Financial Independence Daily FI discussion thread - October 13, 2019 |
- Daily FI discussion thread - October 13, 2019
- There is so much resistance to passive trading as a Korean.
- Optimism and Pessimism in SWR determination.
- Weird question - I think I've made it?
- What was your biggest sacrifice for FIRE?
- Looking to switch careers from teaching to something good for FI/RE and would like suggestions (and other miscellaneous advice)
- Has anyone here used MaxiFi planner?
- Do you think that FIRE is mostly an aspirational thing for a majority of people?
| Daily FI discussion thread - October 13, 2019 Posted: 13 Oct 2019 01:06 AM PDT 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]  |
| There is so much resistance to passive trading as a Korean. Posted: 12 Oct 2019 08:30 PM PDT Just want to share my observations as someone trying to get into passive investing in Korea as a Korean. I read a lot of FIRE stuff thats all the rage in english media and wanted to get into that myself. One thing i noticed about trying to do that as a korean is the amount of resistance you will face. First off etf's and indexs are almost never advertised or mentioned when you go in for consulting (if consulting even exists). They will usually pitch financial packages that lock you in for 10 to 20 years where they promise an annual return of 2% "guaranteed" for a safe option. This was from samsung one of the larger financial management services available here. When asked about etf's or index fund options tracking the S&P 500 they begrudgingly acknowledge its existence but quickly go on to say how risky it is and how nobody is managing it. That you are at the mercy of the markets. ghost emoji Even using a conservative metric of 4% average annual return long term they balk at the figure. Claiming that they regularly make 20 ~ 30 % returns on a 6 month basis with their managers. Even looking up several s&p 500 etfs offered by a few investment firms they clearly and prominently label the s&p 500 index fund as high risk. Practically one step away from bitcoin. https://i.imgur.com/5Vj1Jv3.png I told them the whole spiel about trying to avoid fees and how most managers can't beat the market. That if the S&P 500 containing the top 500 US firms in an extremely globalized world were to permanently collapse it would practically be the end of the world in which "safe" assets like cash and real estate would likely lose value dramatically as well (especially non US monopoly money like the korean won). They usually dont have a response. Even going into korean investment apps signs of resistance, dark spaces and nudging towards more high risk trading are prevalent. The mobile app of kiwoom investments only show hourly and daily fluctuations which contribute to a sense of nervousness to encourage frequent trading. Again the claims of 20~30% gains in 6 months from now predictions are prominently displayed (all of them managed funds of course). Lots of leveraged and margin stock options prominently at the front and even deceptively added at the end of fund titles like S&P 500 index fundleveraged. -> i almost clicked this those fuckers. This is not even mentioning how hard it is to find the index funds and etfs on their search function, usually requiring exact queries and multiple tries before the right one pops up. Of course the other more high risk funds keep popping up. Anyways those are my observations. Thank your lucky stars for companies like vanguard and robin hood. EDIT: VANGUARD SAVE US! YOURE OUR ONLY HOPE [link] [comments]  |
| Optimism and Pessimism in SWR determination. Posted: 13 Oct 2019 04:41 PM PDT To determine our SWR, most of us rely on sources such as the Trinity study, the ERN guide, or FIRECalc. It's important to note that all these later guides are derivatives of Trinity: they adopt its underlying dataset and methodology, to arrive at very similar conclusions - with minor adjustments, such as planning for an early retirement of 50 years versus the more traditional 30 years of Trinity. With these minor adjustments, they all end up in an SWR range between 3.25-4%. This whole nebula of Trinity-derived studies, is based on two sources: a dataset and an assumption. The dataset is the returns of the entire American stock market over the 20th century. The assumption is that these return rates represent a normal, and we should expect them to persist. Specifically, for our purposes, we expect them to persist into the 21st century so we can finance our 3.25-4% retirement. The potential weakness in this assumption was pointed out by a recent answer on another forum:
You are welcome to read the entire answer, as it is interesting. Personally, it led me down a rabbit hole of criticisms and doubts of the Trinity study. A particularly poignant one was raised by the Bogleheads Safe Withdrawal Rates pages, arguing that blindly relying on Trinity is a form of retrospective bias. That is: buying and holding a broad US stock market index turned out in retrospect to be a great investment strategy, yielding returns high enough to support the famous 4% SWR. Far from representing some sort of normal, these returns were in fact exceptional, and buying virtually any other country's stock market would not produce anywhere near enough returns to support a 4% or even 3.25% SWR. There are some interesting arguments about why VTI was such a great investment throughout the 20th century, having to do with the US's unprecedented rise to supremacy, buoyed by exceptionally favorable geopolitical, social, and macroeconomic factors. The bottom line is that we've identified the US total stock market as a great and obvious investment in retrospect. This is a little bit like someone claiming they have a great plan for a 20% SWR: all you have to do is invest in Amazon, Google, Microsoft, and Facebook. Data clearly shows that this portfolio has in the past yielded returns high enough to support a very high SWR. If you just happened to pick these specific companies, and no failures like Yahoo. Given all that, one may fairly ask what is a Safe Withdrawal Rate, according to the pessimists? The consensus I find among said pessimists is around 2%. To quote William Bernstein, for instance:
I can't find anyone, even among the (reasonable) pessimists, seriously arguing for an SWR lower than 2%. The good news: pessimists generally seem to share Bernstein's view that "3% is probably safe". The key difference between the optimists and the pessimists can be therefore be summed up thus:
Put another way: the optimistic range is 3.25-4%, while the pessimistic range is 2-3%. The main differentiating factor is your estimate of real returns on your portfolio. If you estimate the 7% 20th century VTI as the normal, then you are an optimist, whereas if you expect lower figures such as 5% or even 3.6%, then you are a pessimist, and should consequently aim for the lower range. The lower you expect these returns to be, the closer you should cut your SWR down to 2%. It's important to note that there are serious evidence-backed studies and experts arguing for (effectively) the entire 2-4% extended range. You can check the references in the articles I linked above. Some experts do believe that 20th century yields represent a normal, and so we can expect them to persist or even rise over the long term. Others argue for 5% or even 3.6% sustained real returns. Some experts argue that 7% returns could be sustained by simply diversifying internationally - i.e. holding VT instead of just VTI. Others point out that international investments can be extremely risky, with geopolitical hazards like regime changes, defaults, and nationalization threatening destruction of wealth that dwarfs any loss you may reasonably expect in VTI. Nobody knows for sure how the market, the economy, or humanity in general will behave, but I hope this discussion can at least broaden our horizon of different views and estimates to what a Safe Withdrawal Rate really is. [link] [comments]  |
| Weird question - I think I've made it? Posted: 12 Oct 2019 05:16 PM PDT Hey all, I've been following this sub off and on for a while now, and it's been awesome watching other people's ambitions in action. I've had the same ambition over the years, and suddenly find myself realizing that I may have actually reached financial independence 2 years ago, without realizing it. I'm wondering what to do with myself now. Long story short, I have real estate that is netting me about $2800 a month. That, right there, has me realizing I could become an expat and travel the world to many countries on that alone. One of my pieces of real estate is near where I live (rented), and I could move into it, and still 'save' about $500 a month, after expenses (but not counting for medical). I'm 47. I live in a really expensive area of the US, and I'm renting, as well, which is, yes, costing me a bit. I could move to my condo, and save some change, but I don't like living there, and I like where I am. So that's a cost I'm willing to accept. All that said, given my current situation, I could potentially payoff another property in about 3-4 years, which will net me another $8k a year. After all I said above, and knowing I'm now netting $2800 a month (not accounting for fed taxes I'll need to pay on that), does anyone who's already reached financial independence have any ideas about what I should be considering for the next few years? I'm still employed, though my hours are cut. So I'll be earning less. I can take a pension in 2 years, due to my union contract, which I intend to take (around $45k). Would love to hear y'alls feedback on this. [link] [comments]  |
| What was your biggest sacrifice for FIRE? Posted: 13 Oct 2019 04:27 PM PDT Reposting from r/fatFIRE as a user mentioned this was a more suitable sub for this question. Asking out of curiosity as well as for personal reasons. I'm considering a move to a lower COL city which will involve many sacrifices including abandoning my friends and city which I love living in. Torn because I know it's the right thing to do financially but I also know I will take a hit to my enjoyment of life. [link] [comments]  |
| Posted: 13 Oct 2019 05:11 PM PDT So I've read through the rules and FAQ, and I think my situation is specific enough that I feel warranted asking for advice here. I am a math teacher (24 y/o), unmarried (have a gf, but I don't know if I would even get married), and no children (I don't think I want any either). I have saved approximately $21k in a good old-fashioned savings account, which I know is not even close to the best place to store my money. I've looked at a variety of options, but it is all very overwhelming and I don't know what to pick or where to start, and I just end up leaving it sitting in the savings account instead. To complicate matters, I am interested in switching careers. The stress from my job is all-consuming and it doesn't pay as well ($50k salary) as other jobs with less work. That said, I have a math degree and two years of teaching experience, and I'd like to know which careers would be best for FI/RE given my credentials. I'm interested in earning money other ways, like through real estate, but I do not currently own a property. I live at home and think I will start renting an apartment somewhere within the next few months. I own my car in full (and expect it to last me a while longer) and I have no other debt to speak of. For the most part, I'm looking for career suggestions for jobs that are good for FI/RE and how I should go about making the transition. But I'm also happy to hear advice addressing anything else I posted about here, or where I should start investing my money (given my particular situation). Thank you in advance! [link] [comments]  |
| Has anyone here used MaxiFi planner? Posted: 13 Oct 2019 09:26 AM PDT I'm "kind of" FI but I can't stop obsessing about calculating and recalculating the numbers: what IF scenarios constantly swirl in my head and being that I'm actually freelancer and can go back to work at any time I get knee jerk reactions about picking up a gig every time market tumbles or I face some unexpected large expense. I just wonder if this planner would make this way of thinking worse or actually help by making everything more precise. Plus I really would like to run different withdrawal scenarios through something (someone) that could take into consideration all the details. [link] [comments]  |
| Do you think that FIRE is mostly an aspirational thing for a majority of people? Posted: 13 Oct 2019 09:25 AM PDT Everyone dreams of retiring early. The hyper-capitalist nature of our society, plus the precariousness of employment, means that people have to work longer and harder than previous generations to keep their job and stay ahead. I graduated from college 6 years ago without any debt. My first job offered a salary of $35,000, and it was the best I could do at the time. I lived with my parents until age 26. I didn't make more than $50,000 a year until 2019, when I got a job paying $70,000. I prioritized saving for retirement and was extremely frugal. But still, here I am, at age 28 with only $125,000 in retirement assets (plus $25,000 in cash that I don't count towards retirement). I suspect that I will be working until age 70 if I can. But the thing is... I currently enjoy my job. I work for the federal government. I don't look at email on the weekend, express anxiety about upcoming project milestones, or fear too much about layoffs. I work 40 hours a week and never have to think about work outside of work. Compared to some other jobs I've had, being a government employee is like being semi-retired. I have a lot of time to myself to read and write, and do the things I enjoy doing. So many people want to do FIRE because they are anxious about their jobs or their jobs are such a big source of stress they just want to get rid of it. I suspect that the only people who can seriously do FIRE are people who have a high starting salary out of school (software engineer, consulting, investment banking, etc.), embrace being frugal, and even then it takes these people into their 30s to finally retire. But even when they retire, all it takes is one medical emergency (e.g. cancer) to throw a wrench into those plans. Not everyone can or has the aspirations to achieve these extremely high-paying jobs. Not everyone wants to give up raising a family to retire early. Not everyone wants to live in a shitty apartment with a million roommates and eat a can of beans for dinner every night during the prime of their life. I suspect the answer for many is not FIRE necessarily, but fairer labor conditions where people are not always squeezed out to the last drop while still being compensated fairly. [link] [comments]  |
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