Financial Independence Daily FI discussion thread - Tuesday, June 29, 2021 |
- Daily FI discussion thread - Tuesday, June 29, 2021
- 500k milestone after my 28th birthday! 1/4 the way to FI
- How do you know its time to retire?
- The Case for NTSX and Chill instead of VTSAX and Rest for FIRE
| Daily FI discussion thread - Tuesday, June 29, 2021 Posted: 29 Jun 2021 02:00 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]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 500k milestone after my 28th birthday! 1/4 the way to FI Posted: 29 Jun 2021 01:25 PM PDT I like many others here just wish to share their progress. I'm excited about my journey and thankful to this sub for guiding me throughout. This is quite the fun birthday present. It involved a lot of luck and some hard work. I'm not going to come here and post about how much hard work this took for me, I'm just going to be honest. I inherited ~60k after my grandparents passed away, my parents gave me 15k for a wedding gift and I grew up in an upper middle class household with smart parents who influenced my career from birth and paid for my college tuition. I hope to do the same for my children. I'm grateful for the luck that's bestowed my life, its okay for me and people in similar situations to me to be excited about this stuff regardless. Net Worth:
Income Breakdown
Net, Expenses and Savings
Some notable things: I got married in 2020, expenses are arbitrarily high because of that. I had some unexpected one time expenses totaling like 10k this year and lost tuition reimbursement due to a new job so expenses are arbitrarily high this year too. I got lucky with amazon stock in 2017, bought 16 shares and am still holding today. This year I've been gambling a bit with meme stocks, started with 3k and I'm sitting at 17k right now, I have no idea if this will last. I also sold off some stock purchase program stocks from my old company with an 11k gain from the pandemic. This was awesome. Some of the "Other" income category include sold capital gains, wedding gifts (15k from parents 7.5k from guests) and credit card points/rewards from churning I've pulled back from trying to save as much as I can now that I have a bit of money. When I first started with FIRE I was a bit of a frugal jerk, now I'm a bit more generous. For this years numbers, my expected spending/saving shows that I'll save approximately 30k more this year. Expected net worth at the end of the year doesn't include capital gains. My wife and I haven't combined finances yet, we're still working it out, so until then we're keeping it separate. She has 80k in student loans, well now like 67k. I helped her pay off one of them ~13k with some stock gains and plan on paying off more of them in the coming years. She's able to get public ~safety~ service loan forgiveness for about 50k of them so we're planning and on track for that. Career: I graduated college with a sub 3.0 GPA, I wasn't focused early on and switched degrees after my freshman year. I wasn't able to get an internship right away and was forced to take an unpaid one for experience, I worked on the weekends and evenings at a non-career related job to sustain myself. This kind of kickstarted things, now that I had experience I was able to leave my GPA off my resume and get a paid internship. I found a love for writing software and got a part time gig during the semester for even more experience. This is what landed me my nearly 100k job my first year after college, I got enough experience to be useful. Since then, I've been investing in my career working as hard as I can to progress. I landed a job at Amazon, downleveled into a new grad level from the level I applied for but top of band salary wise. I'm also about to finish part time grad school with a masters in cs. I see Amazon as a foot in the door to more comfortable FAANG companies. I'm generally always investing in my career and myself. [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| How do you know its time to retire? Posted: 29 Jun 2021 12:40 PM PDT Hello all- Me: 47M, US, no kids not married. Professional. I'm in a position where I could 'retire' at any time now due to some secured income streams I have. I could retire and slow travel for many years if Id like. My fear in this that I have a lot of my indenity tied up in my job but the stress is over the top and the hours required at my level is pretty extreme (though I admit, somewhat self inflicted). Im doing pretty well, but I'm def not fulfilled and this is causing me to question if I want to do this for the next 20 ish years of life. Wake up, go to work, come home, sleep and repeat. Aside from the financial considerations, how do you know "its time" to retire? Mentally/physically maybe? I dont want to look back at 67 and realized I wasted 20 years chasing after Jones's and working myself into an early grave for a retirement I can't enjoy. On the other side, if i retire early I'd not be living the life I am now. I would have to cut back and simplify quite a bit. Thoughts? [link] [comments]  | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The Case for NTSX and Chill instead of VTSAX and Rest for FIRE Posted: 28 Jun 2021 11:03 AM PDT Previously in my post on Hedgefundie's 55% UPRO 45% TMF portfolio I got a lot of criticism for recommending it's lower leverage cousin NTSX over VTSAX. I decided to write a quick post about this newly issued fund and why I'm recommending an investment in NTSX over VTSAX for FIRE. What is NTSX?Essentially it is a 90% stock, 60% intermediate term US treasuries leveraged fund. It has performance similar to VTSAX/VOO but with slightly less risk. NTSX holds it's 90% stock position fully paid along with 10% of intermediate term US treasuries. It gets the rest of it's treasuries leverage through treasury futures. NTSX's duration risk is 7.0 years. Read over NTSX's excellent FAQ as well for more information on this fund. NTSX re-balances quarterly with additional re-balancing bands at 5%. Vanguard banned ALL leveraged ETFs except NTSX. NTSX is the only leveraged ETF you can buy at Vanguard. This is a powerful statement made by Vanguard in terms of Vanguard's views for NTSX's suitability for investors. Backtesting LimitationsPortfolio visualizer's CASHX is 1 month Treasury Bills 1972+. So it is modeling actual interest rates. It is not modeling any additional borrowing costs though so it overstates the final balances a bit. There will be a markup to the 1 month Treasury Bills 1972+ of roughly at least 75 basis points for IBKR or ~35 basis points for institutional borrow rates which these back test results are missing. You will need a pro level subscription if you want to view and model these results by charging an annual fee of 35 basis points to the leveraged portfolio. I'll be simulating NTSX's immediate term treasuries with SPY and IEF. Then for earlier back tests VFINX, VFITX, VTSMX. Treasury futures can also move a bit differently than a treasury bond fund due to convexity. You're only trading one bond issue in the futures contract while a bond fund has different issues with different maturities and different duration that the bond fund can pick and choose when to sell. So these back tests may not be as accurate compared to NTSX's actual holdings. NTSX's duration risk is 7 years so that is why I'm fine with just using intermediate term US treasuries. NTSX also mixes in a small percentage of 3 year US treasury futures which I did not do in these back tests for simplicity. NTSX also re-balances quarterly with additional 5% re-balancing bands. Portfolio Visualizer forces me to pick either quarterly re-balancing or percentage based re-balancing bands. There is no way I can combine both of them. This is why I decided to choose monthly re-balancing. It also goes without saying past performance doesn't guarantee future performance. Is it possible for the strategy to break?It's written in NTSX's FAQ:
Back testsSep 2018 - Current NTSX vs VTSAX entire history
2003 - Current Simulated NTSX vs VTSAX entire history
1993 - Current Simulated NTSX vs VTSMX entire history
I cover more back tests in just a minute. Also feel free to play around with these links for back test dates and change parameters. I'm not going to spoon feed everyone over every possible period and yes I will be covering 2000 and 2007 start dates. Just hold on a minute. I want you to really think about these initial results first, as people were insanely disappointed with the first back test result. Are you disappointed with these results?When I look at these results I am very excited. NTSX is getting a bit higher CAGR and less risk than VTSAX. However, many people are really disappointed by these results. One person was very disappointed by the very first back test (Sept 2018) and they decided to invest in VTSAX instead. I am very impressed that NTSX is getting a 18.17% CAGR with a lower Stdev of 16.44% vs VTSAX 16.65% CAGR and Stdev of 20.22%! Take a few minutes to think about what these above back tests are showing. Are you disappointed in them still? What about when we withdraw for retirement?NTSX is barely winning over VSTAX for growth and safety. They're getting 1% more over VTSAX. However, just getting that extra bit of growth and safety tells a different story. Whenever you analyze portfolios you should look at both contribution portfolios and withdrawer portfolios. Let's jump to a few worst case scenarios. Each scenario is $1 million dollars withdrawing 4% SWR at $3333 a month. Retiring in 2007 - current. $1m withdrawing $3333 a month inflation adjusted withdrawer portfolio.
Retiring in 2000 - current. $1m withdrawing $3333 a month inflation adjusted withdrawer portfolio.
For year 2000 $40k a year is now $62k a year after inflation. You're still at 3.6% withdrawals with Simulated NTSX. You're quite safe and comfortable. You're on a crash course with VTSMX/VTSAX with 10.5% annual withdrawals. Will you make it another 9 years for a 30 year retirement? It might be time to go back to work if you haven't already done so in 2009! In 2009 VTSMX had a low point of $328,000. I'd be questioning going back to work in such a situation. 60/40 unlevered is not sitting well at 5.2% withdrawals. (I wish Portfolio Visualizer had a stock/bond glide path option to explore unlevered strategies better!) I'm a lot more excited to see an outstanding difference simulated-NTSX makes here! That extra safety and extra return with simulated NTSX is really paying off. This is why I recommend that NTSX may be a great investment alternative for someone who desires 100% stock risk. It's possible that you may be able to withdraw at 4% SWR on an investment in retirement on NTSX while with VSTAX you're probably going to be a lot more safe with a 3% SWR. The extra safety of NTSX for a withdrawing portfolio helps out a lot. If you desire to withdraw on NTSX then you should probably invest directly in NTSX for your taxable account allocation so you don't realize a lot of capital gains in transferring over to NTSX later on. Yes these leveraged ETFs qualify for long term capital gains if held for over a year despite a recent MarketWatch article suggesting otherwise. Of course, in tax-advantaged retirement accounts feel free to change investments from growth to more security as that's one greatly overlooked benefit for FIRE - the ability to change your portfolio without incurring substantial capital gains. This is why we max out our tax advantage accounts first! After going through this work I've chosen NTSX over VTSAX for my fund to de-risk in from Hedgefundie's Portfolio. TL;DRNTSX and Chill is an excellent investing strategy for FIRE for those who desire 100% stock risk. You can possibly withdraw 4% SWR safely with NTSX in several cases that would be failures for 4% SWR for VTSAX or possibly the unlevered 60/40 portfolio. You would have to use the recommended 3% SWR with VTSAX or the traditional 60/40 portfolio. Being able to withdraw at 4% SWR will greatly speed up your FIRE date. If you desire $100k of income you only need $2.5 million on NTSX compared to $3.3 million for a safer 3% SWR on VTSAX. NTSX will grow a bit quicker with a bit less risk, speeding up your FIRE date. Edits1957 back test of simulated NTSX in response to /u/throwaway81606's excellent post providing a spreadsheet and data for back testing NTSX. [link] [comments]  |
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