Author Topic: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!  (Read 38550 times)

arebelspy

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Definitely.  Agreed.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #101 on: January 13, 2016, 09:21:30 AM »
I guess what my question for Joshua would be what his intention is with these podcasts. Who is the target audience that he is trying to reach? I listened to the Nords interview and the most recent one about inflation. When I listen to the interviews, I get the sense that he is a very skeptical guy and that he himself is "not drinking the mustachian kool aid", that he doesn't think that the ideas that are promoted here and at other similar forums are things that people can actually do to create their own financial freedom with zero interest in finances. That kind of rubs me the wrong way, because while I definitely enjoy the interviews, this platform doesn't seem to be one that is necessarily promoting mustachianism, but affirming the general public's belief that it's not possible to actually retire early unless one has this extensive financial knowledge/background.
« Last Edit: January 13, 2016, 09:26:00 AM by tj »

arebelspy

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I think his audience is more normal people, not necessarily Mustachians, and the ideas are around personal finance in general.

Early retirement is a tiny fraction of the overall podcasts, and just one thing he talks about (infrequently) to present the idea to people, or for people who are a fan. It's not a big topic of the podcast overall.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

BarkyardBQ

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #103 on: January 13, 2016, 10:04:17 AM »
Here's the next installment in the Early Retirement FAQ series with arebelspy! http://radicalpersonalfinance.com/277-early-retirement-faqs-plan-inflation-interview-joe-aka-arebelpsy-just-retired-30-schoolteachers-salary/

Fix the name and the title and the URL


He is is NOT Arebelpsy (A Rebel Psy(Psycho??)), but Arebelspy (A Rebel Spy).

Listening.

Arebelspy also mistyped in the teaser graphic.

tj

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I think his audience is more normal people, not necessarily Mustachians, and the ideas are around personal finance in general.

Early retirement is a tiny fraction of the overall podcasts, and just one thing he talks about (infrequently) to present the idea to people, or for people who are a fan. It's not a big topic of the podcast overall.

In that context, it makes more sense. I only noticed the promotion of the podcast that has been in this thread.

JZinCO

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #105 on: January 13, 2016, 10:49:41 AM »
Here's the next installment in the Early Retirement FAQ series with arebelspy! http://radicalpersonalfinance.com/277-early-retirement-faqs-plan-inflation-interview-joe-aka-arebelpsy-just-retired-30-schoolteachers-salary/
ARB and I, and others had a similar conversation recently. I started it after hearing multiple times from posters' claims about being able to react to the impact of inflation.
http://forum.mrmoneymustache.com/welcome-to-the-forum/mustachians-aren't-as-subject-to-inflation/

TL;DR After a few posts my views came to align with ARB's in that the common argument is: "I can just craft a budget to reduce expenses in response to inflation such that my nominal spending is constant", but after a decade of even mild inflation one's nominal-constant budget eeks out a poor living. After this thread, I was sold on the importance of not reacting to inflation on the spending side but to proactively build wealth to stay ahead of inflation.

Anyway, loved the conversation and all the conversations with ARB. Sometimes the points are muddled in yalls back and forth. The chosen topics are probably best suited for white papers where the math and charts can be used but I enjoy the audio format none the less.
One downside about podcasts is that different topics get hit in a hodge-podge manner across episodes (e.g. an awesome discussion about indexing might be buried in an interview). In the end, I am hoping that Radical Personal Finance ends up with a library of FAQ episodes which, currently, have a good referential use and the entertaining 'conservation' format.


RadicalPersonalFinance

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #106 on: January 14, 2016, 07:36:55 AM »
I guess what my question for Joshua would be what his intention is with these podcasts. Who is the target audience that he is trying to reach? I listened to the Nords interview and the most recent one about inflation. When I listen to the interviews, I get the sense that he is a very skeptical guy and that he himself is "not drinking the mustachian kool aid", that he doesn't think that the ideas that are promoted here and at other similar forums are things that people can actually do to create their own financial freedom with zero interest in finances. That kind of rubs me the wrong way, because while I definitely enjoy the interviews, this platform doesn't seem to be one that is necessarily promoting mustachianism, but affirming the general public's belief that it's not possible to actually retire early unless one has this extensive financial knowledge/background.

I intend for my show to be a daily source of encouragement and education for people with an above-average interest in money and financial freedom. I strive for maximum diversity in the opinions presented so that the content is continually interesting and challenging to the listener. I share my own story and opinions but I try to encourage personal responsibility on behalf of my listeners. If my audience is thinking critically about what they believe and why, I'm happy.

I'm not promoting mustachianism--that's MMM's brand, not mine. But I do try to shine a light on the useful concepts of mustachianism and it's been very well represented throughout the archives of the show.

My opinion is that it's possible to retire early with some basic knowledge and background. But I simply don't think most people want to retire early. What people want is a sense of freedom and control over their life and there's no reason why you need 25x annual earnings to gain that. There are faster and easier ways to gain the freedom and control while you're on the way to 25x annual earnings.

tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #107 on: January 14, 2016, 08:03:38 AM »
I guess what my question for Joshua would be what his intention is with these podcasts. Who is the target audience that he is trying to reach? I listened to the Nords interview and the most recent one about inflation. When I listen to the interviews, I get the sense that he is a very skeptical guy and that he himself is "not drinking the mustachian kool aid", that he doesn't think that the ideas that are promoted here and at other similar forums are things that people can actually do to create their own financial freedom with zero interest in finances. That kind of rubs me the wrong way, because while I definitely enjoy the interviews, this platform doesn't seem to be one that is necessarily promoting mustachianism, but affirming the general public's belief that it's not possible to actually retire early unless one has this extensive financial knowledge/background.

I intend for my show to be a daily source of encouragement and education for people with an above-average interest in money and financial freedom. I strive for maximum diversity in the opinions presented so that the content is continually interesting and challenging to the listener. I share my own story and opinions but I try to encourage personal responsibility on behalf of my listeners. If my audience is thinking critically about what they believe and why, I'm happy.

I'm not promoting mustachianism--that's MMM's brand, not mine. But I do try to shine a light on the useful concepts of mustachianism and it's been very well represented throughout the archives of the show.

My opinion is that it's possible to retire early with some basic knowledge and background. But I simply don't think most people want to retire early. What people want is a sense of freedom and control over their life and there's no reason why you need 25x annual earnings to gain that. There are faster and easier ways to gain the freedom and control while you're on the way to 25x annual earnings.

The theory is not to save 25x annual earnings though, it's 25x annual expenses. A huge difference. I am not of the opinion that leveraged real estate is a faster way to freedom than saving 25x your expenses. I feel like if f shit hits the fan again a la 2008, with real estate that still has leverage on it, but no stable full time job, you most likely would have to go back to work, or pursue some type of income that is motivated by $$$ rather than passion, and in dire scenarios, possibly even declaring bankruptcy on the way and needing to start over. With 25x your expenses saved up, you can follow various withdrawal strategies and expect a reasonable probability of success.  I wouldn't say that the FIRE ideals and lifestyle are necessarily exclusive to MMM's brand, but it certainly speeds things along.

I agree that most people don't want to retire early, but I also think that most people haven't even considered that it's a possibility. I think a lot of the people who post here are legitimately interested in early retirement. if not shooting for early retirement, what would be your opinion on why people would generally want to focus on minimizing expenses and maximizing income vs. the status quo?

There was another thread here of members in their 40s who said that would never have considered wanting to retire early when they were in their 20s and 30s, like several people like myself have stated. That we like the idea of being able to retire early, but don't know that we necessarily would. A lot of these people felt the same way, but over their years, they have been fed up with work, watched loved ones die or had various other circumstances where they actually did retire early or are close to it even though the idea seemed pretty ridiculous to them when they were younger. I want to put myself in that position, where I can choose, and that is the point of delaying gratification for me to some extent.
« Last Edit: January 14, 2016, 08:36:20 AM by tj »

RadicalPersonalFinance

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #108 on: January 14, 2016, 09:02:25 AM »
The theory is not to save 25x annual earnings though, it's 25x annual expenses. A huge difference.

Forgive me, I mis-typed in my haste. You are correct.

I support the pursuit of financial independence as quickly as possible. It's an almost every-other-day theme of my show. Extreme savings is a reliable and proven way to get there. But  it's only one way. Keep an eye out for a forthcoming interview with Jake Desyllas on his excellent new book: "Job Free: Four Ways to Quit the Rat Race and Achieve Financial Freedom on Your Terms." He covers three other ways.

I'm not sure how many shows you've listened to, but I do work hard to serve the E-R community with good and useful content.

I myself am pursuing financial independence as aggressively as possible.

But, as is true with many content creators, I have my own opinions. I like MMM's work but he and I have very different perspectives on many issues.

I am presently biased in favor of real estate for my own financial independence and that tone will come through. I formerly managed stock portfolios for retirees so I'm quite comfortable discussing the topic of balanced portfolios, asset allocation, etc.

But, my conscience will no longer let me participate in broad-based mutual fund investing. I can no longer profit from the business activities of a majority of the publicly traded companies and sleep well at night.

So, I have opted out, pulled my money from equity ownership, and adjusted my investments to things I can do with a clear conscience. (I also no longer manage client funds and I offer zero advice to others on the topic.)

There are lots of shows on the topic if you're interested:
http://radicalpersonalfinance.com/265-passive-investing-index-funds-right-way-invest-interview-rick-ferri-portfolio-solutions/
http://radicalpersonalfinance.com/231-how-you-should-respond-to-the-recent-stock-market-gyrations/
http://radicalpersonalfinance.com/175-friday-qa-can-financial-advisors-increase-your-returns-how-to-prepare-for-the-cfp-exam-fastest-way-to-become-a-1er-how-do-you-trust-insurance-agents-what-is-the-role-of-an-ipo-in-an-inve/
http://radicalpersonalfinance.com/financial-independence-via-dividend-investing-interview-with-jason-from-dividend-mantra-rpf0096/

There are loads more...these are just examples.




tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #109 on: January 14, 2016, 10:14:53 AM »
Quote
I support the pursuit of financial independence as quickly as possible. It's an almost every-other-day theme of my show. Extreme savings is a reliable and proven way to get there. But  it's only one way. Keep an eye out for a forthcoming interview with Jake Desyllas on his excellent new book: "Job Free: Four Ways to Quit the Rat Race and Achieve Financial Freedom on Your Terms." He covers three other ways.

I look forward to that and might even pick up the book. Always interested in other ways people are doing this. Why do you incur the cost of retaining your various financial designations if not interested in continuing to manage accounts?
« Last Edit: January 14, 2016, 10:16:44 AM by tj »

RadicalPersonalFinance

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #110 on: January 14, 2016, 12:41:10 PM »
Why do you incur the cost of retaining your various financial designations if not interested in continuing to manage accounts?

1. Backup plans: when I started Radical Personal Finance, I wasn't sure how long it would take to create income from it. If RPF fails or ceases to be fun, one of my backup plan is to go back into financial planning. With my professional credentials I can get an interview for a job at any firm, any time, anywhere. There are some interesting, boutique financial planning firms here in the Palm Beach area where I live that would be quite fun to work in. If I were to return to financial planning, I would probably look to work in a small family office or multi-family office here in Palm Beach. Scouring the world markets for interesting investment opportunities seems like a fun job to me. And, I could make a multi-six-figure salary, live on $40-$50k and be financially independent in a few years.

2. Differentiation and marketing for the show: I'm one of the few professionally credentialed financial advisors with a podcast discussing nuts and bolts of financial planning. Although they're my least popular shows, the technical financial planning shows I create on specific technical topics are a differentiator from my competition and they attract new listeners.

3. Credibility: the designations give me credibility with the financial advisor community. That means more of them start listening to my show. I hook them with my understanding of the mainstream financial approaches and then I educate them on some alternative, radical ideas. This allows me to multiply my influence across the industry and affect many more people. Only a tiny percentage of the general population will every listen to my show. It's too long, too in-depth, and most people just don't care. But many financial advisors listen to my show and most people with money work with advisors. This allows me to reach more people and help them achieve their goals.

4. Diversification of income: because I maintain the professional designations, I have an easier time connecting within the professional advisor community. This can lead to paid speaking on technical topics and makes it easier for me to start my business.

5. It's relatively cheap: Out of this whole list "Joshua J. Sheats, MSFS, CFP®, CLU®, ChFC®, CASL®, CAP®, RHU®, REBC®" the only one that has any annual dues is the CFP certification. The annual dues to the CFP Board are $325. The MSFS is a master's degree in financial planning--it has no continuing education (CE) requirements and no annual dues. All the other designations are educational achievements and  do not have any dues. They do all require CE, but I need to stay very current anyway, so it's not that big of a deal.

Those reasons above have caused me to keep them up until now.

I do consider it from time to time and I may drop the CFP in coming years. I don't love being subject to regulation and oversight by the CFP Board...but for now it doesn't hinder me in any way. I don't sell any products or do any financial planning now, so I have minimal obligations to them.

arebelspy

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #111 on: January 14, 2016, 02:01:58 PM »
That's some awesome info on your perspective Joshua, in those last few posts--you should consider compiling some of it for your about me section of your website.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

arebelspy

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #112 on: January 14, 2016, 02:04:49 PM »
My opinion is that it's possible to retire early with some basic knowledge and background. But I simply don't think most people want to retire early. What people want is a sense of freedom and control over their life and there's no reason why you need 25x annual earnings expenses to gain that. There are faster and easier ways to gain the freedom and control while you're on the way to 25x annual earnings expenses.

(Typo fixed.)

I 100% agree.

But those things take some ... chutzpah.  Many people don't have the courage it takes to pursue that freedom and control, so 25x expenses is the safe, reliable path to FI (and/or ER).

Off the top of my head, I can't think of any easy ways to FI that include getting that freedom and control before FI, without courage.

But if you have that, and a little knowledge and willingness to think and act outside the box, the world is your oyster.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #113 on: January 14, 2016, 02:24:11 PM »
My opinion is that it's possible to retire early with some basic knowledge and background. But I simply don't think most people want to retire early. What people want is a sense of freedom and control over their life and there's no reason why you need 25x annual earnings expenses to gain that. There are faster and easier ways to gain the freedom and control while you're on the way to 25x annual earnings expenses.

(Typo fixed.)

I 100% agree.

But those things take some ... chutzpah.  Many people don't have the courage it takes to pursue that freedom and control, so 25x expenses is the safe, reliable path to FI (and/or ER).

Off the top of my head, I can't think of any easy ways to FI that include getting that freedom and control before FI, without courage.

But if you have that, and a little knowledge and willingness to think and act outside the box, the world is your oyster.

I would agree with this. It is definitely ballsy, but people do it all the time. One of my friends moved from Utah to New York City with a few months of expenses saved up in hopes to land a gig on broadway. It didn't work out, but she went for it, and had lots of NYC experiences that never would have happened in Utah. I envy those stories. I don't feel like I'll need 25X to leave the current job, but I'm not comfortable with just a few months either. Everyone has to find the right balance for them and work with what they have I suppose.


Quote
Scouring the world markets for interesting investment opportunities seems like a fun job to me.

It's interesting that you have this opinion about researching markets, but have no interest in equity ownership yourself.
« Last Edit: January 14, 2016, 02:40:09 PM by tj »

ender

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #114 on: January 16, 2016, 11:51:01 AM »
My opinion is that it's possible to retire early with some basic knowledge and background. But I simply don't think most people want to retire early. What people want is a sense of freedom and control over their life and there's no reason why you need 25x annual earnings expenses to gain that. There are faster and easier ways to gain the freedom and control while you're on the way to 25x annual earnings expenses.

(Typo fixed.)

I 100% agree.

But those things take some ... chutzpah.  Many people don't have the courage it takes to pursue that freedom and control, so 25x expenses is the safe, reliable path to FI (and/or ER).

Off the top of my head, I can't think of any easy ways to FI that include getting that freedom and control before FI, without courage.

But if you have that, and a little knowledge and willingness to think and act outside the box, the world is your oyster.

Also, the closer to FI you are the more likely you will be to take risks which can directly affect your ability to feel freedom/control. Someone working a job they had with $0 saved will be much less likely to stand up to their boss, out of fear.

Leaving a stable job you are bored at for a more risky but likely more enjoyable job? That definitely takes a courage, but that courage is even more required the less financially stable you are.


FiveSigmas

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #115 on: January 17, 2016, 06:58:19 PM »
7Y, ARS, thanks for putting together another thought-provoking show.

I have a follow up question regarding “personal rates of inflation.” ARS, my understanding of your argument is: no matter what your personal basket of goods is, even if it excludes items like SUVs, walk-in cigar humidors, and daily trips to Ruth's Chris Steakhouse, you're still paying for something every year, and that something is going to rise in cost year-over-year. In other words, it's not one's initial starting point that matters, it's the rate at which prices increase thereafter. Is that right?

That makes sense to me, but it also seems like the whole reason that the BoL uses a basket of goods, though, is that different items exhibit different rates of inflation. For instance, table 26 on page 85 of the BoL Nov 2015 CPI report indicates that overall medical costs for an urban consumer went up by 3.2, 2.0 and 3.0 percent in 2012, 2013, and 2014. Average entertainment costs, however, went up by 0.8, 0.4, and 0.0 percent during the same time periods.

Now, a full-on Mustachian will likely use the library a lot more than a consumer, and entertainment might hence make up a negligible portion of said person’s portfolio. If that person still has average or above-average health-care costs, that individual’s personal inflation rate might thus be higher (or at least different) than that of a typical consumer.

Granted, over the long term, the relative inflation rate for items in a given basket will vary over time, and very high relative inflation rates must eventually taper (otherwise, you end up with absurd conclusions like health care making up 99.99% of an average middle-aged person’s yearly budget in N years). Still I think one can argue that over say, 30 years, some basket components will nonetheless have higher inflation rates than others *.

All of this leads me to believe that there’s value in being able to calculate one’s personal rate of inflation (and perhaps make corresponding corrections to back-testing tools like cfiresim).

What do you think?

* Whether we can predict who the winners and losers will be is another question, but I still feel that broad, very rough predictions can be made – similar to the way one can say that stocks should outperform bonds over the long term.

ETA: Thanks for the pointer to http://portfoliocharts.com/. That's an amazing tool.
« Last Edit: January 17, 2016, 07:03:33 PM by FiveSigmas »

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #116 on: January 17, 2016, 07:14:32 PM »
funny how none of us think out own story or what we have to offer is of value.. Then, well I guess others think otherwise.

Very cool..:)

arebelspy

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #117 on: January 17, 2016, 07:52:44 PM »
FiveSigmas: Sure, we may have different rates of inflation.  I don't mean to imply everyone's rate of inflation will be the same.

However, unless you can predict the future, why do you have reason to suspect your personal inflation rate will be lower than the average basket of goods?  Why wouldn't it be just as likely to be higher?

Maybe there's a drought where the lentils you buy are grown, so they go up in price.  Maybe a new rubber tax causes your bike tires to go up in price.

Whatever you spend money on, that should go up in price, over time, and I see no reason why it wouldn't roughly go up the same as everything else, on average.

Your asterisk gets to this, and that's my point.  I don't think you can, over the next 30 years, necessarily predict what items will necessarily lag inflation by a good degree.  And I certainly wouldn't want to bank my retirement on it.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

FiveSigmas

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #118 on: January 17, 2016, 09:44:56 PM »
Yikes, I see that I'm rehashing a few of the arguments already discussed here:

http://forum.mrmoneymustache.com/welcome-to-the-forum/mustachians-aren't-as-subject-to-inflation/

Rather than rat-holing here, I'll switch over to that thread.

RadicalPersonalFinance

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #119 on: January 18, 2016, 12:16:04 PM »
Quote
Scouring the world markets for interesting investment opportunities seems like a fun job to me.

It's interesting that you have this opinion about researching markets, but have no interest in equity ownership yourself.

To be clear, I'm not opposed to equity ownership. I own stock in my own companies and I intend to purchase stock (equity) in many companies in the future, both private companies and publicly traded companies.

There are probably many companies traded on the NYSE that I am happy to own.

But I'm not interested in owning broad-based mutual funds run by a manager that's not me. So, for now, I've pulled back from the publicly traded markets completely to focus on private investments. And, (unless something in my conscience changes) when I return to the public markets, I'll do so with individual stock ownership.

The example I always think of was the family office investment manager I spent some time with who was supervising a condo development project in Costa Rica and in India in addition to all their other investment projects. That touch of the exotic appeals to me. (In the past I considered pursuing a career as an investment analyst and researcher for an international mutual fund company.)

tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #120 on: January 18, 2016, 12:56:24 PM »
Quote
There are probably many companies traded on the NYSE that I am happy to own. But I'm not interested in owning broad-based mutual funds run by a manager that's not me.


It's bizarre to me that a Vanguard fund specifically (whether passive or active), could be against anyone's conscience. Their rock bottom fee structure negates a lot of the issues I have with the financial industry and what they charge clients for investment management.

It sounds like you maybe don't agree with Rick Ferri's opinion about the "evidence" of passive vs. active that was referenced in that podcast, which is totally reasonable, but not all that common around here.
« Last Edit: January 18, 2016, 12:58:43 PM by tj »

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #121 on: January 18, 2016, 01:13:57 PM »
Quote
There are probably many companies traded on the NYSE that I am happy to own. But I'm not interested in owning broad-based mutual funds run by a manager that's not me.


It's bizarre to me that a Vanguard fund specifically (whether passive or active), could be against anyone's conscience. Their rock bottom fee structure negates a lot of the issues I have with the financial industry and what they charge clients for investment management.

It sounds like you maybe don't agree with Rick Ferri's opinion about the "evidence" of passive vs. active that was referenced in that podcast, which is totally reasonable, but not all that common around here.

Or he doesn't want to own a broad index which includes companies that he doesn't agree with their practices, morally.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
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tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #122 on: January 19, 2016, 06:35:48 PM »
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There are probably many companies traded on the NYSE that I am happy to own. But I'm not interested in owning broad-based mutual funds run by a manager that's not me.


It's bizarre to me that a Vanguard fund specifically (whether passive or active), could be against anyone's conscience. Their rock bottom fee structure negates a lot of the issues I have with the financial industry and what they charge clients for investment management.

It sounds like you maybe don't agree with Rick Ferri's opinion about the "evidence" of passive vs. active that was referenced in that podcast, which is totally reasonable, but not all that common around here.

Or he doesn't want to own a broad index which includes companies that he doesn't agree with their practices, morally.

After listening to #281, Joshua clearly has ethical issues with certain companies, that's all well and good, but it does indeed sound like he thinks one can beat the market fairly easily if they study finance enough.  I don't think anyone would suggest that fund managers or stock pickers are dumb by the way, only that it's very difficult to overcome the additional fees in many cases.

In the same podcast, he mentions that he was on a path to 500k or 1 million income annually as a financial planner. This isn't something that most people can relate to I don't think. This also explains why he doesn't distinguish between the "rich" and the "really really rich" in another recent podcast.  (possibly the one with arebelspy?)

I would absolutely question that leveraged real estate is less risky than ownership of debt-free publicly traded stock. Especially in a recession. When the recession doeshit, I'll be happy that i don't owe a dime to anybody, my broadly diversified global publicly traded value tilted stocks might go down in a recession, but they will not go to zero, because the companies that I own will continue to sell products and services. With leveraged real estate in a recession ,people potentially lose thier jobs and stop paying their rent. This is exactly what happened to the people Joshua talked about in the beginning of #281 where he wasn't investing in real estate but his peers were.

From my perspective, we have a family friend who is very high up at a residential REIT that went public in recent years. If I wanted to make an investment in residential real estate, Why wouldn't I just buy equity in that company? They're small enough that they aren't a substantial portion of the various REIT Index funds yett they have a huge staff analyzing opportunities in several individual markets. They have the background and skill to know where the opportunities are going forward. To me, seeing what they are doing, that they've been able to take this company public and are still around years later, that there obviously was a lot of opportunity in individual residential real estate, but these companies (and they are not the only company that is doing this) started snapping up properties on the cheap after the housing collapse, going to the auctions, and writing the check on the spot. How can an individual investor who may need to wait on a mortgage funding or what have you compete with the corporate investor who has almost infinite capital on the spot?  They also have relationships with contractors to rehab in bulk, how can your average joe compete? Maybe there's some markets that these companies haven't branched out to yet, but wouldn't you think it's inevitable that they get there eventually? if that's the main component of somebody's investment plan, I would be worried. A lot of people like real estate, I get that and respect it, but leveraged real estate and a recession sounds pretty risky to me.

I absolutely agree with Joshua that one can achieve higher returns with options other than Vanguard index funds, but I disagree that one can easily obtain a higher RISK ADJUSTED RETURN. That is, I think that other strategies are inherently riskier. This isn't to say the broad market investing is the best risk adjusted return, because it's not, and one reason i tilt to value in tax advantaged space (and even so, there's no guarantee the "value premium" will continue going forward, it sure hasn't shown up lately), but I strongly disagree with the notion that we can control our "rate of return", but I guess my plan sort of requires me to hold that bias, or I would need to allocate my capital differently.
« Last Edit: January 19, 2016, 06:44:09 PM by tj »

arebelspy

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #123 on: January 20, 2016, 02:18:24 AM »
Paragraph 1: Agree.

Paragraph 2: Agree.

Paragraph 3: Somewhat disagree.  If you've bought right, the leverage is irrelevant.  As I mentioned in the first interview, stocks vs. real estate, Vegas home prices fell 60% peak-to-trough, while median rents dropped 5% (1k to 950/mo), and vacancies actually declined (due to foreclosed people needing places to rent now).  The vacancy thing was mostly a fluke though, typically it does go up in a recession.  It's only a somewhat disagree because it's true that if you're overleveraged/bought wrong and any slight drop in rent or increase in vacancy causes you to be cash flow negative, you're at more risk.  But when (for example) rent is $1100/mo and PITI is $300/mo., you have quite a bit of wiggle room for prices to drop or vacancy to increase.  Leverage in equities is rough during downturns due to margin calls.  Mortgages don't have that.  If your stocks drop 50% and your rents drop 10%, I'm happily buying more stocks, the person with stocks is selling low to fund living expenses.  In other words, if you've done it wrong, yes, it's riskier, if you've done it right, it's less risky.

Paragraph 4: Somewhat disagree.  Just because you have a family friend running something doesn't mean you should overweight there and not be diversified. You may think (s)he's a swell person, but that doesn't mean they aren't prone to making mistakes, or that they know better than the market, etc.

Paragraph 5: Strongly agree.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #124 on: January 20, 2016, 07:55:09 AM »
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Leverage in equities is rough during downturns due to margin calls.

I strongly agree. I wouldn't suggest one take heavy stock exposure while one is in heavy debt and I wouldn't suggest using margin to buy additional stocks, evenmoreso in FIRE when one might be without stable earned income.

Quote
Paragraph 4: Somewhat disagree.  Just because you have a family friend running something doesn't mean you should overweight there and not be diversified. You may think (s)he's a swell person, but that doesn't mean they aren't prone to making mistakes, or that they know better than the market, etc.

Oh, I wasn't suggesting investing in that company just because they are a friend, I just happened to hear about their business because it's been mentioned and it's made me feel like that has reduced the opportunities for your average joe, maybe even pushed up prices a bit. I'm not an individual company guy. (I'm tempted to put some with Warren Buffett though) My lien of thinking was more because they have successfully scaled up a real estate business with the power of scale of holding several thousand single family residences across the country and more competition with these various reit's bulk buying. I wouldn't have the knowledge to analyze each REIT and couldn't tell you why this residential REIT is any better than the others.  I don't believe they have any in my local market because they probably not see any opportunities in California. (Certainly no $300 PITI /$1100 rent opportunities around here.) I just question what would make me think I can do better in real estate on my own  than what the residential REITs have been able to figure out through trial and error. I believe Vegas is actually one of the markets where that particular company has seen the most appreciation in their homes since they started doing this by the way, I'm not sure they have seen equivalent rent increases, which the smaller rent drop vs price drop might support. It's interesting the Vegas was hit so hard, but the rent apparently didn't drop accordingly, but I mean, that's why I temporarily owned here also...the mortgage was so much cheaper than renting a similar unit. Nowadays, mortgages are a lot closer but without the flexibility to leave w/o managing a rental. so I no longer own. I could have spent less on my most recent mortgage than my current rent, but that wasn't somewhere I wanted to be long term, and now I have wiped out all of the debt and have significantly more capital for equities. It made sense to me at the time. :)
« Last Edit: January 20, 2016, 09:38:34 AM by tj »

RadicalPersonalFinance

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #125 on: January 27, 2016, 09:39:10 AM »
I just question what would make me think I can do better in real estate on my own  than what the residential REITs have been able to figure out through trial and error.

You might not be able to. But real estate is a fragmented market. An individual investor can go out and walk the streets and find houses and problems that are  not in the easily searchable databases. The big funds can't do that type of work. (Although they can work with "bird dogs" who bring them deals.)

RadicalPersonalFinance

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #126 on: January 27, 2016, 09:40:36 AM »
I support the pursuit of financial independence as quickly as possible. It's an almost every-other-day theme of my show. Extreme savings is a reliable and proven way to get there. But  it's only one way. Keep an eye out for a forthcoming interview with Jake Desyllas on his excellent new book: "Job Free: Four Ways to Quit the Rat Race and Achieve Financial Freedom on Your Terms." He covers three other ways.

TJ, I've just posted the interview: https://radicalpersonalfinance.com/284-job-free-four-ways-to-quit-the-rat-race-and-achieve-financial-freedom-on-your-terms-interview-with-jake-desyllas/

tj

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #127 on: January 27, 2016, 09:51:04 AM »
I support the pursuit of financial independence as quickly as possible. It's an almost every-other-day theme of my show. Extreme savings is a reliable and proven way to get there. But  it's only one way. Keep an eye out for a forthcoming interview with Jake Desyllas on his excellent new book: "Job Free: Four Ways to Quit the Rat Race and Achieve Financial Freedom on Your Terms." He covers three other ways.

TJ, I've just posted the interview: https://radicalpersonalfinance.com/284-job-free-four-ways-to-quit-the-rat-race-and-achieve-financial-freedom-on-your-terms-interview-with-jake-desyllas/

Cool, thanks for linking!

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #128 on: January 27, 2016, 10:08:42 PM »
Joshua,

I've been debating whether or not to say anything/ask about this, but it is bothering me too much to just let it go.

Can you explain a bit your reasoning for including references to Rosa Parks and MLK in your latest podcast about avoiding financial frauds?  I guess I understand the connection on an intellectual level -- as with the McDonald's coffee lawsuit there are facts that may run contrary to the commonly held beliefs about these two individuals and their actions.  But on a gut level I found it rather distasteful.  Of all the examples you could choose to reference, why these two?  It seemed out of place/inappropriate and has me wondering if I will continue to subscribe to your podcast. 

I'll admit that we probably don't share the same views on politics or social issues.  But I don't share Dave Ramsey's politics or religious background, and somehow I can manage to tune out most of his rants and sermons and still enjoy the advice and the debt free screams.  But this really bugged me, for some reason.  And I'm also kind of wondering if I am the only one.

JZinCO

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #129 on: January 27, 2016, 11:12:47 PM »

Can you explain a bit your reasoning for including references to Rosa Parks and MLK in your latest podcast about avoiding financial frauds?  I guess I understand the connection on an intellectual level -- as with the McDonald's coffee lawsuit there are facts that may run contrary to the commonly held beliefs about these two individuals and their actions.  But on a gut level I found it rather distasteful.  Of all the examples you could choose to reference, why these two?  It seemed out of place/inappropriate and has me wondering if I will continue to subscribe to your podcast. 
Agreed. I have a few thoughts. First, if MLK had been an adulterer, does that change my view whatsoever about his civil rights work? No, therefore more information does not influence my belief. I think this ran contrary to the thesis which is that more information can open up a position of ignorance and prevent naive decision making. Second, I would have chosen a clearer example, or just focused on Mcdonalds. The best evidence is second hand from David Abernathy. It would be foolish of me to believe MLK was an adulterer based on hearsay and I think it butts against your thesis there Joshua.  And why does it matter if Rosa Parks' defiance was planned or spontaneous? She worked for the NAACP at the time and had been politically active for years so it shouldn't surprise anyone. But again, does it matter?
To repeat myself again, Joshua, you just muddied the water. We celebrate MLK for his civil rights advocacy, he could have been an adulterer, he could have been a socialist (he was), it doesn't matter. In the same way that it doesn't matter that George Washington owned slaves because that is not the part that we hold up. Knowing other aspects of their life doesn't discredit or even color the ideas we uphold. Just like, I will still enjoy your podcast because while I don't like some of your personal opinions, I really enjoy hearing other opinions.

anyway, I felt that particular episode was sloppy and thrown together. The general idea is correct, but the comparisons were squirrely or unclear and the real "meat" of the story (how folks can get taken advantage of in finance, and how promises are oversold and underdelivered) was barely explored with only one good tangible examples (the referenced book).
« Last Edit: January 27, 2016, 11:19:47 PM by JZinCO »

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #130 on: January 28, 2016, 04:50:38 AM »
7Years, Joshua I am a fan of both your shows, and applaud your work. I had the same reaction as others when you said you were going all-in real estate vs. investing in the markets. I suppose it is unnerving to hear that someone who was a Financial Planner/Adviser by trade has decided to completely exit the stock market all together. I was hoping to hear a solid amount of your savings were going to be invested in a broad index of passively invested funds, but you seem to have thrown a lot of listeners a curve-ball by going in the direction of real estate.

I can see where you are coming from in terms of trying to avoid certain companies for moral reasons. I suppose the question I have is, if you were not morally opposed to investing in broad index funds, would you? Do you believe in low-cost index investing based on what you have seen and learned from a strictly financial perspective?

Part of me sees a low-growth world for the next several decades due to aging Western populations, massive government debt, and a decreasing rate of population growth worldwide. For those of us concentrating on building wealth more quickly than typically desired, I am also having my own personal self-reflection in regards to the usefulness of a passive, broad-market indexing approach.

Anyways, keep up the good work.

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Re: listen to arebelspy answer the most common "Ask a Mustachian" FAQs!
« Reply #131 on: January 28, 2016, 06:51:46 AM »
Here's the next installment in the Early Retirement FAQ series with arebelspy! http://radicalpersonalfinance.com/277-early-retirement-faqs-plan-inflation-interview-joe-aka-arebelpsy-just-retired-30-schoolteachers-salary/
I love it when a good thread I missed the first time is resurrected.