so there's a fixed amount of supply. The high yield comes from leverage (borrowed money), Income producing assets like REITs, Future Buy Ins. These are popular in FIRE as a way to pay for those pesky monthly bills. Anything extra gets invested into growth or other high yield investments to further grow the pile.High Yield normally found from REITs, Financials, Energy and Telecom heavy cash flow industries.
Now I did mention the above that doing it within a ROTH IRA for example would be of great benefit if you have the means to be able to do so. This is because of all the dividend growth that is taxed as ordinary income would grow tax free in a ROTH IRA (granted some rules where used) This could me thousands to hundreds or thousands extra in your pockets come retirement.
Some examples of high yields
REITS (0 - Realty Income, WPC - WP Carey, PSA - Public Storage)
Energy (EPD - Enterprise Products Partners, KMI - Kinger Morgan, ENB - Enbridge)
Utilities & Telecom (DUK - Duke Energy, SO - Southern Company, VZ - Version)
* Personally for me short term power companies could be a good play as AI will be sucking up a ton of power and most likely at first they will need to pull power from the grid before these companies get their own power solutions online. That's just a feeling I have and would be a rather short term play most likely 1-3 years.Business Development (ARCC - Ares Capital, MAIN - Main Street Capital)
Blue Chips (T - AT&T, MO - Altria, PFE - Pfizer)
Some other improtant tips. Don't fall for super high payouts unless you are looking for short term investing and pulling out. Most high dividend players like AT&T, and Verizon have had zero growth or negative growth that often offsets any dividends gained from the stock making you break even. These are know as value traps and it's one of the last things you want to be in. Short term you can come out with some decent returns. Long term you normally would be better off with your money in savings.
Have you tried FIRE Investing yourself? If so how do you like it? What tips or tricks have you learned or gotten lucky on?
If you all find this stuff interesting I'll continue to post about it and later on my own progress reports if you're into that.