Setting Small Investment Goals…

Just a FYI for potential readers: My next several posts will probably be financial related. Hopefully this doesn’t “bore” you too much! 😉

Like many people, I have long term goals for myself from a career, financial, and personal perspective. These goals are 5,10, and sometimes 10+ years in the future. One of my long term goals is being able to a taxable (non-retirement) investment portfolio that generates at least $2,500/month in income. This equates to a portfolio that annually generates $30,000 each year. Having a portfolio that generates $30,000 per year sounds like a steep mountain to climb unless you break it into smaller more achievable goals. 

I wanted to share a few thoughts and strategies about breaking things into smaller goals that have worked for me as I go about this journey to generate at least $2,500 in investment income per month…

It is really hard when you first start buying stock realizing that the stock you just purchase may only pay you a paltry $3.80 per quarter or ~$13.00 per year. That can be down right demoralizing to even think about! So instead of thinking about the longer term amount, when I bough that first position, I looked at things from the perspective of if I had enough dividends to buy a new share of stock in the company I was buying. This did two things for me:

  • It made the goal more realistic and achievable
  • It made me focus on the short term while inching along towards the longer term objective

I was talking with a co-worker a few weeks ago about where I’m at towards my long term goal and told this person that year 0 to year 3 are probably the hardest years to go through when it comes to this investment goal. I say this because it’s difficult to see any progress being made especially when the investments I’m making may only be buying partial shares of stock in the very beginning. It’s also challenging because for most stock investments the benefits to ownership are not realized immediately and you have to be in it for the long haul through both the ups and downs that the market could go through.

I would estimate that I’m somewhere between the middle of year 0 and the end of year 1 in terms of establishing a dividend investment portfolio, having a good number of high quality investments, and starting to see the benefits of dividend re-investments and dividend raises. Right now, I have 5 positions which I consider to be a full positions and am working on building a 6th full position. I define a full position as an investment where reinvested dividends will buy at least 1 full share of stock per quarter.

The 6 positions that I have now generates an estimated $1,400 per year in investment income. (Note: My $1,400 number is actually conservative because I own a couple ETFs where distributions can be uneven and aren’t as predictable as companies who pay dividends.) While the $1,400 number is still really low compared to the $30,000 per year that I want, I am going to use to set a small goal. My small goal for the rest of the year is to get my forward estimated annual dividend income to $2,000 per year.

In my mind, $2,000 is a more attainable goal to aim for this year. Even if I don’t achieve that goal by the end of year, the number is more attainable and realistic than looking at it against the overall number. This also helps me with planning. Right now, I am working on establishing my 6th full position and after that I will build a 7th full position. My plan is once I have my 7th full position is to circle back and buy an additional 10% in my existing 6 positions. Then I will establish positions 8, 9, and 10 and then recycle to other existing positions to add 10% again.

Over the coming days, weeks, months, and years, I will continue writing about this journey to $30,000 in investment income. I hope you will like hearing about my journey!

If there’s anything I would like to end with, it’d be this: Establishing smaller goals to achieve bigger ones is something that can be applied to anything whether its weight loss, paying off debt, buying a home, or investing. Celebrating the small wins also makes it much easier to continue marching down the path of obtaining that bigger goal.