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    Financial Independence Year in review - 2019 Milestones and 2020 Goals!

    December 29, 2019

    Financial Independence Year in review - 2019 Milestones and 2020 Goals!

    Year in review - 2019 Milestones and 2020 Goals!

    Posted: 28 Dec 2019 05:14 PM PST

    As the year draws to a close, many of us are doing our final checks of our spreadsheets and wanting to take a minute to reflect on what this last year has provided for us and what we are hoping for in the next one.

    Please use this thread to do report anything you want - whether it be a massive success, reaching a mini-milestone, actually accomplishing your goals from last year, or even just doing nothing while time does the work for you (for those in the 'boring middle' part). We want to hear about all that 2019 did for you - both FI related and personally as well.

    After reflecting on the past, we also want to look towards the future. What are you looking for in the new year (or even decade) - what are your goals and aspirations that will help guide you this coming year. Are you looking to finally max our your retirement accounts, get a 529 going for your kid, nearing that next comma, becoming completely worthless, or finally hitting your number and cashing in all the GFY's you can get?

    submitted by /u/CripzyChiken
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    best of 2019 - r/FinancialIndependence - Nominations

    Posted: 28 Dec 2019 05:19 PM PST

    Reddit has begun its annual Best Of Awards campaign for 2019 and we here at /r/financialindependence are participating. That means we have been given a ton of Reddit Awards and since we can't figure out how to convert this to VTSAX, we figured it be best to give it away.

    We encourage everyone to participate in the nominations.

    Categories with number of top posts to be awarded:

    • Best Overall Contributor (4 platinum awards)

    • Best Overall Submission/Topic (4 platinum awards)

    • Best Daily Discussion Helper (2 platinum awards)

    • Best 'Help Me FIRE' Helper (2 platinum awards)

    • Wild Cards (anything that doesn't fit into one of the other categories - such as best comment answer, best inspiring victory/follow up, most in-depth spreadsheet, and more!) (3 platinum awards)

    • Community Superlative - for those who best fit our community (Most mang of the mangs, Most put into VTSAX, Jolly-est GFY, etc). Feel free to make up your own superlative and nominate someone for it! (upto 6 gold awards)

    Ground rules:

    1. Only original posts from 2019 are allowed.

    2. Each category will have its own top-level comment below. Post your nominations under the appropriate category comment and provide a link to the original Reddit post as well as the nominee's username. In order for this to go as smoothly as possible, we ask that you do not post the direct link to the image or article, just the link to the original Reddit post.

    3. Please make a new comment for each separate nomination. You can nominate 3 entries per category, but you cannot nominate yourself, and your account must be at least 90 days old and have positive karma to participate. You can vote on as many entries as you like.

    4. Upvote the nominations that you like under each category. This post will be in "Contest Mode" for the duration of the voting period, which means that the order in which nominations are sorted will be random and scores hidden to make the contest as fair as possible.

    5. All general discussion should be kept to the 'General Discussion' category. Please use the voting categories only for nominations, not discussion.

    6. The winners from each category will be based on the most upvoted comment containing a submission link. A person cannot win twice in the same category, and will be capped at three total wins. Any banned or suspended accounts are not eligible.

    7. If any categories don't have enough nominations that get upvoted, additional winners from other categories will be selected.

    8. It should go without saying, but all normal subreddit rules are still in effect for this post.

    How will winners be announced?

    Winners will be announced in a follow-up post after all the votes are tallied. Reddit awards will be sent out after that post goes live.

    What if I have questions?

    Message the moderators with any questions.

    Thank you for helping make /r/financialindependence such a great subreddit in 2019! Good luck to all the nominees and we look forward to what's in store for us in 2020!

    submitted by /u/CripzyChiken
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    I am rich, not because I have a lot of money, but because my money frees me from spending my time doing things that are miserable.

    Posted: 29 Dec 2019 08:37 AM PST

    This thought occurred to me when considering that I have several siblings that each have more money than I do, but who persist in working at jobs that are definitely not their "best life".

    Quitting a job with status to be retired can be challenging. Status is a game we play in social interactions all the time. Since I retired, I notice this game most when meeting old friends. They want to know what I have been doing since I left work. I feel slight internal pressure to have interesting things to tell them.

    Retiring from a 40+ hour/week can be challenging. The 40+ hour work week organized my life in so many small insidious ways. Every choice about how I spent my time/life was anchored in the week vs weekend and how long is PTO and how long will it take to get to my job in the morning. Giving that up leaves you in great jubilation (for months), but eventually I had to build some anchors into my day (morning ritual, exercise, long term projects and short term goal setting).

    I think for my siblings, these two barriers (status and time) are enough to keep them working no matter how much money they have banked. They will eventually quit work, but they may have a rough time. The work to do before retirement is (1) learn how to feel good about one's self without the status of being a "boss". (2) Identify and pursue passions outside of work that will give wings to one's days when the 40 hour/week shackles have fallen away.

    submitted by /u/Ifch317
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    A Few Graphs about Whether to Invest at All-Time Highs

    Posted: 29 Dec 2019 05:51 AM PST

    tl;dr - Don't trust strangers on the Internet to write correct code. AH! I should have been more suspicious when the results didn't come out exactly the way I expected. The upper bound on David's parameter is probably less than 5%, not 15%! Making new plots now. Sorry about that!

    MAJOR EDITS: There was a bug in how I coded up David's strategy, and it made his results much better than they should have been. I discovered it while implementing /u/Bigholebigshovel's suggestion of a modified DCA, where you DCA unless there is a dip, in which case you dump everything in.

    I don't know the proper etiquette when a post needs to be changed so much, but has already been up for several hours, with lots of comments. I'm reluctant to delete it, but if the mods want to remove it, I'd be TOTALLY fine with that. If this was a paper I had submitted, I would retract it. But I don't want to retract the discussion in the comments.

    Anyway, here's a (probably) correct version of the original post:

    tl;dr - In a mild surprise to me, waiting to invest new cash when the market is at an all-time high is a perfectly fine strategy.

    tl;dr2 - h/t /u/HealthCare2FIRE_Blog "Between dumping and DCA, go with what helps you sleep at night."

    It's a new year on Wednesday, and I bet most of us will be putting $6k into IRAs and investing Thursday morning. Over on r/investing /u/SuperCaptainMan asked the question that is probably on many people's minds: Is it really safe to invest right now given the huge rally in 2019?

    As the top comment over there indicates, investing every year on Jan1 (and in general, investing as soon as you have money to invest, regardless of market conditions) is a great strategy. I'm a Schwab fanboy, so I'll link Schwab's assessment of 5 investment strategies. Obviously Peter Perfect (who always invests at the low point of the year) comes out ahead, but Ashley Action (who invests immediately) almost always comes in second place. Dollar-cost-averaging, like Matthew Monthly, is not much worse than Ashley, and is forced on many of us who get our salary gradually throughout the year instead of all on Jan 1.

    Schwab's last two "strategies" of Rosie Rotten always investing at the yearly high point and Larry Linger only holding cash don't seem realistic. That is, they are an extreme version of being nervous about Jan1 during a rally, and imo too far to the extreme to be relevant. So I made up a new character for our story, David Dip, who waits for an X% dip off the all-time monthly S&P500 high before investing. If you are comfortable looking at graphs without explanation, here they are.

    I coded up David's strategy (and the other 5) in Matlab to see how they compare. I'll post code in the comments. I got the data from ERN's SWR spreadsheet. I didn't do any extra vetting of the dataset, and apparently it's slightly different than what Schwab used, so take this for what it is--casual data visualization by a random stranger on the Internet.

    David's strategy is unlike the other 5, because it takes a parameter. How big of a dip does there need to be to invest? I ran every integer percentage value from 0% (which should and does match Ashley exactly) to 20% 15% (which is obviously too much, as you'll see). I expected to show that David's strategy is just like Ashley's when the parameter is low, and worse than Ashley's when the parameter is high. What I saw is slightly different than that, but only slightly. Edit: In the buggy code, it looked like the parameter could be as high as 15% and David was still doing fine, even slightly better than Ashley. In the corrected code, I see exactly what I expected. For values <5%, David is just like Ashley. But for values >5%, David is worse, and by 10% or 15%, MUCH worse.

    EDIT: In the comments, /u/Bigholebigshovel suggested that I not use Ashley as the baseline, but instead use Matthew Monthly (DCA). So I implemented a "Shovel" strategy that does DCA while waiting for a dip. So this looks like David, but Shovel will never hold cash more than 12 months. This turns out to be a very good strategy, assuming I haven't bungled things again.

    First, let's replicate Schwab's results to make sure my code is mostly correct:

    https://imgur.com/DYQb8wi

    Pretty close. My numbers are consistently higher than Schwab's, and I don't know why. Perhaps ERN is reinvesting dividends and Schwab isn't, or something like that. The trend is spot on, so I'm not going to worry about that.

    Next, I ran David's and Shovel's strategies over 78 periods of 20 years each. I computed the mean and median normalized return, where Ashley's return (or David with parameter 0%) is set to 1. Matthew's return (or Shovel's with parameter 100%) is set to 1. On average, Ashley does 2% better than Matthew, so you can imagine a horizontal line at 1.02 representing Ashley. David's line starts exactly at Ashley's value. The result shows that David outperforms Ashley by an average of ~1% when the parameter is set perfectly. The result is that while Shovel is fine at any parameter, David is only OK as long as his parameter is very small, <5%.

    [Not going to link to the old, wrong images, though they are still in the album]

    https://imgur.com/QtLdI6S

    Remember, that's 1% over 20 years, meaning a few basis points per year. But actually, I think this result is very encouraging! If psychologically you can't bring yourself to invest during a rally, don't! Just make sure that as soon as there is a dip of 5-10%, you invest. If you only wait for headline-making dips of 15% or more, your returns will suffer.

    I think the right way to interpret this is that if you can't stomach the thought of lump-sum investing on Jan1 when the market is at an all-time high, do DCA instead while you wait for a small dip. Also, David and Shovel never sell stocks once they buy in (and neither did Peter, Ashley, or anyone else). In other words, this strategy only applies to new money.

    What market conditions cause David's strategy to be especially bad? Well, a very long rally with no dips, obviously. Here's one example:

    [Not going to link to the old wrong images]

    https://imgur.com/9bmuM0j

    [I removed a lot of irrelevant commentary here]

    How about the market conditions where Shovel doesn't do well? Well, to be honest, it looks like random noise to me, and I don't see any trends or patterns that predict when Shovel won't work well. This is a good thing, by the way.

    That's all I've got. I made a couple plots of the PDF of David's return, so maybe I'll tidy those up, label them, and add them to the imgur album. I thought this was an interesting and mildly surprising result, so I wanted to share.

    Happy (almost) New Year!

    ETA3: Code is in github. I'm not a github expert, so tell me if you can't see this: https://github.com/plexluthor81/pf_play/blob/master/strategies_for_30yr_investing.m

    submitted by /u/plexluthor
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    Daily FI discussion thread - December 29, 2019

    Posted: 29 Dec 2019 12:07 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.

    submitted by /u/AutoModerator
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