FIRE

[red_slr]

Condi said:

red_slr said:

Its a valid point, and I said on the part time thread a lot of people who follow FIRE are often well paid, well educated individuals and they can afford to live off only 30% (for example). Its 10 years BTW now 20.

So lets say you have a couple (I have chosen numbers that work back nicely to explain the point)
Their joint income after tax is £100k.
They live off £30k and save £70k (after tax).

To FIRE at £30k you need an invested pot of c.£750k which assuming you save the £70k flat rate and apply the 4% gain after inflation you are at just under 10 years.

I appreciate not everyone would be in that situation but those are just nice numbers to show the example of how it can work for some people.

Those 'some people' are such a small fraction of the population that it is really not even worth commenting on.

To be earning £50k a piece after tax means 2 incomes at 75k, which is unusual in itself. To only be spending £2.5k per month between them on those salaries is going to be very unique - mortgage payments, bills, food, travel, etc will likely be most of that figure, before you include things like clothes, going out, holidays etc.

No doubt in some, rare, cases it is possible, but earning £75k before tax puts you in the top 5% of earners in the UK. The majority of those top 5% earners are no doubt in the SE/London, where even a 2 bed flat will cost £2k a month rent or £1-£1.5k mortgage. If you have kids, and need a bigger place, then you can probably say goodbye to nearer £3k a month on rent, or all of your £2.5k per month on the mortgage.

Valid comments, but there are people doing it at all levels of income. Like I said COL and kids makes a massive difference.

[mikeiow]

NickCQ said:

bhstewie said:

I raised a thread about LifeStrategy last week and was looking at 60 as I figure in a bad situation 80 could still drop a lot?

Almost certainly.

But the hope is that 80 outperforms 60 in the 9 out of 10 years that there isn't a recession, and through the cycle produces higher returns to compensate for the higher volatility experienced.

If you are investing for 20+ years, you should experience multiple cycles, so on average the good years will have exceeded the bad ones by the time you need to sell.

That was my point!

Condi said:

mikeiow said:

Just to check my reading: are you suggesting that for anyone under 40, 100% equities in a DC scheme would be foolhardy?

My viewpoint is that if you have 20+ years to accessing/needing DC funds (which most under 40 would!), then 100% equities should be fine. 80% if you are particularly nervous.
Anything less runs a fair risk of missing out on decent long term gains that tend to occur.

Vanguard 80 or 100, or IM Index 80/100 is precisely what I would suggest for that.

Of course, the world is quite different today to even 5-10 years ago. No-one knows how far from the next "correction" we are - I've felt it has been overdue for a couple of years, BUT if I had removed funds to less 'risky' funds, I'd have missed out on a lot of growth, probably more than might be at risk when the correction occurs.

Being far closer to wanting to access funds, I naturally now dial things down a bit....if only we had a crystal ball, eh!

A good property fund will happily return above inflation without any of the volatility of stocks, and depending on your attitude to risk that might seem a good place to put some of your investment. I can also think of plenty of indexes and funds which have underperformed, against inflation or other investments.

IMO investing is about spreading risk across a range of assets while also maximising your growth. It's also a personal decision and what suits one person may not suit another. Keeping exposure to different asset classes is sensible. If you had invested heavily in the PIG or BRIC economies which were widely touted as having so much potential you would have not fared very well.

So you've swivelled to talk about other options, & yes spreading risk is good, but suggesting property funds as being that happy solution is perhaps up for debate right now - https://www.bbc.co.uk/news/business-50714866

Certainly spread your risk, but I think for anyone with a long time horizon, 80-100% equities in a low-cost global fund seems to me to be the most obvious thing to do.
Be interested to hear if you disagree with that!

[Condi]

mikeiow said:

So you've swivelled to talk about other options, & yes spreading risk is good, but suggesting property funds as being that happy solution is perhaps up for debate right now - https://www.bbc.co.uk/news/business-50714866

Certainly spread your risk, but I think for anyone with a long time horizon, 80-100% equities in a low-cost global fund seems to me to be the most obvious thing to do.
Be interested to hear if you disagree with that!

Not really, that's your opinion. Arguably a nice balance of risk and reward, but some people prefer to take a more active interest than a simple passive tracker fund. It still exposes you to the risk of stock market crashes, and personally I prefer to pick funds and find opportunities hoping to outdo a worldwide tracker, over a reasonable length of time, either by choosing asset classes or specific funds which invest in areas I see as having potential. Obviously investing in a tracker means buying the shares which decrease in value as well as those which increase.

Property has proved to be a very successful long term investment, with returns about the same as worldwide tracker funds over the last few years. Why wouldn't you want some different exposure if it gave approximately equivalent returns?

[FredClogs]

There's nothing wrong with holding property in a diversified portfolio, but you can buy global property trackers...

https://www.hl.co.uk/funds/fund-discounts,-prices-...

Also be aware property value is heavily correlated to equity prices, it's not a good hedge against the stock market weakening.

[anonymous-user]

FredClogs said:

There's nothing wrong with holding property in a diversified portfolio, but you can buy global property trackers...

https://www.hl.co.uk/funds/fund-discounts,-prices-...

Also be aware property value is heavily correlated to equity prices, it's not a good hedge against the stock market weakening.

Although I have not read much about FIRE, I guess this is what I have been inadvertently been doing over the last couple of years. I now have (to me) a decent 5 figure sum in a Marcus account and often wonder if there is something better I can do with it. I know very little about this sort of funds, but have a couple of questions.

1)What happens if the fund suddenly vanishes, is it literally a case of "sorry you lost all your money"
2)There have been cases recently of funds stopping people from withdrawing their money to stop the fund collapsing. Again, is it a case of "sorry you lost all your money"

Basically this is not a sum of money I can afford to lose, it is literally me saving every penny I can over the last two years.

Already have a BTL, that is what I bought with the previous three years of saving every penny I can.

[FredClogs]

Joey Deacon said:

FredClogs said:

There's nothing wrong with holding property in a diversified portfolio, but you can buy global property trackers...

https://www.hl.co.uk/funds/fund-discounts,-prices-...

Also be aware property value is heavily correlated to equity prices, it's not a good hedge against the stock market weakening.

Although I have not read much about FIRE, I guess this is what I have been inadvertently been doing over the last couple of years. I now have (to me) a decent 5 figure sum in a Marcus account and often wonder if there is something better I can do with it. I know very little about this sort of funds, but have a couple of questions.

1)What happens if the fund suddenly vanishes, is it literally a case of "sorry you lost all your money"
2)There have been cases recently of funds stopping people from withdrawing their money to stop the fund collapsing. Again, is it a case of "sorry you lost all your money"

Basically this is not a sum of money I can afford to lose, it is literally me saving every penny I can over the last two years.

Already have a BTL, that is what I bought with the previous three years of saving every penny I can.

This is a tracker fund which aims to track the global property price index by investing in firms which are involved in the global property market. Unlike managed property funds which may hold actual physical properties. You can see how one would be more liquid than the other, you won't get locked out of a tracker fund, it'll just follow its index into the ground.

[bitchstewie]

Joey Deacon said:

Although I have not read much about FIRE, I guess this is what I have been inadvertently been doing over the last couple of years. I now have (to me) a decent 5 figure sum in a Marcus account and often wonder if there is something better I can do with it. I know very little about this sort of funds, but have a couple of questions.

1)What happens if the fund suddenly vanishes, is it literally a case of "sorry you lost all your money"
2)There have been cases recently of funds stopping people from withdrawing their money to stop the fund collapsing. Again, is it a case of "sorry you lost all your money"

Basically this is not a sum of money I can afford to lose, it is literally me saving every penny I can over the last two years.

Already have a BTL, that is what I bought with the previous three years of saving every penny I can.

A good starting point would be look at the DIY thread on here.

There some really good resources out there like Monevator that have some good DIY info on them.

Lots of people recommend Vanguard for a pretty simple option.

The main thing to get your head around IMO is saving v investing and your risk tolerance.

You have a sum in your Marcus account, let's say you suddenly need it at some point, with Marcus you can guarantee that your original sum is available whilst with investing you can't though usually given enough time investments will rise.

[anonymous-user]

bhstewie said:

The main thing to get your head around IMO is saving v investing and your risk tolerance.

You have a sum in your Marcus account, let's say you suddenly need it at some point, with Marcus you can guarantee that your original sum is available whilst with investing you can't though usually given enough time investments will rise.

I think this may be the main stumbling block for me. In the past I have dabbled with Gold and Bitcoin and watched the prices religiously, panicking and selling up as soon as the price fell. In the case of Gold I sold at the lowest point possible, if I had just kept it I would have been 30% up now.

I am literally the worst type of investor possible, buying the right things but bailing out at the first sign of losing money instead of riding it out.

I certainly don't need the money right now, but seeing it there and knowing it is safe is a major plus to me.

[bitchstewie]

Joey Deacon said:

I think this may be the main stumbling block for me. In the past I have dabbled with Gold and Bitcoin and watched the prices religiously, panicking and selling up as soon as the price fell. In the case of Gold I sold at the lowest point possible, if I had just kept it I would have been 30% up now.

I am literally the worst type of investor possible, buying the right things but bailing out at the first sign of losing money instead of riding it out.

I certainly don't need the money right now, but seeing it there and knowing it is safe is a major plus to me.

Respectfully I wouldn't see either of those as an investment

I did a lot of reading before doing anything but it's still hard work seeing anything lose money but what I have learned so far is that it usually bounces back.

I once read that an analogy is to imagine watching someone walk up a hill whilst playing with a yo yo so long term you're heading uphill but depending where the yo yo is at any given moment in time you might be up or down.

If you want a simple to digest starting point maybe start with the Lars Kroijer videos

https://www.kroijer.com/

[mikeiow]

Condi said:

mikeiow said:

So you've swivelled to talk about other options, & yes spreading risk is good, but suggesting property funds as being that happy solution is perhaps up for debate right now - https://www.bbc.co.uk/news/business-50714866

Certainly spread your risk, but I think for anyone with a long time horizon, 80-100% equities in a low-cost global fund seems to me to be the most obvious thing to do.
Be interested to hear if you disagree with that!

Not really, that's your opinion. Arguably a nice balance of risk and reward, but some people prefer to take a more active interest than a simple passive tracker fund. It still exposes you to the risk of stock market crashes, and personally I prefer to pick funds and find opportunities hoping to outdo a worldwide tracker, over a reasonable length of time, either by choosing asset classes or specific funds which invest in areas I see as having potential. Obviously investing in a tracker means buying the shares which decrease in value as well as those which increase.

Property has proved to be a very successful long term investment, with returns about the same as worldwide tracker funds over the last few years. Why wouldn't you want some different exposure if it gave approximately equivalent returns?

I admire the fact that a low-cost global fund "means buying the shares which decrease in value as well as those which increase", but when you "pick funds and find opportunities hoping to outdo a worldwide tracker, over a reasonable length of time, either by choosing asset classes or specific funds which invest in areas I see as having potential" actually won't lead to any reduction in value.....hmmmm......

We can happily agree that we could both be right, perhaps.

If someone with a long horizon wants to invest, I believe a low-cost global tracker would suit them just fine.
If they have your level of expertise in picking funds and finding opportunities, then I am equally sure they will do just fine!

I'd go with

bhstewie said:

If you want a simple to digest starting point maybe start with the Lars Kroijer videos

https://www.kroijer.com/

[anonymous-user]

I was FIREd for a while. But then came a young kid and a partner with unequal income and the idea if FIRE just evaporates. Either partner has different views on it, or being a SAHD doesn't suit or you feel need for legacy or whatever.

[Kent Border Kenny]

Do these blogs / sites pay much attention to the other side of the equation; income?

I’ve not put as much thought as I could into my investment portfolio, but have been working away on maximizing my income for about twenty five years, which has now made it far easier to be able to invest at a rate that will leave me secure when older.

I get the impression that the income side is a bit glossed over.

[Condi]

There was a piece in the Metro or Standard earlier about some bloke who had 'retired' at 27 with 250k in the bank, and he was banging on about FIRE. He can't have been that smart though, cos £250k isn't going to see him through to 85 unless he lives like a hermit and has no money to enjoy his time.

[red_slr]

Generally speaking the younger you retire the more you need in the pot, its obvious.

There are plenty of people with FIRE "numbers" of £250k but most of them are >60 if not >65 (i.e SP age).
For someone to retire in their late 20s on 250k... no way. Using the usual FIRE numbers that's £10k PA.

A poll of 400+ FIREists in the USA asking what pot size they need to FIRE has roughly 35% in the $500-$1m bracket and 35% in the $1m-$2m bracket. Only 2 out of the 400 people said they needed $250k or less....

[Flooble]

Depends if ‘retirement’ means sitting around doing nothing or taking a lower paid but more interesting/enjoyable/whatever job

[Womble8]

Condi said:

There was a piece in the Metro or Standard earlier about some bloke who had 'retired' at 27 with 250k in the bank, and he was banging on about FIRE. He can't have been that smart though, cos £250k isn't going to see him through to 85 unless he lives like a hermit and has no money to enjoy his time.

Somewhere near the end of the article is says he still enjoys redesigning properties.

“One of my passions is looking up properties. I love going and looking at houses and thinking about how we can redesign this.

“That’s what generates income by accident. I made £34,610 this year without even trying. If you chase your hobbies, you’ll probably make more money.”

‘Retired’ but earns £34k selling houses. 🤪

[Condi]

Womble8 said:

Somewhere near the end of the article is says he still enjoys redesigning properties.

“One of my passions is looking up properties. I love going and looking at houses and thinking about how we can redesign this.

“That’s what generates income by accident. I made £34,610 this year without even trying. If you chase your hobbies, you’ll probably make more money.”

‘Retired’ but earns £34k selling houses. ??

Oh ok, so he's not really retired. And i guess it also depends what he means by not trying - does he mean he's not pushing for the deals and work, or is it literally a passive income. Sounds like the former and he's just got a job he enjoys and is calling it his hobby.

[bitchstewie]

Kent Border Kenny said:

Do these blogs / sites pay much attention to the other side of the equation; income?

I’ve not put as much thought as I could into my investment portfolio, but have been working away on maximizing my income for about twenty five years, which has now made it far easier to be able to invest at a rate that will leave me secure when older.

I get the impression that the income side is a bit glossed over.

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.

[anonymous-user]

bhstewie said:

others like Terry Smith will say forget focussing on income and invest for total return and draw what you need when you need it.

^^^ This. You're either "doing alright" or you're not. And these things must always be considered in the context of the immediate tax environment.

[bitchstewie]

rockin said:

^^^ This. You're either "doing alright" or you're not. And these things must always be considered in the context of the immediate tax environment.

It's getting a bit off FIRE but I've never understood investing for income.

I can't get my head around buying dogs where their share price can tank but you'll get a "safe" dividend