Financial Independence A cautionary tale on active investing |
- A cautionary tale on active investing
- Record number of 401k Millionaires
- Is it worth delaying RE for 4.5 years for lifetime retiree health benefits?
- Am I 'addicted' to money? Should I just quit FIRE plans?
- Daily FI discussion thread - February 08, 2018
- FIRE content in Chinese for my parents?
- A cautionary tale on what not to do for retirement planning.
- The only path to FI I can see right now
- Good time to invest?
- If you are FI and no longer working...how much cash do you leave outside of your investment portfolio (emergency fund)?
- Basis in my Rollover Roth IRA?
- Disentangle UTMA?
- what would you do?
- Are there any sell & rent vs stay calculators?
| A cautionary tale on active investing Posted: 08 Feb 2018 12:33 AM PST Hi all, Just wanted to share my story to illustrate how important it is to stay the course. I used to be a volatility trader. That is, up until 2 days ago. For those of you who are unacquainted with the short vol trade, it's essentially a bet that the S&P 500, the heart of the US economy, will stay calm or regain equilibrium after a shakeup. It's amazingly profitable due to the natural mean reversion property of the VIX, and tailwinds from the way several of the volatility ETPs are structured. Sounds solid, yes? I thought so too. 100% of the time in the past, after a volatility event, products like XIV and SVXY would suffer a large drawdown, and then after some resolution is reached with the original catalyst (or enough time has passed, volatility gets crushed). VIX futures begin to fall soon after to catch up with spot, and within mere weeks, XIV/SVXY recovers to its original price and then some! So, buying on these dips and holding until a recovery became a rudimentary strategy that piqued many others' interests, and spawned a plethora of well-backtested indicators, algorithms, systems, a subreddit, really an entire community. For many of us, including myself, our systems were the hedge. The last week or two, volatility had been steadily rising in response to multiple recent events, and so I averaged down exactly as how my strategy would have me do, buying large chunks of XIV at what seemed to be support points. By the time XIV was down to 122, I had run out of cash. I was all in - not that it mattered, of course it would recover well beyond where it started - after all, it has done this every single time since the introduction of VIX futures 15 years ago. To be fair, there were some warning signs such as an objectively terrible futures curve shape and the volatility of volatility products themselves. I had overridden those signals in my system to chase the dip, against my better judgment! All that changed Monday afternoon, right after 4 PM. The price went from 99 to 20, all in a matter of 15 minutes after the closing bell, where no stop loss could have helped. The indicative value of XIV was reported as being 4.22, an absurdly low number we all thought was a mistake at the time. Turns out there was no mistake. Both Feb and March VIX futures spiked up an unprecedented 110%, which never even happened during the Great Recession. This basically destroyed short vol products in one fell swoop. My final losses were 97%. After I calmed down enough to think straight, I did some back-of-the-napkin math. If I had simply taken the chunk of money earmarked for active trading, dumped it into VTSAX, and forgotten it existed, I'd be up $25k right now. Instead, I'm down $56k. More than an entire year's worth of working hard and frugally saving, obliterated. 8% erased from my FI/RE progress. So, there you go. As far as traders go, I'm probably a fair bit more sophisticated than your average mom-n-pop trend chaser. I had deep knowledge of the products I was trading. I've done my due diligence on the risks, created a risk model, quantified them, used that to create a system... but in the end, none of it helped. I still don't know where I'm going after this. Short vol is still a solid trade but it became immensely more risky in my eyes now since as the tail risk exposure feels much more real. I expect the volatility complex itself to stay more volatile until the trade gets less crowded, and the market as a whole becomes healthier (consider that 74% of growth in the past 9 years came from corporate stock buybacks, purchased with money raised from debt offerings, only made possible by the absurdly low interest rates). What should most people take away from this story? The stock market will shit on your face when you try to get smart with it. Buy VTSAX and forget anything else exists. For myself, I don't know if I can go back after being redpilled. I'm considering a core position of 80% /ES and 20% /ZN futures, rebalancing on a regular basis, and substitute with UPRO/TMF in places where I can't do futures. I think my volatility trading system still has value, but I would use it with MUCH smaller allocations and hedged with far OTM VIX calls. Thanks for listening. EDIT: Thanks for all the comments and feedback everybody. I am a bit thrown off kilter by how unsupportive the majority of comments are... I'm just trying to show people what could happen if you get too cocky and greedy with a high-risk-high-reward trade, and that it's definitely not for everybody. I just lost a ton, I realize I made mistakes, can you get off my case now? If everybody who posts a cautionary tale gets insulted and downvoted they might as well not bother posting at all.
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| Record number of 401k Millionaires Posted: 08 Feb 2018 10:33 AM PST Last year hit a record high number of people with $1 million+ in their 401k. Are there more people like us? Just a consequence of inflation and the market? What are your thoughts? https://www.cnbc.com/2018/02/07/the-number-of-401k-millionaires-hits-new-high.html [link] [comments]  |
| Is it worth delaying RE for 4.5 years for lifetime retiree health benefits? Posted: 08 Feb 2018 06:39 AM PST I am an early 40's NJ state employee for the past 20.5 years. At the 25 year mark I am eligible for state retiree health benefits. Basically it boils down to paying 35% of the cost of the current insurance premiums. http://www.state.nj.us/treasury/pensions/hb-retired.shtml I have been FI for the past 2 years and I do actually like my job but definitely want to RE. I know healthcare is a major pain point for a lot of early retirees. Knowing this, should I just rough it out? EDIT: Married with 2 kids. No significant medical conditions right now. EDIT: Wife intends to work, so RE income is expected to be fairly high. [link] [comments]  |
| Am I 'addicted' to money? Should I just quit FIRE plans? Posted: 08 Feb 2018 05:31 PM PST 30 years old, in my 3rd year as an attending physician. I've been a workaholic the past 3 years because I can't pass up the opportunities thrown at me left and right. I make on average $2000+, for each 12 hour shift I pick up. I still remember the times when I was a broke student, and barely scraping by as a resident, that it seems to me an absolute sin to pass up the chance to make decent money today. I haven't felt any burn out from work, as most of the time it's pretty chill (I work mostly night shifts, so I often have a lot of downtime to take naps, watch TV, read etc) As a result I've been ramping up my annual income from ~300K my first year -> 400K the second year -> and plan to make 500K this year. I'm not frugal, but I don't think I'm spendthrifty either. I have maxed out my 401K, IRA each year since finishing residency. My employer has also been voluntarily contributing 30K into my 403b plan each year (even if I don't contribute anything). Then after these retirement contributions, I've spent ~100K on living expenses per year. And about 30K into my student debt per year. The remaining money I've just been dumping into my trading accounts, where I occasionally trade index ETFs/individual stocks/write options, or withdraw some as cash for larger purchases like cars, buying gifts or flying first class on the infrequent vacation trips etc. In any case, I feel...addicted to the high income stream. Seeing the constant flow of cash into my bank account gives me sort of a thrill. I think if I were to retire early, I wouldn't be as happy, as I probably won't have accumulated enough to be confidently withdrawing 500K each year. I feel lost. Would you recommend I change anything I'm doing or just keep plugging away with maxing my retirement accounts and living/working in this manner? I'm not married, but my SO makes about 200K; haven't really factored in her potential contributions since we're still early on in our relationship. I'm sure having future kids might change all of my current way of thinking too? [link] [comments]  |
| Daily FI discussion thread - February 08, 2018 Posted: 08 Feb 2018 03:08 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| FIRE content in Chinese for my parents? Posted: 08 Feb 2018 10:23 AM PST I'd like to introduce the concept of FIRE to my 57 year old parents. One lives pay check to pay check and one lives very beyond her means taking out second mortgage and racking up 6 figure credit card debt. The problem is they are Chinese with limited English. My Chinese isn't good enough to translate and explain to then. Can someone recommend some good content like Mr money mustache but in Chinese to share with my parents? [link] [comments]  |
| A cautionary tale on what not to do for retirement planning. Posted: 07 Feb 2018 05:53 PM PST One benefit of financial independence is that if you become sick or injured, you can focus on your health, rather than your work. My practice group had a meeting to discuss accommodating a reduced schedule / time off for one of our podiatrists, who is around 60 years of age, and has been practicing for around 30 years. Despite leading a healthy lifestyle (normal weight, regular exercise, reasonable diet, no tobacco or excessive alcohol use), he's had a treatable form of cancer and now is in heart failure which will require an implanted device and some rehab. I've known him for years, he doesn't live extravagantly, and I was surprised how tough this is going to be for him financially if he has to stop working completely. Good financial decisions he made: Got a doctorate, stayed in a stable practice situation, made an above average income for the profession. Participated in our defined benefit plan (sort of mandatory in our group). Drove modest cars (lately a Toyota Prius). Lived in a modest home, we are in a medium cost of living small metro area. Has excellent health benefits. Bad financial decisions he made: Got divorced after having 2 children (twins), ex got alimony, child support, and a chunk of his pension for years. Got remarried to a semi-retired woman with a couple of kids that freeloaded off them (co-signed loans for a home and cars which they wound up subsidizing). Took a loan against his pension to put one of his kids through art school and help the other one start a business that failed. Never bought own-occupation disability insurance. Today, he's not old enough to take his pension with incurring some stiff penalties, and he's not old enough for social security yet. The group is planning to take care of him, but I'm still surprised by his situation. I guess I'll be even more surprised if I find out other members of the group are in the same situation. edit: (to throw in a few more details). We are in a group practice, and the group plans to continue to cover his share of overhead and his income / salary. As far as whether he was happy at home in the 1st or 2nd marriage, I don't know. From talking things over with him, I think his retirement plan was to continue to practice until at least 65, take his pension, social security, and medicare, and keep up around the same lifestyle. [link] [comments]  |
| The only path to FI I can see right now Posted: 08 Feb 2018 05:53 PM PST Hi there, I'm in my late 20's & have the opportunity to go back to my old job in my home town. I could live with my parents & save easily $25k a year. I could invest my savings into real estate over a few years. Problem is, I don't know if I'm ready to go back as I have been travelling for 1 year & I'm afraid of feeling trapped again at home. Will I regret doing it in a few years? (and wish I had traveled instead) or Will I regret not doing in a few years? (and wish I had saved hard & was closer to FI) I don't knooooooooooow what to dooooooooo [link] [comments]  |
| Posted: 08 Feb 2018 05:17 PM PST So, I have been reading a lot of FIRE books lately and trying to come up with a plan. My fiance and I are more on a lean fire path maybe just fire someday. We were saving up to buy a house in the next four to five years. We have no debt and are putting in 10-15 percent into our 401k's not maxing yet because our salaries are too low. We are in our mid twenties. My question is we have 10k save up already besides our emergency fund. Should we invest that in VTSAX now and just start over with our house fund? If we want to retire early wouldn't we need a fund that wouldn't occur penalties if we are under 59. I haven't gotten that far in researching what happens while we are waiting for our 401ks to mature. I know something about roth ladder but not sure how to use it yet. However, every book I read is like vanguard now while you are young. Is there anything I should know that would happen to our taxes if we buy stock? Edit: Also, open to all suggestions on what to do next with our 10k. [link] [comments]  |
| Posted: 07 Feb 2018 08:32 PM PST I'm not asking about your allocation of cash in your investment portfolio. I'm asking specifically about your emergency fund - the cash that will never be invested. I'm sort of FI....not by choice. I'm dealing with some medical/disability issues. I'd like to return to work, but I don't know if it will be possible. I'm planning my finances around the worst case scenario that I never work again just in case. I received a windfall (lawsuit settlement) a few years ago and now have a net worth of $2.6MM. 60%+ of it is still in cash, so I haven't really had to worry too much about short-term cash issues. I've just been moving money into my checking account from one of my higher yielding cash vehicles when necessary. In the future, I expect to be more heavily invested. But, I don't know how much of my net worth I should set aside and not invest at all. Everything I've heard about emergency funds is catered toward people that are working, so I keep reading the same 3-9 months of expenses. I'm guessing that window is designed to give people wiggle room so that they can find a new job and get a new steady stream of earned income. But I'm already not working...I'm already living in the "emergency" time. I'm spending $30k right now a year which includes all my expenses from rent, insurance, food, etc.. But I expect this number to go up in the future. I'm living too frugally and really need to try and enjoy life more. I also would like to buy a house in the next few years. The only thing stopping me currently is that I move around too much. I've never bought a house before, but I was thinking of allocating $500k to this. With interest rates rising, a mortgage might not be that attractive by the time I'm ready to buy. [link] [comments]  |
| Basis in my Rollover Roth IRA? Posted: 07 Feb 2018 06:23 PM PST I transferred my Roth 401k from a previous employer to my Fidelity Roth IRA. I don't see where my contribution basis is in Fidelity, which I understand I will need if I retire early and want to take early distributions. Does anyone know where I can find this? If brokers don't track it, how should I go about building an appropriate track record that will stand up to an IRS audit, should I be challenged? [link] [comments]  |
| Posted: 07 Feb 2018 09:59 PM PST Hi all, My parents have been setting money aside for me in a UTMA since childhood. I'm now 22, and the amount is now considerable, somewhere in the mid six figures, which is obviously a tremendous blessing. The portfolio itself is opaque to me in that I know neither the amount nor its holdings, and is managed by my parents' financial advisor, who charges 1%. My understanding is that should I choose to, I am eligible to take control of the account now that I've reached the age of maturity. Some thoughts:
The course of action I've been thinking of at the moment is to wait a year or two, build up my own work experience and financial situation, and ensure that I feel responsible enough to manage the money myself. Still, the opacity and likely underperformance makes me a little uncomfortable, and I'm not sure if it's a good trade for long-tail behavioral alpha. Thoughts? [link] [comments]  |
| Posted: 08 Feb 2018 05:38 AM PST Let me start with I know this is first world problem, but thanks for the discussion anyway. I'm getting a bonus tomorrow that is nearly 6 figures gross and I am struggling with how to make the most of it. It was an unusually good year so I don't expect to make this kind of money annually. What would you do? More about me: 43YO married with 1 kid, high income earner, in HCOL area. No debt other than mortgage. Currently on track to FIRE in 13 years when kid graduates HS. Our mortgage has 12 years left, ~300k (less than half the current value of the house) at 3.4% interest. It's a high payment every month which makes me feel locked into my job so I am tempted to put the bonus on the house despite the low interest rate. But then it would be even more locked in. We invest significantly in the stock market every month and with reasonable returns that amount is already enough to get to our FIRE number on the timeline. If real estate were reasonably priced here, I might buy a rental but it doesn't seem like an option here. Suggestions? advice? words of caution? [link] [comments]  |
| Are there any sell & rent vs stay calculators? Posted: 07 Feb 2018 10:13 PM PST I've owned my house in a hot market for 5 years. I want to be FIRE in 10 years. I am 35 later this year. My market (Sacramento) is one of the hottest housing markets out there right now. I bought my place for 340K and it seems like I could sell for $460K via redifin. I have been talking to agents. I am very much determined to sell because I have owned in a couple down or stale markets.... At the same time, the home developers stopped building after the crash a decade ago and supply has slowed and demand is wild. The inventory is low.... I feel like this could all fall apart quickly based on past experience but maybe i am wrong.. I think an economic downturn could affect demand. [link] [comments]  |
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