Journey to Financial Freedom

**As a disclaimer, the content on this blog post was drafted on November 11th, 2019. I decided to share this material with you because of the great value it brought my fiancée and I in the past year - jump starting our journey towards financial freedom.

Updates on how these investments are doing to date are provided at the end of the post. I hope that this inspires you to take action on achieving your long-term financial goals, too!**

With a wedding on the horizon, dreams of owning our first home, and plans of raising a family, it’s only right that my first blog article covers the very first steps that my fiancée and I decided to take in our journey to future financial sustainability.

You might ask - “Where’d ya’ll start?”. Great question! As all people in this day and age begin research on any topic - I summoned Google’s Chrome app on my iPad Pro and searched “best ways to create passive income.” One of the first search hits came up as an article from Wallet Hacks, titled as “27 Immediate Ways to Make $1000 + Monthly Passive Income in 2019.”

To my surprise, a couple of the suggestions listed were things that I’ve dabbled in (or currently dabbling in) throughout my 30 years of life. Starting up a high yield savings account, investing in stocks, getting paid to do things I’m already doing, taking advantage of credit card sign up bonuses, and taking advantage of bank account promotions were among the things that gave me a sense of confidence while navigating our way through the world of financial planning.

However, there were things that I wasn’t so sure of and wanted to learn more about as they were among the top suggestions listed - Crowd Sourced Real Estate Investing; and Investment in Growth and Income Index Funds.

Curiosity in these areas led me into a rabbit hole of articles, which eventually came with a better sense of understanding.

Crowd Sourced Real Estate Investing

Real estate crowdfunding means pooling money together from a group of investors to make real estate investments. As mentioned in “How Crowdfunding for Real Estate Really Works” by Realty Mogul:

“Neighbors have bought property together, husbands and wives and their sisters and brothers have collectively bought property and even multiple institutions have come together to collectively purchase property.

The major difference between collective real estate investing of the past and crowdfunding for real estate today is the ability to transact online and the unparalleled access to deal flow by using the internet as the new distribution platform.

Given the advances in modern technology, investors can now browse investments online, securely sign legal documents online, transfer funds and have access to investor dashboards to watch how investments are performing.”

In essence, crowdfunding provides opportunities for investors with limited capital (like myself) to join financial forces for investment in curated real estate transactions. This allows investors to take advantage of the ever growing real estate market. On average, online real estate crowdfunding platforms like Fundrise and Diversyfund have average annualized returns of 10-17%. In comparison to high yield savings accounts, you’re looking at about 10 times greater growth on an annual basis.

Historically, online platforms like Fundrise and Diversyfund have only been around for a few years so there is limited data on how investments like these will perform during economic downturns - particularly when the real estate market isn’t doing so well.

But if we take a step back and look at the bigger picture, we are an ever growing population and the living space on this earth is finite. It only makes sense that as time progresses, the value of property will continue to rise with demand. So if you’ve got money pent up in a savings account and don’t mind the risks, you may want to consider this avenue to get your capital working for you in the long run.

Growth and Income Index Funds

I’ve always been involved with the stock market - one way or another. In fact, I’ve been involved with the stock market since I started 401(k) contributions in my early 20’s. However, I wish I was more involved with the way my hard-earned contributions were invested over the years. I guess these are thoughts that only surface as you get older and realize that there is a point in life where you’ll no longer be able to work as much as you have been.

These thoughts led me to “Growth and Income Fund”, an article from Investopedia, which shed some light on the way my contributions have been invested throughout the years.

“A growth and income fund is class of mutual fund or exchange-traded fund (ETF) that has a dual strategy of both capital appreciation (growth) and current income generated through dividends or interest payments. A growth and income fund may invest only in equities or in a combination of stocks, bonds, real estate investment trusts (REIT) and other securities.

A growth and income fund is a type of blend fund, which invests in both growth and value stocks.”

I went ahead and logged into my E*TRADE account and looked up funds just to get an idea of what sort of returns come from investing in this area. My search found that the top large blend funds have average annualized returns of 10% or greater in the past 10 years. Once again this almost 10 times greater than the returns you would get in a high yield savings account.

For example, the Vanguard Mega Cap Growth ETF is ranked first in the Large Growth ETF category per U.S. News with a 10-Year trailing return of 14.96% compared to the category’s average of 9.48%. The funds top 10 holdings include Microsoft, Apple, Amazon, Facebook, Google, Visa, The Home Depot, Mastercard, and Comcast. The fund’s expense ratio is also 0.07% which makes the fund one of the lowest cost large growth funds available.

The more I read about ETFs and portfolio management on E*TRADE, I realized how easy it would be to manage my own portfolio of growth index funds at a relatively low cost.

At the end of it all, I put my money where my mind dwelled and I invested in both crowdfunded real estate and growth index fund investments. I figured that the only way to reap rewards is to take risks. These risks are tried and true (for the most part). With internal reasoning, I decided to take them in stride. I’m hoping that one day I can look back at these decisions and say to myself, “Not bad, John. Not bad at all…”

1/3/2021 UPDATE:

From November 2019 through March 2020, we created a joint E*TRADE portfolio containing ETFs (MGK and VIG) and engaged in dollar cost averaging (investing periodically over a time period) to reduce the impact of market volatility. We halted our investments into this portfolio to allocate some liquid cash towards our downpayment for a home and ride out the turbulence in the economy due to effects from the COVID-19 pandemic and uncertainties from the presidential election. As of January 3, 2021, this portfolio yielded a total gain of 39.1%.

In the same time period, we invested in Diversyfund’s Growth REIT Commercial Real Estate Portfolio and have seen dividends come in throughout the year - increasing our portfolio value by 3.8% through just dividends alone. We expect to realize more gains in this investment when property in this portfolio sells.

I don’t know about you, but I’d have to say that these yields are way better than letting your money sit in a conventional savings account with any bank. We hope that 2021 will bring continued success on our journey to financial freedom.