1. starting with zero balance today. plan to put about $10k per month into stocks for 60mo/5yrs.
Since you can’t put $120k/year into retirement accounts, presumably, at least a chunk of this, if not all, would be in taxable accounts?
2. plan to buy high growth stocks that are beaten down; think SHOP,SQ,TTD and other tech stocks.
3. assuming a 10% annual growth rate, I’d have about $800k in 5 years.
Well, I get closer to $790k, but close enough. However, since you are, by your own admission, ‘a new investor’ I would question how you expect to achieve 10% annual growth on a regular basis. Think Netflix, Teladoc, Pinterest and Zoom - all great for a while, but nowhere near 10% over the long haul. And if you think you’re going to be smart enough to sell at the peak - I would ask how you think you would know when the peak is, without looking back at it.
4. sell all growth stocks and buy dividend stocks; think HD, SBUX with around 3% div yield - huge tax bill here and am not sure if there’s any way around it; alternatively, I would buy dividends stocks to begin with, which avoids the tax bill but unlikely to achieve 10% annual rate.
Yes, a huge tax bill. In a taxable account you will have to pay at least 15%, and probably 18.8% up to 23.8% on your long-term gains, and your ordinary income rate on the short-term gains (which you will have since you are buying right up through the end of the 5th year). If we assume an average of 20% in taxes on your $190k in gains, that will leave you with a total of $752k.
I think you’d probably be better off just buying index ETFs and just letting them ride.
5. live on about $24k dividends income a year ($800k*3%),which is enough for me (house paid off and single);
Really? Will $24k be enough if we have, say, 5% inflation each year? Because after 5 years of 5% inflation that $24k will buy what about $18.5k buys now. And even though you have a paid off house, your property taxes, insurance, utilities and food costs aren’t going to stay the same as they are now - they are going up. And you don’t seem to have anything figured in for taxes. Assuming you are going to be collecting SS at some point, with $24k in dividends, you will be at a level that at least some of your SS income will be taxed.
if stocks go down, I’d have more dividend income due to higher yield. if stocks go up significantly, I’d start selling at maybe around $1M mark.
Huh? If stocks go down, dividends are unlikely to increase. And growth stocks typically take a bigger hit in downturns than dividend stocks, so you are going to be selling low and buying high - the exact opposite of what you should do. And if stocks go up like they have been, the yield will probably be lower because dividends tend to lag outsize price gains. That’s why the S&P 500 yield is lower now than it used to be.
I’m sure there are a lot of problems with this approach.
I think you are trying to achieve FIRE by being a hare, when most people who are successful at achieving FIRE actually a lot more like tortoises. I understand that you want to make up for lost time, but you can’t. All you can do is go forward from where you are. Take a deep breath, slow down, and figure out a plan that will get you to where you want to be without having to take large tax hits.
AJ