Critical Mass


FYI, for anyone wondering, the previous post was an April Fools Day post. Please do not take any of that advise seriously.

Whether it’s Link running through Hyrule fields before he even acquires the Master Sword, or the first few stock purchases in your portfolio, there’s always a slow beginning that precedes the awesome climax. The beginning of some games can be especially hard sometimes. You don’t have any awesome items or skills, so when a challenge comes up, the stakes are high and so is the challenge. I completely believe that dividend growth investing follows the same difficulty curve of RPGs where you start off at a disadvantage.

In 4th edition Dungeons & Dragons, characters are separated into tiers based on level. Below level 10 is the Hero tier, between 10 and 20 is Paragon, and finally at level 20, the Epic tier. At each tier, a character can take on significantly greater challenges. Dividend investing is similar. When you’re first starting out, it can seem difficult to save enough money for your first few positions. However, once you have your first 10 companies paying you dividends, it gets a little easier, because the passive income is making up for some of the fluctuations in your expenses. Then at the $150,000 mark, your portfolio reaches Critical Mass. Sounds epic right?. This threshold is labeled this way because a 3.5% annual dividend will payout almost $5500 which is the current maximum contribution to an IRA for a year. This means if you were putting your investments in an IRA, your dividends would be contributing almost as much as you are.

For the past 5 years, I have been working various jobs developing my skills as a web developer, all the while feeling underappreciated and underpaid. After discovering dividend growth investing a little over a year ago, I’ve been taking what little money I could squeeze out of my budget to invest in high quality companies. This year, my dividend income has reached a level where it can cover my occasional video game purchases. I’m finally starting to feel like I’ve made it into the next tier, which is a great feeling.

I like to imagine that, in all of spacetime, I have already reached Critical Mass level, and it’s just a matter of time and persistence until I reach my goal. You’ve accomplished all of your goals as well, you’re just not at that point on the timeline yet. Think about that next time you get anxious about where you are in your investing journey.

For more dividend investing advice, check out Dan Mac’s recent article compiling advice from many dividend bloggers including myself. You can find the article here.

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