Summary
Investing any amount is worthwhile.
Chasing ex-div dates is rarely useful.
Markets move slower than you think, but bigger as well.
This is a path that was full of failure, lessons learned, investments, self improvement, pain, and joy from the process. Let’s get going, and embrace the process with open arms.
The focus on this series is what can be done when we’re starting from scratch, completely. I'm talking no assets, having a retirement account that we can’t contribute to, and less than $500 to our name with being plenty in the red overall. So, while I think that proves that I’m definitely not a financial advisor, I am capable of learning and applying those lessons learned.
So, starting with exactly zero dollars saved and plenty of debt, let’s take a look at increasing net worth by over 200% and creating brokerage accounts to do help. You folks in your twenties, thirties, forties that are punching the time clock but not seeing any real gains; this is for you, by one of us.
The phrase that started it all - “If you don't find a way to make money while you sleep, you will work until you die" (Buffett). In January of 2020 I purchased the company I worked for, with an end goal of being able to enjoy a retirement instead of working constantly for a company that hadn’t cared about me. I heard this phrase while driving to a retail job at a company that was classified as an essential business, as I had just shut down my company in accordance to the state order that went into effect.
I couldn’t work at my company, I couldn’t pay my employees, and I was left scrambling. I had no retirement account that I could contribute to, my DoD TSP couldn't be touched without destroying what I had saved, I had less than $500 to my name, no savings, and I was counting my blessings for finding a paycheck so quickly. I’m sure that many can relate to that situation when our economy suffered over 30%, and I know that many were in even worse positions than me.
The thought on my way home was simple — “how can I make money without punching the time clock”? The next morning I opened up an online savings account with .50% interest which was 500% higher than my bank. I then heard about this thing called inflation, and learned how it makes my money worth 2-3% less every year, which means that I’m LOOSING 2.5% or more every year in this account. Upon learning what this investment thing is and the often touted 8% per year long term gains, I opened up a Roth IRA account and a taxable account and started my journey.
My first investments were heavy into the taxable account with my tax refund from 2019, with the intent of generating as much percentage yield as I could as quickly as I could because we can all get rich quick. After all, that's what TV and radio ads pitch, right? Well, I made some buys at the time - OLN, VSTO - and wouldn’t you know, a month later they hadn’t jumped up any real amount, and one had actually dropped in value a bit, and only one paid me to own them. I promptly dropped them once I broke even on the price. VSTO was about $22/share then, and now its $40 a share. OLN was about $11.35/share, and now it’s $48/share. Ouch, right? Well, yeah, but the lesson learned — that the market moves slower than we think was one that was well worth that lesson. The other lesson learned was why unrealized gains are called unrealized. While you might have them today, you may not have them tomorrow or the week after.
The reason for buying OLN was really simple - I was working retail selling ammunition faster than it could be delivered at a local store, so I could see the real world impact that this would have on the company. OLN not only owns Winchester ammunition and reloading component production, but they also are heavily involved in the epoxy, chlorine and acid chemical production that thrives with construction demands and the increased demand that 2020 brought along for sanitation products. A little thing that most also don't realize about OLN is their contract to run Lake City, the Department of Defense's ammunition plant in 2019 for 7 years and can be extended three years by the Army.
That's a pretty diverse recipe for quick gains in 2020 and maintaining them for a while - but the dividend yield is so low I can't see keeping it for myself. It is a very stable dividend however, having been paid every quarter since August of 1989
Around this time I discovered that people make a living at this, and discovered what dividends were. I started buying EVERYTHING that had a near double digit dividend yield before the ex-div and then hoping I would break even when selling that same share a little bit later. After all, this would allow me to create a captured gain along with an unrealized gain. Guess what? That ALSO didn’t work because I had no idea what an ex-div date was, Or that typically the price increases when that day got closer, OR that the price can drop afterwards, OR that my funds were tied up for two days at the first brokerage I was using for several days and I couldn’t reinvest it somewhere else. I also found out that this broker took a cut of my dividends, and that other brokers don't charge for trading or dividends. I also discovered the high, high cost of target date mutual funds and the downside loss if I sold them. This was revolutionary for me, and while many would call these experiences losses, I’d rather call them the cheapest financial education I’ve ever experienced.
Well, following these lessons I purchased a Seeking Alpha membership, started buying investment books, found out about ETF’s, market indexing, covered call methods, and dividend growth strategies. In March I got my tax refund from the state, put that into my taxable account, I got my personal books in order to be debt free of revolving debt by October 2021, started to pay myself first via my accounts. My rules were simple
Positive, permanent change happens a little at a time
$20 per week into my Roth IRA, regardless anything else in life
Don’t focus so much on getting debt free that I don’t have a life
Any money from sales in my taxable account will become contributions to my Roth
Since January my net worth has increased by $3,800. I make money every month without working. I have learned how to pay myself first, before any other obligations in life. So, keep your eyes, phones and mouse clickers open for episode #2, the actual beginnings of the investments, theories, and general rules from a laymen perspective (and when I’m willing to make an exception). I would appreciate any and all insights, feedback, and constructive criticism that anyone has to offer. Thank you for your time
~Mike