Take more risk after FI

[vagavince]

Im in index (sp500+international+bond) Looking at Tesla, Bitcoins, GameStop etc make me feel I'm not taking enough risk and might be missing out.

I'm already FI. So I'm thinking about increasing my bond allocation from 20% to 30%. And also set aside 3% (i.e. 1 year withdraw) to speculate on the next big thing whatever that is.

What do people think about this strategy.

Edit: I don't mean buying these things specifically. I mean taking on some high risk speculative bets since I have the ability to take on more risk.

[legalstache]

Why? You've already won if you're FI.

The GameStop thing was basically gambling. Bitcoin seems similar. To me, it seems like you'd be lowering your chances at successful fire by doing this. I would also not put anywhere near 3% of my portfolio towards speculative bets like this. A few hundred dollars, sure, maybe, but why risk anything more than that?

[bacchi]

You're late to the party.

Losing an additional 3%, especially when the entire market falls, will dramatically increase your SORR. Don't do it.

[MrGreen]

Not quite sure I understand the payoff. If you're using a 3% withdrawal rate you're already lower than the perpetual withdrawal rate. You're basically guaranteed not to run out of money.

So you want to make your portfolio 10% more conservative so you can take some portion of money and make speculative bets in and effort to get a better return? This makes no sense. Why not just leave your AA alone, or move it to 90/10 and forget the speculation?

What are you missing out on when you've already won the game?

[vagavince]

Yeah, I'm also not sure what I'm thinking about. I think its a sense of FOMO and thinking I should be doing more when I see my portfolio return 10% a year and bitcoin return 4X in a month.

I feel I have a lot of ability to take risk now that I'm FI and also working. So I have the resource and I want to capitalize on that.

What is my goal? I have enough money for my current life style. But gain from speculation will allow me to help family and friend or doing something I otherwise wouldn't have. If I lose it also won't hurt me much

[MustacheAndaHalf]

I don't see a month where Bitcoin went up 4x.  I think it's only FOMO if it happened!  There's Dec 9 - Jan 9, where it doubled in price... but how would you know that's about to happen on Dec 9?  Could Feb 17 to Mar 17 replay, losing -50%?

I've noticed Bitcoin's price tends to crash every few years.  Are your odds of a profit better when BTC has gone up 4x in one year, or after its crashed and is on sale?

[reeshau]

If you want to pick up a hobby of speculation, I think it would be better to think of it as part of of your withdrawal rate, rather than monkeying with your capital.  As Mr. Green pointed out, your withdrawal rate of 3% is super conservative.  Bump it up a little, open up a speculation account, and play there.  Believe me, It's much better to make mistakes (aka learning) on small amounts, than big amounts.  If your goal is to learn about these methods of speculation, then you won't be disappointed by your hobby.  If your goal is to make up for going more conservative in your AA with big profits from speculation, you are almost certain to be disappointed.

Then, when you are comfortable with these things, and confident in your abilities, go big.

Also, a number of brokers have "play money" accounts you could use, so you can see big numbers, but learn at zero cost.

[yachi]

You identified 3 things with massive valuation runups in completely different categories, but not anything you think is currently mispriced (unless, you sneakily want in because you know they're overvalued).
GME stock ran up not based on the ability of the underlying business to support the price, but due to an attack to try and short squeeze.  It's possible the short squeeze was a success although reddit was filled with people at $350 to $450 begging everyone to hold because $1,000 and even higher prices were coming.
TSLA stock ran up based on it's ability to deliver electric cars where others were unable to, but now requires successful implementation of many different business objectives to justify its price.
Bitcoins are an interesting technology for paying for goods, but provide you with no ownership of an underlying company: your returns won't be based on the performance of a company, or even the success of the underlying technology.  You're betting on someone else wanting your coin more than you do.

My point is, it takes different skills to successfully take advantage of the above 3 speculation bets, and you may have missed the party on them.  But cheer up, you probably also missed a lot of similarly popular speculation bets in history that didn't turn out well: the dot com runup (people successfully identified the internet as a life-changing technology, but unsuccessfully invested in it).  GME (hey, what goes up to $450/$500 from $4, must come down to $50 or wherever it's at now).

If you're interested in investments, the psychology of investments, how markets work, how to find market inefficiencies and similar pursuits, that's all worth studying and understanding.  If you're just looking for more excitement, you're probably better off just spending more of your 'stache on some actual roller coasters.

[ericrugiero]

It's easy to identify investments where you would have made a ton of money AFTER they go way up.  How many other risky stocks went down over the same time frame?  Unless you have a way to identify the ones that are going to go up you are better off in index funds.  There is a lot of competition in this area and lots of people "have a system" but underperform the market.  Even the professionals who spend all day researching typically underperform the market. 

The last thing you want to do is buy after something already went up and is over valued.  GME is eventually going to go down to where it should be based on the business.  People who buy in now will lose money unless it goes up temporarily and they sell at the perfect time. 

Like others said, it's OK to have play money.  But, if you win big a couple times don't get overconfident and think you have it figured out.  You could bet big and lose big. 

[Catbert]

If you need a thrill go to Vegas and put your play money on red.  :-/

[trollwithamustache]

bubbles sound like a terrible FI investment choice.

[Metalcat]

You left out lottery tickets and black jack.

[ChpBstrd]

Nobody would be asking these questions if the market had not gone up 75% since late March. When the market is DOWN 20%, people start asking if they should have had more conservative portfolios. I've been here a while. I've seen it. I've felt it too.

1995-1999 was considered the "dot-com bubble" and I suspect our current era will be known as the "meme bubble", because everything going up is something that grabs attention on social media. Weed stocks anyone? Tesla Cybertruck! Who wants a cryptocurrency featuring a dog meme from Facebook? If you want to speculate, guess the next internet meme. Millions of people are now watching a particular reddit group for the next big thing, and if that doesn't make you lose sleep, just wait.

TL;DR: No, don't increase your risk just because the stock market has risen to a record 2.4x GDP!

[yachi]

There's a more subtle question posed in the thread title that could be answered differently.  Set aside the idea of wildly speculating with your portfolio for a moment. 

Assume you're FI based on spending 3% of your Stache, when FIREcalc says you can spend 4%, or even more outrageously that you're FI but still working with no plans to stop anytime soon.  It could make sense to reduce your bond allocation.  After all, you can lose 25% of your Stache immediately without risking your FI status.  You'll still want to model your reduced bond allocation in firecalc and other programs to ensure you're not taking more risk than your portfolio size can handle without losing FI status.  Why consider this since you've already "won the game"?  Because the game changes based on how much you can withdrawal.  For some, much you spend in retirement is a balancing act against retiring as early as possible.  But if you find yourself in a position to greatly increase your spending, then you want to.

Barely FI, but living on the funds - don't run up the score
Well within FI, 25% or more higher than intended spending - why not run up the score?
FI 2x, 3x, 4, over - why hold any bonds at all?  You don't need the protection.

[Beach_Stache]

Every time I've gone after a "quick win" or had FOMO, the market smacks me in the face.  I don't know enough about any individual company to know if it's undervalued or if the stock will go up and really I don't know enough about the fears or happiness of all the investors in the world to know their reaction to things which is what generally drives the market.  I know a lot less about the market that the majority of the people on this forum.  What I do know is basic math and history, and that if both tell me anything, it's that set it and forget it in low cost index funds will put me in a much better situation than 90%+, and 80%+ on hired financial advisors.  I like those odds.  I am fully aware of how I am a Basic B in terms of intelligence, and I know my limitations.

If you want to gamble, I would take a specific amount that you are okay losing, and just have a separate account for "gambling money" and see how you do against an index fund over 1, 2, 3 years.  Maybe you'll do well!

[Steeze]

I will say that taking more risk after FI is warranted - personally I think first have a perpetual withdrawal rate (3.5% +\-) with a conservative allocation like 70/30 and a healthy spending assumption. Once you have that then any additional funds can be very aggressively invested (100% stocks) since you are unlikely to ever need that money for anything except to give away.

If you must speculate then do it with high conviction for companies you believe are underpriced due to their enormous growth opportunity which your average analyst is failing to see. Do it on companies which have a mission which personally resonates with your core values, who you will see through no matter what. Do it on companies whose leadership inspires you.

There is no sense in throwing away money on long out of the money call options on meme stocks or speculating on Pokémon cards. Yes there will be people making a ton of money on that, but most will lose. That is essentially gambling and has no place in an allocation. I would agree with others that if you want to budget a line item in your spending for gambling they you do you, but don’t make it part of your stash or a huge percentage of your monthly spend.

Personally if I ever get to 70/30 @ 3.5% then I will probably start picking individual stocks, mostly for my own entertainment with money above that amount. Perhaps even set aside a chunk $10k-50k to try my hand at day trading. That would be after my son’s college fund is full, I have money for a down payment on a house for him, I have money to give my parents as they age, etc. I am taking about real excess stash that I will never need, not trying to juice my core portfolio.