Discussion
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hstewie said:
hstewie said: I was reading this site on and off yesterday and the chap has a "take" on income in that he thinks of investing today as buying a future income stream.
http://earlyretirementextreme.com/
I know others like Terry Smith will say forget focussing on income and invest for total return and draw what you need when you need it.
But this is still looking only at the investment side. I get the impression that a lot of people work on this side in great detail but don’t also work on increasing earnings.http://earlyretirementextreme.com/
I know others like Terry Smith will say forget focussing on income and invest for total return and draw what you need when you need it.
It’s all well and good managing to get an extra percent out of a portfolio but it’s not going to make enough of a difference if your household income is £30k.
Kent Border Kenny said:
But this is still looking only at the investment side. I get the impression that a lot of people work on this side in great detail but don’t also work on increasing earnings.
It’s all well and good managing to get an extra percent out of a portfolio but it’s not going to make enough of a difference if your household income is £30k.
Do you mean during the "fiRE" piece? Or as in during your younger working lifetime focus on earning more so you're saving more?It’s all well and good managing to get an extra percent out of a portfolio but it’s not going to make enough of a difference if your household income is £30k.
bhstewie said:
hstewie said: Do you mean during the "fiRE" piece? Or as in during your younger working lifetime focus on earning more so you're saving more?
During the younger, full-time working period.There are some very high paying jobs that a decent fraction of people could get into with a few years of diligent planning and work.
A 5 pieces series of articles on Monevator (a good blog for all sorts of things money related).
https://monevator.com/debating-fire-the-believer-v...
The rest of the articles are linked from the homepage or down the right hand side
https://monevator.com/debating-fire-the-believer-v...
The rest of the articles are linked from the homepage or down the right hand side
I don't claim to be following 'FIRE' or necessarily a strategy for others to follow but I am putting 5% of my monthly take home into a VLS 100. I limit the monthly contribution to 5% as I am saving towards a property deposit too. Hence my cash savings are roughly 10x the total current value of my invested funds. Investing goes against the usual advice when saving for a property deposit but the investing is for the longer term and separate to the house deposit so it's a risk I have to accept. I don't touch individual shares..at least not for the time being but I've seen the VLS 100 swing between -16% and +28% during 2018/2019 so has helped build my tolerance to risk...getting burned on the AIM a few years back.was a painful but much needed lesson!
VR99 said:
I don't claim to be following 'FIRE' or necessarily a strategy for others to follow but I am putting 5% of my monthly take home into a VLS 100. I limit the monthly contribution to 5% as I am saving towards a property deposit too. Hence my cash savings are roughly 10x the total current value of my invested funds. Investing goes against the usual advice when saving for a property deposit but the investing is for the longer term and separate to the house deposit so it's a risk I have to accept. I don't touch individual shares..at least not for the time being but I've seen the VLS 100 swing between -16% and +28% during 2018/2019 so has helped build my tolerance to risk...getting burned on the AIM a few years back.was a painful but much needed lesson!
Makes sense to me, I also keep my savings / investments in different pots depending on how quickly I may need it. VLS100 is definitely for the long term / 5 years minimum. My SIPP is 100% Equities, but I also have some ISAs in VLS60, VLS20, and cash. I'm not very scientific, but I think I should always be able to get hold of money when I need it, without taking to big a hit. Personally I've had my fingers burned with individual shares in the past, so now I would never put more than a couple of hundred quid in a share, just for a bit of fun.BlackG7R said:
Makes sense to me, I also keep my savings / investments in different pots depending on how quickly I may need it. VLS100 is definitely for the long term / 5 years minimum. My SIPP is 100% Equities, but I also have some ISAs in VLS60, VLS20, and cash. I'm not very scientific, but I think I should always be able to get hold of money when I need it, without taking to big a hit. Personally I've had my fingers burned with individual shares in the past, so now I would never put more than a couple of hundred quid in a share, just for a bit of fun.
I don't have the balls for individual shares.I purchased a few when I started out and didn't like the daily volatility which doesn't seem to occur with most funds and trusts.
bhstewie said:
hstewie said: I don't have the balls for individual shares.
I purchased a few when I started out and didn't like the daily volatility which doesn't seem to occur with most funds and trusts.
I think that’s the general advantage of modern ETFs and funds. To build a large enough and sufficiently well structured individual equity portfolio requires a large amount of capital and a reasonable level of competence. I purchased a few when I started out and didn't like the daily volatility which doesn't seem to occur with most funds and trusts.
A colleague and I have been trying to work out a way of designing a good, solid equity portfolio and it’s doable but there are some pretty fundamental structural hurdles in the first instance.
Individual equities each will have a minimum ticket charge for execution. These rapidly add up to be a significant cost until your portfolio is really quite large.
In very crude terms, if you’re buying £100 clips with a £10 min comm then you can see the issue.
The latest retail solutionnof zero comm dealing doesn’t work either because the way that works is the broker sells their client flow to a prime brokerage who fills the orders away from the market price to capture the revenue needed to pay themselves and the sub broker. So the client is still paying a comm but now it’s wrapped into the full price so no longer overt. This doesn’t mean that it isn’t a good product but means that you have to fully understand what you are really paying to work out if it’s better for you. And that’s quite tricky and obviously the point of the product. I’m actually surprised that it is permitted in the UK as similar products in the past have been closed by the FCA.
You then have the hurdle of PTM Levy on each stock which you don’t have with ETFs. That puts you 0.5% offside on top.
So, by the time you’ve calculated a minimum deal size where it works you are probably in the realms of £10k a positions very roughly.
Then there is the diversification. We reckon that you need up to 40 blue chip positions to be properly diversified but at least 20 so you can begin to see the size of pot needed to be efficient.
You then have the time cost of monitoring the fundamentals and the ongoing transactional cost of changing or adding to positions.
I have a work around for the comms and taxes which is actually pretty cool and we have a £40k portfolio up and running that is outperforming the ftse but it’s simply too clunky. It’s too many positions and too large a capital requirement to be viable.
Where physical equity does work and work really well is using a smaller number of holdings and with much shorter time frames in order to generate alpha on top of a completely bog standard, steady investment portfolio.
My colleague and I have run this structure for ourselves and internally for years and it works well.
The basic premis is that you invest 80% of the pot into a completely conventional fund investment portfolio, whether yourself or through an IFA etc. 20% is then allocated to ultra low cost, zero tax individual blue chip medium term trades based on fundamentals. And that smaller more more active portfolio’s purpose is to try and earn alpha to help outperform the market.
The other issue with retail investors trying to use individual equities is that most end up going gambling. The lure of mega returns (reality, debilitating losses) from non blue chip equities is too much for many. There aren’t many investors who can sit in isolation and just focus on a couple of dozen of the most boring blue chips which is what is needed.
I've noticed some 'themed' ETFs I own are made up of a bunch of other ETFs. I'm wondering if there is much advantage to owning individual stocks if you can get the blend of exposure and risks you need with a mix like this.
Re FIRE. I wonder how people manage issues and resentment with people they are close too. It can't be easy maintaining relationships with people who have to go to work every day AND be in the blast zone of your frugality. Not so much an issue at retirement age as lots in the same boat. But at 40?
Re FIRE. I wonder how people manage issues and resentment with people they are close too. It can't be easy maintaining relationships with people who have to go to work every day AND be in the blast zone of your frugality. Not so much an issue at retirement age as lots in the same boat. But at 40?
Sambucket said:
Re FIRE. I wonder how people manage issues and resentment with people they are close too. It can't be easy maintaining relationships with people who have to go to work every day AND be in the blast zone of your frugality. Not so much an issue at retirement age as lots in the same boat. But at 40?
I think most people don't really tell people the exact details for this reason. There are some extensive threads on MMM about this subject and the best advice seems to be just to tell people you are taking a career break of a year or two.
As for being frugal, I guess unless you are going on lean fire then most people who fire have a pretty good understanding of their budget and generally have enough money so they don't live like a hobo.
What happens if you are in a relationship , and one person wants and needs to work? It seems to me, like an all or nothing deal. Can you imagine one person working for 20 years and the other gardening or whatever, and not having fights over division of life labour?
Add kids to the mix and it gets messy fast. Much as I hate the 9-5 monday to friday routine, there is some value in synchronicity
Add kids to the mix and it gets messy fast. Much as I hate the 9-5 monday to friday routine, there is some value in synchronicity
Sambucket said:
What happens if you are in a relationship , and one person wants and needs to work? It seems to me, like an all or nothing deal. Can you imagine one person working for 20 years and the other gardening or whatever, and not having fights over division of life labour?
Add kids to the mix and it gets messy fast. Much as I hate the 9-5 monday to friday routine, there is some value in synchronicity
Just claim that you now identify as a woman and will therefor be sitting at home all day watching TV. You’ll need to find things to complain about though so it isn’t as easy as it looks on paper. Add kids to the mix and it gets messy fast. Much as I hate the 9-5 monday to friday routine, there is some value in synchronicity
NickCQ said:
Sambucket said:
Add kids to the mix and it gets messy fast. Much as I hate the 9-5 monday to friday routine, there is some value in synchronicity
Kids make it easier, right? Effectively the kids become the ‘job’ of whoever isn’t working. Making the division of labour feel more equal. NickCQ said:
Kids make it easier, right? Effectively the kids become the ‘job’ of whoever isn’t working. Making the division of labour feel more equal.
I've been following financial samurai ER journey, as he is (or was) a SAHD and there are some (adjusted for scale) parallels with my situation. He has recently changed his mind about FIRE. https://www.financialsamurai.com/why-i-failed-at-e...
It is interesting to watch the lifecycle of these lifestyle trends. Which can also seen with digital nomad blogs. More often than not, the initial part of the journey is sustained by optimism, but the end result varies a great deal. I'm not saying there isn't positive aspects to FIRE, I'm just wondering if these lifestyles introduce more conflict and tension to a (young) life, then they resolve.
I am an accidental FIRE person. Naturally frugal and work obsessed for a decade led me to the same place without realising it. But now
I have a kid with a partner who is in no shape or form on the fire train. And short of blowing up my life, I can't really see any other option than to work and suffer some lifestyle inflation. Taking the badge off the Tesla only goes so far. And full time child care is a real job.
Sambucket said:
NickCQ said:
Kids make it easier, right? Effectively the kids become the ‘job’ of whoever isn’t working. Making the division of labour feel more equal.
I've been following financial samurai ER journey, as he is (or was) a SAHD and there are some (adjusted for scale) parallels with my situation. He has recently changed his mind about FIRE. https://www.financialsamurai.com/why-i-failed-at-e...
It is interesting to watch the lifecycle of these lifestyle trends. Which can also seen with digital nomad blogs. More often than not, the initial part of the journey is sustained by optimism, but the end result varies a great deal. I'm not saying there isn't positive aspects to FIRE, I'm just wondering if these lifestyles introduce more conflict and tension to a life, then they resolve.
I am an accidental FIRE person. Naturally frugal and work obsessed for a decade led me to the same place without realising it. But now
I have a kid with a partner who is in no shape or form on the fire train. And short of blowing up my life, I can't really see any other option than to work and suffer some lifestyle inflation. Taking the badge off the Tesla only goes so far.
FIRES in one of the worst HCOL place on earth. Income requirements are staggering.
Has a kid once FIRE'd thus increasing his budget quite a bit - in a HCOL area too. Double impact.
Has a yearly income via his investments and business income of $260,000USD. TWO HUNDRED AND SIXTY GRAND.
Then, on top of all that his blog would be very boring if everything went to plan wouldn't it. Perhaps its click bait, perhaps it was part of his plan all along.
All I know is if he had moved to Denver (or some other LCOL area) in 2013 with his net worth, invested as he has done he would be a very, very wealthy man.
I don't buy into his BS story tbh, as his new goal is to retire (again) by 2022.
His FIRE story and plan is just not typical of 95% of people.
I'm sure all the big FIRE bloggers are on the make. They are obsessed with money and have nothing else to do!
HCOL living can be quite sticky. I'm assuming his partner likes to work, if he is a SAHD. So might be tricky to try persuading her to move to Denver? It's another example of the tension. It might benefit his net expenses, but perhaps not hers. Wages in SF are sky high vs denver.
HCOL living can be quite sticky. I'm assuming his partner likes to work, if he is a SAHD. So might be tricky to try persuading her to move to Denver? It's another example of the tension. It might benefit his net expenses, but perhaps not hers. Wages in SF are sky high vs denver.
Maybe not pissing money away on trinkets and other waste, saving it for the impending an inevitable future, giving yourself economic freedom, having something to pass on is what the last surviving non sonsumer addicts just refer to as normal and obvious?
Surely these people are just repackaging normality and selling it to consumption addicts?
Surely these people are just repackaging normality and selling it to consumption addicts?
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