Author Topic: FI but not RE. Anyone taking bigger risks?  (Read 4447 times)

Refrozen

  • 5 O'Clock Shadow
  • *
  • Posts: 3
FI but not RE. Anyone taking bigger risks?
« on: May 21, 2017, 03:02:33 PM »
I reached my LeanFI number (3.6% WR) recently and suddenly got an appetite for risk for money beyond that. I'm now exploring some of the "evils" around here - options strategies, algorithmic day trading, cryptocoins, individual stock bets, etc.

Anyone else find their appetite for risk increased a lot when you realized you really didn't need the money? What did you end up playing with and how did it go?

Obviously a lot of you just retired immediately...

sokoloff

  • Pencil Stache
  • ****
  • Posts: 770
Re: FI but not RE. Anyone taking bigger risks?
« Reply #1 on: May 21, 2017, 04:53:15 PM »
My risk profile is naturally pretty high (risk-tolerant). Even before we became FI, my income stream allowed me to take large risks from a comfortable base. The thing you want to take care is not to go from FI to way-way-not-FI.

For me, prime strategy is:
Find a tech stock I want to own.
Write naked puts (near the money usually) on it.
Either pocket the premium (if it went up/sideways) or get assigned (if it went down).
Then write covered calls to get out of the position.

That's a long-only strategy and so it's not fair to judge performance over the last 8 years only, but let me tell you, it's been *spectacular* over that time. ;)

DanLee

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: FI but not RE. Anyone taking bigger risks?
« Reply #2 on: May 22, 2017, 01:56:19 AM »
I first started saving bank accounts. Then I started using mutualiteit fonds. Turned a lot wiser and used ETF. Then I user all the extra time I had at my job getting payed waiting to Read a lot and research and started buying individual stocks. And also used very risky cryptocurency (I consider this gambling not investing). Bud I only used any surplus money for it not effecting my Fire date that much.
Bud after all I benefited a lot from it bud also lost about 60000 euros bud als gained much more.

So all thing considered I used to take more and more risk the more FI I got. Bud it also had to do with absolutly no investments go bad, you go think your the next warren buffet. Bud sooner or later you gonna lose:).

My best advice is to make a extra account for risky investments where you cant lose more then the amount your investing and not more then 20% your savings rate.
« Last Edit: May 22, 2017, 02:03:20 AM by DanLee »

BTDretire

  • Handlebar Stache
  • *****
  • Posts: 1474
Re: FI but not RE. Anyone taking bigger risks?
« Reply #3 on: May 22, 2017, 09:02:28 AM »
I first started saving bank accounts. Then I started using mutualiteit fonds. Turned a lot wiser and used ETF. Then I user all the extra time I had at my job getting payed waiting to Read a lot and research and started buying individual stocks. And also used very risky cryptocurency (I consider this gambling not investing). Bud I only used any surplus money for it not effecting my Fire date that much.
Bud after all I benefited a lot from it bud also lost about 60000 euros bud als gained much more.

So all thing considered I used to take more and more risk the more FI I got. Bud it also had to do with absolutly no investments go bad, you go think your the next warren buffet. Bud sooner or later you gonna lose:).

My best advice is to make a extra account for risky investments where you cant lose more then the amount your investing and not more then 20% your savings rate.
I'm 62, mostly retired, wife still working. I have 71% of my financial assets in the stock market. I'm trying to decide if I want to go conventional 50/50, 60/40 or make the kids rich. We have 34x spending and SS starts in 4 years for me, 9 more years for my wife. A 25% correction wouldn't change my lifestyle, but growing the stash another 25 or 30 years would give the kids quite a cushion. My wife says stay in the market, but I have a nagging thought, once you have it, protect it.

sokoloff

  • Pencil Stache
  • ****
  • Posts: 770
Re: FI but not RE. Anyone taking bigger risks?
« Reply #4 on: May 22, 2017, 10:11:02 AM »
I'm 62, mostly retired, wife still working. I have 71% of my financial assets in the stock market. I'm trying to decide if I want to go conventional 50/50, 60/40 or make the kids rich. We have 34x spending and SS starts in 4 years for me, 9 more years for my wife. A 25% correction wouldn't change my lifestyle, but growing the stash another 25 or 30 years would give the kids quite a cushion. My wife says stay in the market, but I have a nagging thought, once you have it, protect it.
I advised my parents (who are a similar age and circumstance) to invest the money in accordance with the timeline of the people who will be spending it. You can take a 25% hit and still have over 25x your spending and that's before considering SS.

I'm fully with your wife here: leave it in the market (especially if it's only 71% of your investable assets). That surplus will do your kids more good and there's little risk of you and your wife taking a financial hit in the market so severe that it puts your retirement/FI at risk.

Disability insurance for your wife (especially if she's the source of your medical coverage until you qualify for Medicare) might be wise. Otherwise, leave/put the money in the market.

BTDretire

  • Handlebar Stache
  • *****
  • Posts: 1474
Re: FI but not RE. Anyone taking bigger risks?
« Reply #5 on: May 22, 2017, 11:30:38 AM »
I'm 62, mostly retired, wife still working. I have 71% of my financial assets in the stock market. I'm trying to decide if I want to go conventional 50/50, 60/40 or make the kids rich. We have 34x spending and SS starts in 4 years for me, 9 more years for my wife. A 25% correction wouldn't change my lifestyle, but growing the stash another 25 or 30 years would give the kids quite a cushion. My wife says stay in the market, but I have a nagging thought, once you have it, protect it.
I advised my parents (who are a similar age and circumstance) to invest the money in accordance with the timeline of the people who will be spending it. You can take a 25% hit and still have over 25x your spending and that's before considering SS.

I'm fully with your wife here: leave it in the market (especially if it's only 71% of your investable assets). That surplus will do your kids more good and there's little risk of you and your wife taking a financial hit in the market so severe that it puts your retirement/FI at risk.

Disability insurance for your wife (especially if she's the source of your medical coverage until you qualify for Medicare) might be wise. Otherwise, leave/put the money in the market.

 We pay our own medical plus two kids, ($11,250). Her (SS) disabilty check now would be more than her SS check at 67y/o.
   I know there are Mustachians that plan on 100% in stocks, and will alter their lifestyle if needed.

Financial.Velociraptor

  • Handlebar Stache
  • *****
  • Posts: 1018
  • Age: 45
  • Location: Houston TX
  • Devour your prey raptors!
    • Financial Velociraptor
Re: FI but not RE. Anyone taking bigger risks?
« Reply #6 on: May 22, 2017, 12:50:43 PM »
I paid off my house before I put any money in the market (well except for 5% to get employer match on 401k).  I did this because I knew I wanted to be aggressive and I wasn't comfortable with risking any mortgage money.
Achieve Financial Escape Velocity - Financial Velociraptor

trollwithamustache

  • Bristles
  • ***
  • Posts: 299
Re: FI but not RE. Anyone taking bigger risks?
« Reply #7 on: May 22, 2017, 02:41:36 PM »
Ha! enjoy your money vices. Control position size.

And yes, once you achieve a baseline FI/comfort/whatever its easier and more fun to take risks. Its also easier to make risky money (again, with  good position size control) if you can be more analytical and keep emotions out of it.

Options can, btw, run you over in a hurry. You probably don't have any advantage.

Abe Froman

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Location: Greater Chicago
Re: FI but not RE. Anyone taking bigger risks?
« Reply #8 on: May 23, 2017, 08:18:04 AM »
I'm 62, mostly retired, wife still working. I have 71% of my financial assets in the stock market. I'm trying to decide if I want to go conventional 50/50, 60/40 or make the kids rich. We have 34x spending and SS starts in 4 years for me, 9 more years for my wife. A 25% correction wouldn't change my lifestyle, but growing the stash another 25 or 30 years would give the kids quite a cushion. My wife says stay in the market, but I have a nagging thought, once you have it, protect it.
I advised my parents (who are a similar age and circumstance) to invest the money in accordance with the timeline of the people who will be spending it. You can take a 25% hit and still have over 25x your spending and that's before considering SS.

I'm fully with your wife here: leave it in the market (especially if it's only 71% of your investable assets). That surplus will do your kids more good and there's little risk of you and your wife taking a financial hit in the market so severe that it puts your retirement/FI at risk.

Disability insurance for your wife (especially if she's the source of your medical coverage until you qualify for Medicare) might be wise. Otherwise, leave/put the money in the market.

One idea is to consider leaving a certain amount in a Roth earmarked for your kids/grandkids. Paul Merriman has a great podcast - and in this article (http://paulmerriman.com/turn-3000-50-million/, he describes how socking away a couple grand into the volatile but healthy returns (over a long long time) of small cap value can have some amazing numbers.

Monkey Uncle

  • Handlebar Stache
  • *****
  • Posts: 1039
  • Location: West-by-god-Virginia
Re: FI but not RE. Anyone taking bigger risks?
« Reply #9 on: May 28, 2017, 11:18:49 AM »
My risk profile is naturally pretty high (risk-tolerant). Even before we became FI, my income stream allowed me to take large risks from a comfortable base. The thing you want to take care is not to go from FI to way-way-not-FI.

For me, prime strategy is:
Find a tech stock I want to own.
Write naked puts (near the money usually) on it.
Either pocket the premium (if it went up/sideways) or get assigned (if it went down).
Then write covered calls to get out of the position.

That's a long-only strategy and so it's not fair to judge performance over the last 8 years only, but let me tell you, it's been *spectacular* over that time. ;)

Has the performance been better than if you had just purchased the stocks outright and held them as long as the fundamentals stayed intact?
"Take this job and shove it" - David Allan Coe

sokoloff

  • Pencil Stache
  • ****
  • Posts: 770
Re: FI but not RE. Anyone taking bigger risks?
« Reply #10 on: May 28, 2017, 05:00:03 PM »
On a "straight up" stock (like AMZN has been), the performance of just buying the underlying stock is better. On a stock that has significant periods of little/no price change, the options strategy wins.

If you can reliably pick future AMZNs, you don't to eek out a synthetic dividend... ;)

lemonde

  • 5 O'Clock Shadow
  • *
  • Posts: 56
  • Location: Close to Chicago
  • A puzzle in progress...
Re: FI but not RE. Anyone taking bigger risks?
« Reply #11 on: May 28, 2017, 05:12:17 PM »
We're thinking of buying a farm, but haven't found the right one yet.

SwordGuy

  • Magnum Stache
  • ******
  • Posts: 3363
  • Location: Fayetteville, NC
    • Flipping Fayetteville
Re: FI but not RE. Anyone taking bigger risks?
« Reply #12 on: May 28, 2017, 07:46:23 PM »
We're thinking of buying a farm, but haven't found the right one yet.
(Bows)  You won the contest for most risk. :)

BlueMR2

  • Handlebar Stache
  • *****
  • Posts: 1809
Re: FI but not RE. Anyone taking bigger risks?
« Reply #13 on: May 31, 2017, 04:47:15 PM »
We're thinking of buying a farm, but haven't found the right one yet.

That's my dream.  :-)  I'm not sure I'll ever have the risk tolerance to carry it out though.  Not so sure my wife would like it either...

Anyways...  I'm solidly past my FI numbers, but have not gone RE as I'm taking some of the extra to buy a couple things I'd been lusting after for awhile (things which notably do NOT incur pricy upkeep, I'm not that crazy!).  We're fairly heavily biased towards retirement income rather than pre-retirement as well, so it would require effort and planning to get the ladder going and avoid penalties.  Honestly, that right there is the big reason I'm not considering RE more, just the pain of trying to make the RE money accessible earilier as the non-RE portion is probably just a little too skimpy to get us all the way to RE age.

My wife did just quit her job, but she actually likes working, so will probably be looking for something at least part-time again soon.  It's just her current situation reached the stage at which is was too painful to go to work and deal with a bad boss even part-time.

SumBum

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 39
  • Location: Edwardsville, IL
Re: FI but not RE. Anyone taking bigger risks?
« Reply #14 on: May 31, 2017, 05:55:13 PM »
I am close to FI but not quite there yet.  I've already found I'm more willing to throw some money at "riskier" investments that I wouldn't consider without lots of cushion.  It's more a mindset now of:  I can spare a little and won't be in dire straits if it fails.  Of course, that doesn't mean forego due diligence, etc.  I've done some real estate crowdfunding, structured assets, and would love to get into hard money lending but that requires a much higher entry fee than I'm willing to do at the moment.

Blahhhh456

  • 5 O'Clock Shadow
  • *
  • Posts: 34
Re: FI but not RE. Anyone taking bigger risks?
« Reply #15 on: June 03, 2017, 03:13:39 PM »
I am close to FI but not quite there yet.  I've already found I'm more willing to throw some money at "riskier" investments that I wouldn't consider without lots of cushion.  It's more a mindset now of:  I can spare a little and won't be in dire straits if it fails.  Of course, that doesn't mean forego due diligence, etc.  I've done some real estate crowdfunding, structured assets, and would love to get into hard money lending but that requires a much higher entry fee than I'm willing to do at the moment.

May I ask which real estate crowdfunding you used. I have been looking at FundRise and wanted to hear about someone else's opinion before jumping in.

SumBum

  • 5 O'Clock Shadow
  • *
  • Posts: 8
  • Age: 39
  • Location: Edwardsville, IL
Re: FI but not RE. Anyone taking bigger risks?
« Reply #16 on: June 04, 2017, 08:54:52 PM »
Afraid I won't be too much help, Blahhhh!  :(

It's more of a new adventure into crowdfunding for me so I'll apologize right now for not really having a lot of experience of my own to draw on.  Based on recommendations, I jumped into a portfolio offering from a fairly new company called Holdfolio, and even more recently added some funds to GroundFloor.  Feel free to PM me if you want more info about either of those.

I'm not accredited so that limits where I can invest.  There are a couple crowdfunding and note funds I'd like to dip my toe in once I reach that level.  I think FundRise was on my list of possibilities (I haven't seen anywhere yet that they require accredited status) but I haven't researched it enough to offer any advice one way or the other.


Blahhhh456

  • 5 O'Clock Shadow
  • *
  • Posts: 34
Re: FI but not RE. Anyone taking bigger risks?
« Reply #17 on: June 17, 2017, 11:46:59 PM »
Thanks SumBum! I will look into those two as well.