How To Build A Long-term Investment Portfolio Earning 250% Annual Return

Investing is gambling but a good investment is a ticket to wealth. There is a difference. While it is not Las Vegas nor the local corner store scratch-off but it is still gambling nonetheless. While I cannot predict the future but I can look back at where we started to see, “Did We Beat the Market?”

Chasing Change

My mom is a diligent saver. She emigrated from Haiti to the US back in the late 70s. It had to be tough to navigate and figure out US society as well as the complexity of the banking system. [wealth concept: Geo-arbitrage]

She took an incredible leap of faith to move the needle forward. [generational wealth building]

It was not until the 80s with the advent of the commercially viable computer that wealth started to dramatically change.

Seasons of Wealth

Unfortunately, those at the bottom were missing from the [1] Soft and Technical Skills Race gap. While immigrants were doing their best to learn a new language and often work two low-end jobs, the future was gaining momentum.

By the 90s, the tech and investment bubble increased at a feverish pass. The [2] Money Management and Investment Race gap was in full effect. I still remember people opting out from learning how to type or understanding how the internet works. What is new and challenging, often intimidates people.

By the 2000s, the [3] Debt Leveraging and Knowledge gap meant that if you did not pivot, you were relegated to where you were. I was working at McDonald’s and saw how fear of change kept people exactly where they were. From check cashing stores that charge over 23% interest to a low understanding of interest rates; people began to leverage their future on looking like they were faux successful.

Color-less and Functional Differences

That is how change functions. It is merciless and color-less. The basic intervals changes and if you are not changing with it, you are merely falling behind. Those very changes are happening again. This is why history is seen in a cyclical pattern. If you fail to read the moment you are in, you will be render obsolete.

If you fail to acknowledge what didn’t work in the past as a problem, you are doom to repeat it. With that said, this is why I share financial literacy.

The goal, “Don’t miss the future holding on to today, it’s already the past.”

Less than 40% Own a Home, and Less than 30% Own Stocks

To be frank, most people are terrified of the unknown. Success is an unknown. Although there are three universal access points to wealth i.e. Home, Business, and Investments, the average person is satisfied with their 9-5.

Starting a business isn’t for everyone. Turns out, 80 percent of small businesses fail in three to five years. Buying a home comes with a massive barrier of entry. The ten to twenty percent deposit is hard to come by. Investing in businesses or real estate might be a fair compromised to start.

Here are some entry-level tips:

1. Know Your Risk Profile

Primarily, your RISK PROFILE determines how you will invest and more important how you successful you will be. Your risk profile comes down to your RISK APPETITE – willingness to take risk, RISK CAPACITY – ability to take risks i.e. age, income, etc., and finally, RISK TOLERANCE – the define limits or boundaries for that risk i.e. downside of 15%.

Some people cannot stomach a $50,000 drop in a week but that is wealth. The more money you have in the market the more you stand to lose. Conversely, the more you stand to gain as well. Overall, my wife and I lost about $50,000 during the downturn of March 2020. Unlike the 60% who withdrew and thus cementing their losses, we stayed in the market. Instead of the words, look at the numbers below:

2. Engage in the Investment Process

Secondly, establish a monthly investment contribution goal since wealth is equal to Contributions x Time x Rate of Growth.

The more you contribute, for a sustain amount of time, the better you will performed. Consistency is key to catching FIRE. While I know it seems sexy to day trade in the short term, I can bet that the people you know aren’t making the wealth that they are describing.

I would recommend that you look for the NET PROFITS (if any).

The Net means the Gains generated vs the Losses incurred.

Ask for their tax returns; become more inquisitive about their wins. Not even for one year, check their numbers for the last 5 years. You will find that it is a thin margin of success. Personally, it is not my cup of tea. I rather invest for the long haul. It is not sexy or glamorous.

3. Understand it will take time

Thirdly, understand your portfolio style. Consider the tax implications of your investment classes and under the rules of the game you are able to play. Most people do not know that frequently trading for profit can lead to higher taxes. There is no issue with making money, just remember to retain at least 20% of it for taxes.

Understand what your Equity to Bond ratio means and how that effects your Efficiency frontier (refer to Personal Capital). Finally, start periodically reviewing your allocations. What you are looking for is your break down of Growth-Value-and Dividend paying stocks. Which is the entire break down of the over 150% portfolio that I am about to share.

This is all before Qualitative and Quantitative analysis. Yeah that is a lot of stuff but no one said becoming rich was easy.

Disclaimer – Do your own research!

Like everything only, learn to do your own research and take this as just random advice. This is my personal portfolio on M1 Finance if you want to see it in real time, click TNFG Starter Kit v3.

If you are more defensive, you can start with this monthly dividend portfolio aka the ZODIAC portfolio

inFocus – Average Investing

“Being Average is a Failing Formula” Grant Cardone

The average financial advice nowadays is to invest in index ETFs. If that sounds vague, that is just because it is. While I understand why the average person would gravitate to their idea because it is relatively easy. Easy hurts less than the reality. However, I found out that average US household isn’t doing so well.

I DON’T WANT TO BE AVERAGE

While my portfolio was pulling away with over 250% growth in 2020, index ETF netted less than 30%. Play with being average if you want. For me, the proof is in the data.

See Vanguard Total Stock Market $VTI growth and Vanguard S&P 500 ETF $VOO below.

Our Household TNFG Strategy in 2020+

To be clear, this is not our only investments.

This is our first after-tax brokerage investment portfolio. We invested in ourselves i.e. soft skills first. Secondly, we are maxing out on our 401ks, ROTH IRAs and HSAs. Furthermore, we are in an investment group to buy into community wealth building. And finally, we ave this account. We are setting up 3-4 pension style income sources and retiring early. That’s our Higher (Level)Max approach.

We started back on January 10, 2020 with just $350 to invest. The goal was to invest $1,000 per month for a total of $12,000. With a blend of 60%, dividend-paying stocks and maybe 40% play money; we started to tweak the technique.

In our M1 account, we bought several growth holdings and sold under performers. Moreover, we cut the companies that I was not too sure of.

We are in the third iteration aka version 3 and headed to version 5 by 2022.

5-Segment Breakdown

TNFG Global Market

This is my high performance slice that carry the heavy growth hitters. These 10 global companies are making constant waves in the news. They bring in an average of 0.79% Dividend yield and carry an Expense Ratio of 0.07%. One day, I’ll likely replace Exxon Mobile $XOM and Visa $V with the likes of Sea LTD $SE and Shopify $SHOP?

It’s not perfect but the growth is hard to mess with.

TNFG’s US Domestic Picks

This is my original first built out. It was heavy on dividends and still is. I trust it but it doesn’t make the biggest waves. I’m hoping that 2021 gives it more juice as the market returns to normal.

These 20 domestic companies are trusted brands. They bring in an average of 2.336% Dividend yield and carry an Expense Ratio of 0%.

If I had to replace somethings, I would kick Cisco Systems $CSCO out and replace it off the bat with Nike stocks. Sneaker heads aren’t going anywhere and it is recession Teflon. People are always down to stunt of people even during quarantine. Makes no sense to me but with $1/share dividend for the year, about 150 years would guarantee someone a new sneaker per year. Courtesy of the company. I would also throw out $VTI due to redundancy.

TNFG REITs and Upgrades+

All about REITs, Home Upgrades, and Dividend Payouts. Goal for this Pie is to have 1-3 Monthly Payouts, 2-4 Semi annuals, and 6-9 Quarterly. No more than 10 Companies.

They bring in an average of 2.858% Dividend yield and carry an Expense Ratio of 0.03%. They don’t make a ton but it’s a buy now and hold for the market to go back to normal in 2022.

REITS and their dividends, keep me warm at night. I added some Home Depot $HD, Lowes $LOW, Peloton $PTON and Invesco QQQ trust $QQQ to average the numbers out. I’m positioning this as a HGTV style slice for fun(d).

TNFG Futures ETF+

Based on Blog write-up of the best ETFs for 2021. This is an opportunity to diversify with a pure ETF slice and own a piece of the future. A simple eight holdings with an average of 0.639% Dividend yield and carry an Expense Ratio of 0.55%.

The goal of this segment is to go big on value and new market sectors like cannabis. Gaming is going to bring in the big bucks. In addition, buying the travel ETF $JETS makes sense in 2021 in anticipating for travel resurgence in 2022 and beyond.

Although this is the newest segment that cannibalized my Play-Growth slice, I have a strong sense that this will be in my top three for the next 5 years. I would be open to rounding it out with some high dividend yield ETF and some Alternatives ETF.

M1 Global Dividend (Expert Pies)

The M1 Global Dividend Pie provides exposure to global companies with larger than average dividend distributions. This slice was built for people seeking continuous dividend income from global companies. Dividends can provide income investors with cash flows.

I added this slice as a safety net. For some reason, I haven’t decided to sell it but I will likely have to since the expert pies aren’t controllable. By that I mean, you can’t manipulate the target percentages in here or add other holdings.

There are five holdings in here with dividend yield of 2.933% on average with an expense ratio of 0.29%. I don’t think there is much more room to grow here. I’ll be looking to dismantle and build back something a bit better by year’s end.

Why Start ASAP!

Biggest reason, it pays more than the average bank savings at less than 1%.

For every $1,000 investment in the dividend zodiac portfolio ends up being $36.60+ per year for a lifetime. At $100,000 invested, that is $3,600+ per year for the rest of your life. At $1,000,000 after a lifetime of investing, that is $36,000.

How much time would it take you to invest $1,000,000…?

Less time than you think. Compounding interest helps you fight your way upward and helps you sustain generational wealth for lifetimes to come.

In this portfolio, you are looking at a possible 625% increase in the amount you invest from now until December 2025. Let us say you dropped $12,000 as of January 2020 that would translate to $63,000 profit.

If you made monthly contributions of $1,000 for 5 years at even 100% growth rate per year, the grand total ends us being over $500,000 of profit. Calculations below, I rest my case.