Right now my focus is kicking off and planning a bit what this new FIRE Program will look like. I went over a bit of this in a pervious article but now I want to drill down into it a bit more. This is my plan but everyone's plan will be different depending on how much money you invest each month and your risk tolerance and of course how markets perform.
Once I get this squared away and rolling most likely early 2026 or 2027 and maybe last late as 2028 (feels honestly crazy saying that year and I feel old now lol) I'd also like to apply this a bit to the crypto world as by then we should start to see more of a blend of crypto, stocks, etfs etc. But there would still be small things we can do right here on hive with HBD for example.
*This article is not financial advice and is for entertainment purposes only. Do your own researching before investing and understand the risks.
A short recap of what FIRE Is
FIRE stands for Financial Independence, Retire Early. It's the ability to be able to live off of your investments via dividend payouts and no longer work if you choose not to. Or continue to work and explode this system even more. What's crazy about money is there's often thresholds you hit that kick things into overdrive.
As many famous people say and I would agree with this the first $100,000 is the hardest.
This is because before that $100,000 you really don't see any meaningful impact of your investments so it can be a real challenge for people to keep on task and many fall off.
Once you hit that $100,000 even at a 4% dividend rate you'd be making $4,000 a year. Which for some people could be a full month of not working. This also starts to speed up compounding. Toss this up to a 7% yield or even 15% (HBD hint hint) and you're now seeing $7,000 - $15,000 values. You can quickly start to see how things can compound much faster and this isn't even account for asset growth of the stock this is just dividend payments which could be used to pay off those pesky bills that show up. Car, Home, Health etc.
The Buckets
With FIRE there are a number of ways going about it. Some try to fast track it with margins, high end yields etc. Which can work out but come with a massive amount of risk with it. So this is where it really comes down to your goals.
For myself I'm leaning towards the next few months pushing into high yields only and seeing if that helps build groundwork to be able to compound faster plus I'm just interested to see how these things work off hand.
To me with investing there are 3 core buckets (maybe 4 if you consider savings accounts but for this we are not going to factor that in at all) Those three buckets being...
- Long Term Growth
- Closed End Funds
- High End Yield
You could also throw a 4th in here which I would put between long term growth and closed end funds that have a mix of growth but good dividend payouts of 4%-7%.
Long Term Growth Stocks
The main goal of these stocks are growth. This means there could be zero dividends or if it does pay dividends it's normally 2% or less.
You can think of Long term growth stocks as ones like Apple, Microsoft, Google, Amazon etc. These are often stocks that pay little to no dividend and instead focus towards growth. While they don't really build passive income if we look at their last 5 year track records we get the following.
5 years from today growth of the following stocks...
Apple - 107%
Microsoft - 147%
Google - 230%
Amazon - 46%
So even the worst case here being amazon if you would have bought and held the stock from this time back 5 years ago you would have saw at least a 9.2% growth in value of your stock you bought 5 years ago and a 46% in best case. Now of course you would have bought more stock so assuming for easy calculation you invested $500 monthly into these stocks on the same day you'd see roughly the same or even higher being that for two of those years the stocks were selling at a hard discount 2021-2022 area.
Closed End Funds
I'm actually going to touch on closed end funds here but I think I'd feel better in something like REITs or other low growth higher dividend stocks. You can also look into ETFs to help spread you money out across more stocks like JEPI or SCHD which is a popular one talked about.
Closed end funds are different in being that they pool money from investors like a mutual fund or ETF but it's a fixed amount of capital. These are popular because they often pay out monthly and the payout is often rather high. But there's two main things you want to look out for when picking one of these.
The first being Expense ratios which really is another word for fees. It's how much of a fee is taken from the stock because it is being actively managed.
The second being leverage the more leverage the more risk in rising interest rates and volatile markets.
High End Yields
This set of funds is a weird bag that you really need to understand and also understand they are VERY high risk. These funds often pay out weekly or monthly but there are things to account for such as ROC (Return on capital) so that dividend yield your seeing is actually much lower being that it's accounting for some of that ROC each week or month. This can range wildly on what your real return is. Some times it can be high wild others the real yield can be low or even negative being that a lot of this is done on option calls. These can however offer a much higher cash flow which can speed up compounding.
The Plan
For the first few months all money will go into the high end yield bucket to try and build passive income which can be compounded faster. Extremely high risk and could fall flat. But the cash flow would allow me to move those rapid cash flows into other asset areas which will then be split at first 60% growth and 40% closed end funds or ETFs with decent dividends of 5%.
Here's another thing that many people don't factor in. Even though you buy a stock with say a 1.7% dividend rate often times the stock could increase these dividends if it's doing well over time. This is where you need to calculate your YOC (Yield on cost) which can often times end up being 3% or higher depending on the stock and it's dividend growth. I know personally I have a few rather old REITs that have gone through the ringer but invested in during 2020-2021 with covid craziness. Those are now paying me a solid 12% yield which used to be 5% when I look at Yield on cost.
Now I'll also be investing in some other areas as well because the high end yield buckets are very risky. To explain this lets look at the high yield earner EGGY. While it shows a 22% return you have to understand how these work with a ROC. If we look at just the last month the SEC Yield was just 0.59% and now remember you also have high management fees with these. Factoring all of this in including the NAV (Net Asset Value) we can see there was actually a negative return because of the NAV erosion that happened. While these might seem and sound great you need to look at real yield and how much of the payout was ROC (Return on capital).
Excited for 2026 -2028 where this and hive will play a much bigger factor. The future is looking good!
I'm at the point where I feel like the gains should be coming a lot faster than they are. Everyone talks about compounding interest and I feel like after 20 years I should be seeing bigger gains each year. Like high five figures, but that isn't the case.
It takes a lot of money at 4% need 1 million working at 4% to make $40,000 which would have been ok 5 years ago. With massive inflation that feels off the mark now. I think these last few years really screwed over a lot of people.
I think my funds gain about 9 to 12 percent each year and growth is definitely happening, but it still feels slow. I was just hoping for more by this point. Realistically, I am still under 50, so I have time, but the momentum feels slow if you know what I mean.
Yep 100% know how you feel. It takes a good amount of money sadly. This is why when people hit something like 2 million bucks your income just grows because chances are you're going to live below the means of the interest earned which means some of that rolls over and compounds into more. Right now 2 million bucks in safe 4% yields like bonds would set you up well. Getting to that 1 million or 2 million asap is the challenge lol
I'll be lucky if I ever hit that mark. I was hoping crypto would get me there, but it seems less likely now.
Hive is hardly moving at all lol
Same as it ever was...
That's a good plan!
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It's good to expand and try new things. All the best
I started accumulating dividend stocks a few years ago. My goal is to supplement my planned pension if I decide to retire in a few years...for the moment, everything is going according to plan, although slowly.
It does take a lot of time and a lot of capital.
Thanks for the high end overview of the FIRE plan, I've not heard much about it other that it causally being mentioned in financial videos I watched. Can crypto generally be put in the high end yield category, specifically DeFi staking tokens? I feel that because of the volatility of the token, the yield offered may not fully reflect the actual return of capital, especially when markets are bearish.
You could for sure and it's an area I will most likely focus in about two years from now. With the way things are in the crypto space at the moment it just doesn't make sense to. I believe we will see a blend over between crypto and stocks within that time frame and for it to really be put together.