Financial Independence Daily FI discussion thread - October 28, 2020 |
- Daily FI discussion thread - October 28, 2020
- When the market dropped last March, my net worth dropped by over a million dollars (-22%)
- Weekly Self-Promotion Thread - October 28, 2020
- "Why You Shouldn’t Max Out Your 401(k)" by Nick Maggiulli
- How to get rich (without getting lucky)
| Daily FI discussion thread - October 28, 2020 Posted: 28 Oct 2020 01:07 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]  |
| When the market dropped last March, my net worth dropped by over a million dollars (-22%) Posted: 27 Oct 2020 05:40 PM PDT I've been retired for 2.5 years now, and I pop in here from time to time to tell people how things are going. I do it because I am encouraged to do so (by you nice folks) and I like to share what I learned so far. Feel free to ask me anything you like. My first post - a 1 year in reflection + FIRE story I'm a patient person, a future-oriented person, and these characteristics helped me to persist in the long-term planning I did when I was working towards FI/RE. It helped me hold on to my investment in crypto as it soared (Stick to your plan, man: I took some profits, which is how I jumped the queue to FIRE earlier than expected and with more than I needed, though I was heavy on the FI/RE path before that). I am also a semi-rational person (I think), who has played out a number of scenarios in my head many times. In fact – I had to do that to feel confident to retire in the first place. What if ____ (fill in catastrophic thing) happens?… each time I figured out how I would survive and most of the survival plans fell out to: keep cool and sit tight (a couple of them included "and go back to work.") Considering how the stock market and economy in general are cyclical, I had gone through the "what do you do when there is a crash and your net worth drops significantly?" (note the crash part is not "if", but "when"). The answer, as previously mentioned, was "sit on the porch and watch your sunflowers grow." There was a conversation in (I think) one of my posts last year where after the market had dropped a small amount I mentioned I had just chilled through it (while others flipped out and panic-sold and were then kicking themselves) and someone on here snarkily replied "well, wait until you see a REAL drop, then we will see what you do!" Well Snarko VonSnarkington, this post is for you. As you might recall, the month of March was brutal, with many days showing huge losses in the stock markets. Not only did the market drop precipitously but my historically uncorrelated asset bitcoin shit the bed as well (a universal rush to cash?) leaving me just over $1M poorer net-worth-wise. My portfolio consists of real estate (my old house that I now rent out), index funds, and bitcoin. I outright own my current house (sold my bond funds to buy the house) and a piece of shit truck that I love. I also own a cat free and clear. So what did I do as my portfolio took a double barreled shotgun to the face?!?!? Not a goddamn thing. Ok, that's a lie. I loss-harvested 90k worth of index funds which have since recovered and then some. I held tight. I held strong. I built shelves for my workshop out of salvaged lumber. Psychologically I have to say I felt off – it was not fun, and it was not Zen (though I tried brother, I tried). I had to argue with myself "well, this is one of those situations that test your mettle, meboyo…" and "wow, how is this going to play out… nervous… yuck…" but even though I experienced emotions, there was never even the option in my mind to sell in order to protect capital. It never appealed to me as a wise option and I had no compulsion to do so. For years I have made an informed decision to commit to this strategy I believe in, and damnit I am going to stick by it. I own my house. I know how to cook. I have health insurance and a rainy-day fund. I am retired, by design, because I stick to the plan until it no longer makes any sense – and this was a case where it looked like things were going to be ok (maybe it will take 3 years, but ok nonetheless). I had no idea we would see a stock/crypto recovery so quickly. By the end of this August when I updated my monthly spreadsheet, I had crossed back above where I was just before the crash. As of last week my net worth is 10% higher than it was before the crash. I also used the confusion in the marketplace in April to buy a beautiful old house to live in (and it has a huge detached workshop!) in a new, lower COL city (with cash, at a discount). Who the hell knows what happens next with this economy, politics, health, meteors, and the old Gods of Cthulu, but I've got one "been there, done that" under my belt now and I feel like I played it well by not playing at all. If anyone is looking for me, I'm out back in the workshop, making smoke and dust and a general mess as I teach myself woodworking and metalworking to enhance my primitive art constructs. Feel free to ask any questions, and when shit gets weird, remember to breathe. [link] [comments]  |
| Weekly Self-Promotion Thread - October 28, 2020 Posted: 28 Oct 2020 01:07 AM PDT Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. [link] [comments]  |
| "Why You Shouldn’t Max Out Your 401(k)" by Nick Maggiulli Posted: 28 Oct 2020 10:09 AM PDT https://ofdollarsanddata.com/should-i-max-out-my-401k/ Nick Maggiulli calculates the benefit of contributing to a 401k vs traditional and finds a small (0.34% annualized) benefit over a taxable brokerage account, assuming you withdraw at the same tax bracket that you contribute. Because 401k fees are often higher than this, he recommends only contributing to the match. I think it would have been nice to run the model with the max contribution instead of only $10k, because that would widen the gap between 401k and taxable. But I've run those numbers and come to a similar conclusion: If your 401k has high fees or if you expect to be in a similar or higher tax bracket in retirement, then limiting 401k contributions to the match might be the best idea. Of course, there are psychological benefits to a 401k (you're way less likely to spend your 401k savings on a boat or a fancy car) and money in a 401k is shielded from creditors. And if your fees are low or you roll over to an IRA when you change jobs, a 401k does have a real benefit ... multiple years' worth of spending even in Nick's calculation. If you're in a very high tax bracket and you really expect to be in a lower bracket in the future, a 401k can have an even larger benefit. Personally, I'll continue to max out my trad/Roth 401k contributions. My fees are low and I have an adequately large emergency fund and a medium-term savings fund (in I Bonds) that I can access without penalty. FYI, all this is already in r/personalfinance wiki, which is the best personal-finance resource on the internet: https://www.reddit.com/r/personalfinance/wiki/commontopics [link] [comments]  |
| How to get rich (without getting lucky) Posted: 28 Oct 2020 03:34 AM PDT Apologies for the clickbait title; it's originally from a 2018 tweet by an entrepreneur named Naval Ravikant. I recently stumbled upon the tweet, and even though I'm many years into my own FIRE journey and was not looking for financial advice at the time, I was amazed to discover the overlap in thought with this community. Naval followed up with a series of tweets with tips on wealth building, which I've quoted here (link below):
That's 681 words and a whole lot of dense knowledge. Or opinions, take your pick. I really enjoyed thinking about these ideas and how they're applicable in my FIRE journey, where I'm collecting equity in companies (via cheap, broad based index funds) and let compound interest work for me. But I'm just another W-2 slave, so I'm also aware at some level now that I'm barely scratching the surface of productive output compared to the tools available to me in our high tech society. Personally, I also think building wealth ethically is especially important to this community because we care about the quality of our post-retirement lives. It's not desirable to cross that finish line panting and sweating with a trail of emotional wreckage behind us. We focus on differences in target number or target date, while Naval's advice might be about target mindset. Any points you disagree with Naval on? Would you alter any advice if you were giving it to someone starting their FIRE journey? Is he too Silicon Valley focused, or do you think this advice works everywhere? [link] [comments]  |
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