“Six Years Into Investing: A Journey of Persistence, Growth, and Challenges”
Six years have passed since I started my investing journey. Over this time, I’ve dedicated myself relentlessly to dividend reinvestment—so much so that I could be described as an “extreme investor.” Today, I’ve nearly achieved the initial goal I set for myself. However, this journey hasn’t been without its struggles. It has been a path marked by trial, error, and personal growth. In this article, I’ll reflect on the progress I’ve made, while also looking ahead to the challenges and opportunities of the next 10 to 20 years.
1. Initial Goal: ¥2 Million Annual Dividend Income
When I started investing six years ago, my initial goal was to earn ¥2 million annually in dividends. This amount was based on my annual living expenses at the time. Now, six years later, I have almost achieved that goal.
This success is the result of a simple strategy: relentlessly reinvesting dividends. However, ¥2 million, which once seemed sufficient, now feels inadequate in light of current living costs. Inflation and rising expenses are the primary reasons for this. In fact, Japan’s Consumer Price Index has shown an upward trend over the past six years, highlighting the changing perception of what constitutes adequate income.
2. Future Goals for the Next 10 to 20 Years: Over ¥3 Million in Dividends
Having achieved my initial goal in year six, my next target is to earn over ¥3 million annually in dividends. This figure would sufficiently cover family living expenses, education costs, and future needs. Over the next 10 to 20 years, opportunities to spend dividends will likely increase as my child grows and our family requires more resources for education, travel, and other needs.
The Ambition of Moving to Urban Areas
At the same time, challenges loom over the next 20 years. When my son becomes an adult, continuing to live in a rural area might not be the best option. According to the Ministry of Internal Affairs and Communications' "Report on Population Decline and Regional Economy", Japan’s rural areas are expected to face further population decline, potentially leading to reduced infrastructure and public services.
Considering the potential impact on the region I currently live in, I am keeping the option of moving to urban areas open. To make this possible, I aim to increase not only dividend income but also my overall financial assets, ensuring a solid economic foundation for urban living.
3. The "Struggles" and "Liberation" of an Extreme Investor
The Struggles of Being a Salaryman
During my time as a salaried employee, I spent my days constantly worrying about evaluations from my superiors and colleagues, striving to fit in. To be honest, those days were tough. I often felt half-defeated, telling myself, “This is the only way to live.” I had to suppress my true self just to survive in such an environment.
The Liberation of Financial Independence
Now, thanks to my investment journey and the financial freedom it has brought, I am no longer tied to the need for others' approval. This freedom has allowed me to let go of unnecessary stress and focus on working more efficiently. It’s the contrast between the struggles of my salaryman days and my current life that makes this newfound liberation feel so rewarding.
4. The Reality: Over Half of Japan Hasn't Started Investing
Despite my commitment as an “extreme investor,” the reality is that the majority of people in Japan still haven’t started investing. According to the 2024 Survey on Household Financial Behavior by the Central Council for Financial Services Information, only about 25% of people with financial assets invest in stocks or mutual funds. Most continue to focus on savings and cash-based asset management.
This highlights that merely choosing to invest puts me in a minority, and adopting a "dividend reinvestment" strategy narrows the field even further.
5. The Power of Reinvestment: A Numerical Look Into the Future
The power of dividend reinvestment is overwhelming when examined numerically. Below is a breakdown of my six-year dividend history and future projections based on reinvestment.
6-Year Dividend History
- Year 1: ¥300,000
- Year 3: ¥800,000
- Year 6: ¥2,000,000 (Goal achieved)
10- and 20-Year Projections
If I continue reinvesting dividends diligently, my annual dividend income is projected to grow as follows:
- 10 Years Later: ¥3,200,000
- 20 Years Later: ¥6,000,000
This is the "power of compounding" in action. Continued reinvestment amplifies this effect, creating a snowball-like growth in both assets and dividend income.
Dividend Reinvestment Assumptions
- Dividend Yield:
- Assumed annual yield: 4-5%, which is realistic for a high-dividend portfolio, particularly one focused on U.S. ETFs or individual high-yield stocks.
- Reinvestment Growth Rate:
- Considering the compounding effect of reinvestment, I assume an annual dividend growth rate of 2-3%, reflecting the trend of regular dividend increases among high-dividend stocks.
- Asset Growth Simulation:
- Assuming an initial investment of ¥50 million:
- First-year dividend: ¥2 million (4% yield).
- Reinvestment every year leads to compounding growth, reaching ¥3.2 million in 10 years and ¥6 million in 20 years.
6. The Meaning of Long-Term Investment: Perseverance and Reinvestment
Investing is by no means an easy path. However, I firmly believe that consistently reinvesting dividends is the only way to grow the fruit of dividend income. While I didn’t experience the Lehman Brothers shock, enduring the COVID-19 market crash taught me the importance of not stopping reinvestment even during downturns.
7. Conclusion: Looking Ahead to 10 and 20 Years
- 6th Year: Achieved the initial goal of ¥2 million in annual dividend income.
- Next Goals: ¥3 million in 10 years, ¥6 million in 20 years.
- Considering Urban Relocation: Reflecting on rural risks based on government data, I aim to prepare for flexible choices.
- Persevering Investment Style: By continuing reinvestment, I will accelerate asset growth.
The future remains uncertain, but as long as I stay the course, I am confident that the path to financial freedom and expanded life choices will open. The journey of the "extreme investor" is far from over.