The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Jamese20 on June 02, 2017, 11:06:47 AM
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hi guys,
after spending lots of hours reading and studying and learning about myself through the various "risks" i have come up with a plan that i like in general that will help me invest heavily tax free whilst not killing myself financially so i can sleep with any volatility.
My main aim is get get FIRE by 40 (turn 30 in couple of months) 45 worse case scenario.
I am interested in the extremely aggressive investors who are going for the big returns passively and saying screw you to the volatility. I understand markets go down at times and i dont really care until i start considering quitting my profession, so i have no love for bonds or any kind of "safer" asset I'm already set on full 100% stocks.
i am struggling to find details on what is the most aggressive funds for 10 year statistics - i read about the mid cap for the UK demolishing the ftse 100 for example over the last decade as it is a more growth potential and more volatile but i could not find the info myself.
would be good to see what others views are regarding going for growth as fast as possible and not being worried about crashed etc.
after reading some comments on here i get there are some 100% stock holders but in the main people are very wary of risk on here in general? I would like to hear from the aggressors as i have no interest or love for bonds during my accumulation at least maybe even beyond - warren buffet convinced me of this far too well.
apologies if my view of others is wrong but i do see people trying to avoid "risk" a lot more than trying to reach for the highest long term growth
thanks guys
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https://www.ft.com/content/a5af4864-3053-11e7-9555-23ef563ecf9a
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Not me but a very close friend just bought about 6k worth of video cards in order to do digital currency mining. Right now it works out to about $2000/month -$100 in electricity costs for income. So the inital investment will be paid pack quite quickly.
Given this is all presuming the continued appreciation of Bitcoin and it's competitors. However after seeing the rise of bitcoin over the past few years and buying (and unfortunately selling) in the early days around the $100/coin mark I would absolutely consider this a high risk and potentially high rewards investment.
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I follow a blog where the author has hundreds of thousands in junior mining stocks. Extremely wild volatility that looks like a blood bath half the time, but huge ups also. Sometimes.
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If you're looking for high-risk, high-reward, look no further that forex trading, the largest most liquid market in the world. NOT EVER for your entire nest egg, or even a majority. Might I suggest <5%?
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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).
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hi guys,
yep the 10 year horizon i am looking at,
doing the math this makes a huge difference in when you can pull the plug on your career - 6% average growth means i get to a minimum but 9% means there is some juice for a more luxury retirement. 18% type growths like we have seen in the last 5 years is set for life of luxury type scenario (i still feel like crying at that and wish i wasnt such turnip 5 years ago)
small top medium cap indexes seem like they produce a bit more return over a decade time period and emerging markets have the potential also but not recently.
25% ftse 250
25% emerging markets
25% US equity all cap
25% european developed ex UK
that is my current thinking, but i am not sure this is aggressive enough?
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Some things to think about for the FTSE250:
A big chunk of the gains of late was because the pound devalued (not sure if your info was in GBP or USD, but it makes a massive difference).
Arguably, as it has had a good run of things and is now due for some losses or more modest growth. It seems like you are trying to chase yesterday's winner. I'd be more inclined to pile into emerging markets exactly on the basis that they've had a rough run of late so are probably due some growth.
The FTSE100 is being held back by banks, oil and mining. If you think that oil and mining are going to turn around then the FTSE100 may be due for a boost.
The FTSE250 is TINY, the total capitalisation is around £340 billion ($0.4 trillion), the US all share is around $35 trillion. Do you really want to weight them equally in your portfolio?
Also, a lot of sentiment in the UK is pessimistic for the next 10 years. Most of our trade is with the EU, and we've just told them to fuck off so we're looking at the possibility for being a trading nation with no trade agreements.
A lot of the FTSE250 'companies' are actually investment trusts. They won't necessarily stay in the UK if the investment companies leave the UK (JPMorgan have three ITs and are moving big chunks of business to Ireland).
Piling into an asset after it has just had a growth spurt is one of the reasons why the average active investor loses money against the global all share.
If you think you can beat the professionals, consider individual shares or more niche indices.
Risk isn't just volatility, it is also the potential for an index to drop and never recover, or for an individual stock to go to zero.
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Some things to think about for the FTSE250:
A big chunk of the gains of late was because the pound devalued (not sure if your info was in GBP or USD, but it makes a massive difference).
Arguably, as it has had a good run of things and is now due for some losses or more modest growth. It seems like you are trying to chase yesterday's winner. I'd be more inclined to pile into emerging markets exactly on the basis that they've had a rough run of late so are probably due some growth.
The FTSE100 is being held back by banks, oil and mining. If you think that oil and mining are going to turn around then the FTSE100 may be due for a boost.
The FTSE250 is TINY, the total capitalisation is around £340 billion ($0.4 trillion), the US all share is around $35 trillion. Do you really want to weight them equally in your portfolio?
Also, a lot of sentiment in the UK is pessimistic for the next 10 years. Most of our trade is with the EU, and we've just told them to fuck off so we're looking at the possibility for being a trading nation with no trade agreements.
A lot of the FTSE250 'companies' are actually investment trusts. They won't necessarily stay in the UK if the investment companies leave the UK (JPMorgan have three ITs and are moving big chunks of business to Ireland).
Piling into an asset after it has just had a growth spurt is one of the reasons why the average active investor loses money against the global all share.
If you think you can beat the professionals, consider individual shares or more niche indices.
Risk isn't just volatility, it is also the potential for an index to drop and never recover, or for an individual stock to go to zero.
hi mate, thanks for your thoughts,
my view on the ftse is i actually think our mid cap is very positive long term - there is a lot of good businesses with high growth potential, and on the brexit piece I am actually expected a tank in price over the next couple of years hence I want to take advantage so it is actually the opposite.
I am with you on the emerging markets,
what would you recommend as a better alternative?
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Small humans: you literally risk your life to create them, plus they are expensive to raise up to adulthood. The reward is that you still have family when all your parents, aunts, uncles, and siblings die. They might even take care of you in your old age, or they could turn into drug addicts or criminals. Probably something in between.
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Small humans: you literally risk your life to create them, plus they are expensive to raise up to adulthood. The reward is that you still have family when all your parents, aunts, uncles, and siblings die. They might even take care of you in your old age, or they could turn into drug addicts or criminals. Probably something in between.
Awesome.
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Small humans: you literally risk your life to create them, plus they are expensive to raise up to adulthood. The reward is that you still have family when all your parents, aunts, uncles, and siblings die. They might even take care of you in your old age, or they could turn into drug addicts or criminals. Probably something in between.
I was going to post something but this beats the pants off anything I could say. Definitely awesome.
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Marriage is another one. You can get the benefit of splitting expenses, but you could also wind up divorced with massive debts, alimony, etc. I am not even counting the cost of weddings.
Going to college is also higher risk these days. You put in all that time and money with no guarantee that you will get a job in your field.
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I second currency exchange as adding volatility. To date, I have only seen the upside, but I am bracing for when $c to $u is at par again.
Here's VUN ($c) which simply holds VTI ($u) in Canadian dollars.
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Not me but a very close friend just bought about 6k worth of video cards in order to do digital currency mining. Right now it works out to about $2000/month -$100 in electricity costs for income. So the inital investment will be paid pack quite quickly.
Given this is all presuming the continued appreciation of Bitcoin and it's competitors. However after seeing the rise of bitcoin over the past few years and buying (and unfortunately selling) in the early days around the $100/coin mark I would absolutely consider this a high risk and potentially high rewards investment.
Recently discovered approx. half a bitcoin I bought back when the price was around $100/coin (left over change from an online purchase back then). $50 -> $1,250 in four years or so was a pretty good accidental ROI.
I'm guessing your friend is mining Ethereum or one of the smaller alternative cryptocurrencies. Bitcoin mining itself is now dominated by custom ASICs. If you pick the right currency, mining could pay off quite handsomely: 400% ROI annually in your friend's case before considering the potential for price increases. But there is always the risk that either the difficulty will increase too rapidly, or the value of the currencies drops and you don't pay off your investment in computer hardware. So yes seems to fit the criteria from the title quite well.
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I have two main investment accounts. A retirement account in a total stock market index, and a "fun" / kids account. My original thought with the kids account was to put in $50/mo from birth until age 18. It would be set aside for school, etc, whatever we decide to help them with. (And my wife and I also agreed we wouldn't tell our kids about this account). Well since the kids money isn't critical to life plans, it's high risk. I am swing/day trading a fair number of leveraged ETFs. 3x leveraged ETFs to be specific. Very high risk, high reward. In the last month I'm 5x the market returns. My hope is to meet their number early, then set it aside into something more stable, while continuing to put the "extra" into something with higher risk/reward ratio. We all assume the market will go up, so I'm just putting my chips all in for that specific account. At the current rate it's likely that the fun account will overtake the retirement account, despite much lower contributions. I wouldn't recommend for a retirement account, but for quick wealth building at high risk it's working well! If the market goes down.... it wont.
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Not me but a very close friend just bought about 6k worth of video cards in order to do digital currency mining. Right now it works out to about $2000/month -$100 in electricity costs for income. So the inital investment will be paid pack quite quickly.
Given this is all presuming the continued appreciation of Bitcoin and it's competitors. However after seeing the rise of bitcoin over the past few years and buying (and unfortunately selling) in the early days around the $100/coin mark I would absolutely consider this a high risk and potentially high rewards investment.
Recently discovered approx. half a bitcoin I bought back when the price was around $100/coin (left over change from an online purchase back then). $50 -> $1,250 in four years or so was a pretty good accidental ROI.
I'm guessing your friend is mining Ethereum or one of the smaller alternative cryptocurrencies. Bitcoin mining itself is now dominated by custom ASICs. If you pick the right currency, mining could pay off quite handsomely: 400% ROI annually in your friend's case before considering the potential for price increases. But there is always the risk that either the difficulty will increase too rapidly, or the value of the currencies drops and you don't pay off your investment in computer hardware. So yes seems to fit the criteria from the title quite well.
Good guess. They are mining Zcoins, (6 GTX1070's and 3 GTX1080's in case anyone is curious). As long as the difficulty doesn't climb through the roof it's a very interesting side project.
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I have two main investment accounts. A retirement account in a total stock market index, and a "fun" / kids account. My original thought with the kids account was to put in $50/mo from birth until age 18. It would be set aside for school, etc, whatever we decide to help them with. (And my wife and I also agreed we wouldn't tell our kids about this account). Well since the kids money isn't critical to life plans, it's high risk. I am swing/day trading a fair number of leveraged ETFs. 3x leveraged ETFs to be specific. Very high risk, high reward. In the last month I'm 5x the market returns. My hope is to meet their number early, then set it aside into something more stable, while continuing to put the "extra" into something with higher risk/reward ratio. We all assume the market will go up, so I'm just putting my chips all in for that specific account. At the current rate it's likely that the fun account will overtake the retirement account, despite much lower contributions. I wouldn't recommend for a retirement account, but for quick wealth building at high risk it's working well! If the market goes down.... it wont.
Sent from my SM-N920V using Tapatalk
kvette-
My understanding about the leveraged funds is that they work badly over the long term because the rebalancing used to maintain the leverage works daily. I would advise against maintaining this strategy for a decade.
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I have two main investment accounts. A retirement account in a total stock market index, and a "fun" / kids account. My original thought with the kids account was to put in $50/mo from birth until age 18. It would be set aside for school, etc, whatever we decide to help them with. (And my wife and I also agreed we wouldn't tell our kids about this account). Well since the kids money isn't critical to life plans, it's high risk. I am swing/day trading a fair number of leveraged ETFs. 3x leveraged ETFs to be specific. Very high risk, high reward. In the last month I'm 5x the market returns. My hope is to meet their number early, then set it aside into something more stable, while continuing to put the "extra" into something with higher risk/reward ratio. We all assume the market will go up, so I'm just putting my chips all in for that specific account. At the current rate it's likely that the fun account will overtake the retirement account, despite much lower contributions. I wouldn't recommend for a retirement account, but for quick wealth building at high risk it's working well! If the market goes down.... it wont.
Sent from my SM-N920V using Tapatalk
kvette-
My understanding about the leveraged funds is that they work badly over the long term because the rebalancing used to maintain the leverage works daily. I would advise against maintaining this strategy for a decade.
When I say I hope to reach the goal sooner I really mean it. Over the last few years the $50/mo contribution has amounted to less than $3k. My original goal was $10k per kid (2 kids) by age 18. Using this high risk investment over the past few months I'm over $7k. (My oldest is 5, so I have a few years to go!) I don't need to maintain this for a decade - but as long as the returns are there I will. To be clear I'm not holding, I keep very close stop losses on all leveraged ETFs, so they buy and sell almost daily anyway.
Almost every explanation/article explains that rebalancing daily ruins the long term gains. (I've found one or two that disagree) But if you look at actual long term gains, they are still close to 2x, 3x, (or -2x, -3x, etc).
For example on TECL which is a 3x leveraged technology ETF, with a steady buy/sell pattern of $5k in shares recently I've made about $1,200. I also keep a close eye on SOXL, DFEN, XIV, and UPRO.
I'm not saying I recommend this strategy for everyone, I'm young and it's extremely volatile! But the OP asked for high risk/high reward. :)
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Hard Money loans.
Throw out some adds in CL saying you are interested in funding some RE projects and you could potentially make 10-25% returns in 6 months or however you can agree with the other party. You would probably need 50k+ to start and make sure to get 1st lien status on the property. Make sure you agree on what they are doing and their business seems legit and if they default you are ok taking over that property, which can be a pain.
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thanks for the comments folks
to be more precise i was thinking of someone who has a 10 year time frame and wants to maximise returns passively - done too much research to forget the idea of direct trading for me and I dont trust my impulsive nature to be able to do this.
id love to get to FI in 8 years or less really but saving alone just wont make this possible for me really - so i am relying on strong results to achieve this
i guess i just put it into the most aggressive indexes i think best and hope the market rewards for it.
i dont know how anyone gets to save 75% of their income unless you are literally spending nothing, so most i assume are relying on market returns to FIRE?
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Commodity futures trading has historically been a great way to get rich fast. I had friends at work who played around with lumber futures and other things for a while. They eventually got wiped out but it was great fun while it lasted. Another guy played with penny mining stocks since he had a background in mining. He actually did pretty well and retired around age 40 but he was also Canadian and therefore extremely frugal.
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id love to get to FI in 8 years or less really but saving alone just wont make this possible for me really - so i am relying on strong results to achieve this
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i dont know how anyone gets to save 75% of their income unless you are literally spending nothing, so most i assume are relying on market returns to FIRE?
Well if someone can save 50% on an after tax income of $50k, then it's no problem for someone with an after tax income of $100k to save 75%. Lots of folks here seem to save 65+%.
But if in your case a 75% savings rate isn't achievable, and growing your income significantly over the next eight years isn't achievable (really depends on the field you are in), just realize that by looking an investments with a higher variance in return you're both increasing the odds that you'll FIRE in 8 years and the odds that you still won't be FIRE in 16 years. Are you okay with that trade off?
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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).
ethereum will most likely be trading around $1,000 within the next 1-2 years. there are so many insane projects being developed on their platform. their high level partnerships (microsoft, jp morgan, etc) keep growing at an astounding rate.
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id love to get to FI in 8 years or less really but saving alone just wont make this possible for me really - so i am relying on strong results to achieve this
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i dont know how anyone gets to save 75% of their income unless you are literally spending nothing, so most i assume are relying on market returns to FIRE?
Well if someone can save 50% on an after tax income of $50k, then it's no problem for someone with an after tax income of $100k to save 75%. Lots of folks here seem to save 65+%.
But if in your case a 75% savings rate isn't achievable, and growing your income significantly over the next eight years isn't achievable (really depends on the field you are in), just realize that by looking an investments with a higher variance in return you're both increasing the odds that you'll FIRE in 8 years and the odds that you still won't be FIRE in 16 years. Are you okay with that trade off?
hi mate,
I have a good job that i am doing well in to date, but i dont expect rapid income increases without multiple promotions of which i actually dont want to trade my current free time over. I do get bonuses that i havent factored into my plans as, well they are bonuses.
reality is if i obtain bonuses then it will maybe shade a year off, but I am talking about trying to maintain 10% growth of which nobody is claiming we will get over the next decade. the frutrating thing is the returns that are being returned over the last 5 years are 14-18% which would have given me a massive head start.
i have planned for a 6% real return not minus inflation which should get me there in 12 years maybe sooner.
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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).
ethereum will most likely be trading around $1,000 within the next 1-2 years. there are so many insane projects being developed on their platform. their high level partnerships (microsoft, jp morgan, etc) keep growing at an astounding rate.
Yeah, the contract settling feature seems like a real, potentially game-changing innovation. Didn't want to be kicking myself in a few years if it does eclipse Bitcoin.
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Yeah, the contract settling feature seems like a real, potentially game-changing innovation. Didn't want to be kicking myself in a few years if it does eclipse Bitcoin.
i think you made a great decision. investing psychology is interesting, because with bitcoin (specifically), no one took it seriously when it was $0.01, $30, then $250... it slid back a lot, but once it hit the $2000+ threshold, people (average person / finance) started taking it seriously. ethereum is no different. i personally think its use case and tech is far greater than bitcoin.
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The floor S&P future has a leverage of 250x. That is, you risk $250 for every tick. For a 1% gain/drop, you'd gain/lose $6000. For a 10% drop, you'd probably be wiring in money in the morning.
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Like others have said, using leverage is a key to getting above-average returns with the additional risk that you could blow out your account. The successful traders know what their risk is and offset it with various hedging techniques; you can't just "bet on black" with 3x leverage.
Futures and options will give you leverage in a margin account, but they are both contracts with expiration dates, so at a minimum there is some action required even if it's only once a month. Selling naked options gets you about 5x leverage: 1 SPY contract worth about $25k notional only requires $5k in margin because that's what the broker assesses your risk to be. So rather than buy ETFs you could sell SPY puts and get paid premium. Note that you do not get this leverage in a retirement account.
Futures use SPAN margining which gives you something like 20x leverage, but if your contract starts getting underwater your margin requirements will increase. However, most futures are very big: e.g. the e-mini S&P500 /ES controls over $100k worth of stock. You can further control your risk by using options on futures.
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hi guys,
after spending lots of hours reading and studying and learning about myself through the various "risks" i have come up with a plan that i like in general that will help me invest heavily tax free whilst not killing myself financially so i can sleep with any volatility.
My main aim is get get FIRE by 40 (turn 30 in couple of months) 45 worse case scenario.
I am interested in the extremely aggressive investors who are going for the big returns passively and saying screw you to the volatility. I understand markets go down at times and i dont really care until i start considering quitting my profession, so i have no love for bonds or any kind of "safer" asset I'm already set on full 100% stocks.
i am struggling to find details on what is the most aggressive funds for 10 year statistics - i read about the mid cap for the UK demolishing the ftse 100 for example over the last decade as it is a more growth potential and more volatile but i could not find the info myself.
would be good to see what others views are regarding going for growth as fast as possible and not being worried about crashed etc.
after reading some comments on here i get there are some 100% stock holders but in the main people are very wary of risk on here in general? I would like to hear from the aggressors as i have no interest or love for bonds during my accumulation at least maybe even beyond - warren buffet convinced me of this far too well.
apologies if my view of others is wrong but i do see people trying to avoid "risk" a lot more than trying to reach for the highest long term growth
thanks guys
Here's the deal with seeking big returns: you need to take bigger risk and therefore deal with higher volatility.
---- A 10 year window isn't long enough to provide a high confidence rate of success in any high-return equity-based investment vehicle ----
Go back in history and look at various 10 year periods in the market. There are plenty that are flat, virtually flat, and some are declining - and that's even if you're just investing in the total stock market or even large caps! The only investments that aren't going to have those types of risk are going to be stable value/insured products that are going to lock up your money for a lower interest rate over time in exchange for--you guessed it-- less risk.
What happens if at year 9.5 the market experiences a 50% correction and stays flat for 6 years? That's a possibility. I had my portfolio chopped virtually in half in 2008. What if you're in something more speculative like crypto-currency and some new technology wipes it out and there's a near 100% decline?
I think you're best bet given your investment window, apparent tolerance for risk, and desire to be passive is to go 100% into index funds with very low expense ratios. Plow as much damn money as you can into those over the next 10 years and focus your efforts on frugality, tax avoidance, and saving saving saving.
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This is all just a little bit insane.
The absolute highest return highest risk investment would be putting all your money on a single number in a game of roulette.
You could make 36 times on your initial investment. But you have a 97% chance of losing everything. Therefore I give you an option with the highest risk and highest potential return.
My point is, there's no free lunch. It's all just probability distributions. If you want something that has the CHANCE of making better than the index has historically, you'll have to stomach the possibility of making a lot less than the index. But why on earth would you gamble with your future?
I think you're conflating something in your original post. I agree, #$@$ short term volatility. Who the hell cares if something jumps up and down year by year if it's relatively stable at 10 years? But stocks still can do really poorly at 10 years... their 5th percentile returns only really beats bonds (or combination of bonds and stocks) at the >20 year mark.
I'm 100% in stocks because I'm planning on retiring in >20 years. But I don't cherry pick indexes (like weighting small caps). Higher MERs and while (for example) small caps do have better average returns, the spread is bigger and I'm not willing to make the chance of lower returns for my only 1 possible future.
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hi guys,
after spending lots of hours reading and studying and learning about myself through the various "risks" i have come up with a plan that i like in general that will help me invest heavily tax free whilst not killing myself financially so i can sleep with any volatility.
My main aim is get get FIRE by 40 (turn 30 in couple of months) 45 worse case scenario.
I am interested in the extremely aggressive investors who are going for the big returns passively and saying screw you to the volatility. I understand markets go down at times and i dont really care until i start considering quitting my profession, so i have no love for bonds or any kind of "safer" asset I'm already set on full 100% stocks.
i am struggling to find details on what is the most aggressive funds for 10 year statistics - i read about the mid cap for the UK demolishing the ftse 100 for example over the last decade as it is a more growth potential and more volatile but i could not find the info myself.
would be good to see what others views are regarding going for growth as fast as possible and not being worried about crashed etc.
after reading some comments on here i get there are some 100% stock holders but in the main people are very wary of risk on here in general? I would like to hear from the aggressors as i have no interest or love for bonds during my accumulation at least maybe even beyond - warren buffet convinced me of this far too well.
apologies if my view of others is wrong but i do see people trying to avoid "risk" a lot more than trying to reach for the highest long term growth
thanks guys
Here's the deal with seeking big returns: you need to take bigger risk and therefore deal with higher volatility.
---- A 10 year window isn't long enough to provide a high confidence rate of success in any high-return equity-based investment vehicle ----
Go back in history and look at various 10 year periods in the market. There are plenty that are flat, virtually flat, and some are declining - and that's even if you're just investing in the total stock market or even large caps! The only investments that aren't going to have those types of risk are going to be stable value/insured products that are going to lock up your money for a lower interest rate over time in exchange for--you guessed it-- less risk.
What happens if at year 9.5 the market experiences a 50% correction and stays flat for 6 years? That's a possibility. I had my portfolio chopped virtually in half in 2008. What if you're in something more speculative like crypto-currency and some new technology wipes it out and there's a near 100% decline?
I think you're best bet given your investment window, apparent tolerance for risk, and desire to be passive is to go 100% into index funds with very low expense ratios. Plow as much damn money as you can into those over the next 10 years and focus your efforts on frugality, tax avoidance, and saving saving saving.
Yes this is what makes me think the 10 year plan maybe is too hard to achieve on reality.. 15 years looks alot better from a compounding perspective and a market returns perspective
There comes a point where frugality can only take you so far and developing your career can only take you so far before it comes a burden and reduces your quality of life. I don't agree with everything Mmm advices I think it's too much and even though some will be happy doing it I would suggest that alot of people wouldn't be.
It's a balance at the end of the day
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I'm 100% in stocks because I'm planning on retiring in >20 years.
Why not put your money in a 3x ETF and retire in a fraction of the time? I wonder why I don't do this, but I would rather wait for the market to start out cheaply again, and that could be some time.
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When a normal person starts saving 10% of zher income, it represents only a 10% reduction in life style.
When a mustachian changes zher savings rate from 50% to 60%, it represents a 20% reduction in expenses. Sounds much more difficult to me.
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I'm 100% in stocks because I'm planning on retiring in >20 years.
Why not put your money in a 3x ETF and retire in a fraction of the time? I wonder why I don't do this, but I would rather wait for the market to start out cheaply again, and that could be some time.
Because this won't do better than the index.
(http://www.investlogic.ca/stuff/lev.png)
Blue = 3x leveraged S&P 500
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Where are you getting this BMV:IVV from? That's not the right IVV fund/exchange. Here you go.
https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1496779200000&chddm=991576&chls=IntervalBasedLine&cmpto=NYSEARCA%3ASSO&cmptdms=0&q=NYSEARCA%3AIVV&ntsp=0&fct=big&ei=PbY2WcnzJcGB2AaH_paYDg
Haha! You're buying IVV on the mexican stock exchange! BMV!!
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There comes a point where frugality can only take you so far and developing your career can only take you so far before it comes a burden and reduces your quality of life. I don't agree with everything Mmm advices I think it's too much and even though some will be happy doing it I would suggest that alot of people wouldn't be.
Want to be a bit more specific? For *most* people saving ~30-50% doesn't really require big lifestyle changes, it just requires being more intelligent and sophisticated about how/when they spend money. Every case is different, of course, but there are plenty of examples here of folks who save 75% or more who are very happy with their lives after coming from saving nothing in the past. It might look to deprivation to you to go for bike rides to picnic at the park instead of out for an expensive dinner or whatever, but if you actually tried it, you might enjoy it.
The easy and low-risk way to get to RE faster is to cut expenses. Full stop. Chasing returns is going to mean massively increasing the likelihood of not being FI in your chosen timeframe (or maybe ever).
-W
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The absolute highest return highest risk investment would be putting all your money on a single number in a game of roulette.
You could make 36 times on your initial investment. But you have a 97% chance of losing everything. Therefore I give you an option with the highest risk and highest potential return.
Thank you for this whole post, it helps put a bit of this in perspective for anyone that hasn't committed to their investment strategy already. Increased investment profits comes with increased risk, if you want to retire within a hard 10 years the best way would actually be to lower risk exponentially, slash spending, and increase saving so it is more guaranteed.
The roulette game is a great example of this taken to absurd levels, you wouldn't bet on a 97% return with 3% bankruptcy chance so the closer you get to that scenario where do you stop.
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ER is absolutely doable in 10 years. Just save 2/3 of your income for that long, invest in index funds, and you're done with near certainty. We are so lucky to live in a time and place where this is the case.
The failure mode comes when we impatient humans bet it all on roulette, pork belly futures, stock picking, big directional options bets, leveraged funds, beanie babies, Enron, etc. and lose. The failure mode might mean working another 10 years.
#PrisonersDillemma
So to put risk in perspective, you have a clear and nearly certain path to FI behind door #1, or you could gamble on getting an extra - what? - 3 years in exchange for the risk of completely blowing the opportunity to FIRE in 10y.
Would you play Russian roulette if I offered you $2M if you survive, which you probably will? Or would you walk away, work 10y, achieve FI without me, and not risk blowing your brains out for the sake of luxury goods and services?
We are all in the business of selling risk. When we buy stocks or bonds, we (indirectly) fund companies that may lose all our money.
However, the thing I've noticed about the marketplace for risk is that there's not a constant ratio of risk to price. Shooting for 15% returns is well over 50% more risky than shooting for 10% returns. There are options and futures possibilities to double your money or lose it all that have 50/50 probabilities, making their expected value zero! As Bernie Madoff demonstrated, pursuing just a couple extra % of return can expose oneself to unforeseen risks. At some tipping point on the risk spectrum, the risk of losing becomes a near-certainty, and what potential compensation is worth that risk?
The moral of the story is not to be risk averse, but to understand that not only is there no free lunch, but also that lunch gets more expensive the faster you want it.
I think there are certain options strategies that would meet your needs to juice returns at a minimal risk, such as covered calls or spreads. Even selling monthly cash-secured puts can earn you a double-digit return that is less correlated to the rest of the market.
Check velociraptor.cc. He makes a living trading junk bonds and options, among other things, with 'only' a half-million portfolio and a WR well over 5%. It's as close to a realistic five-year FI plan as I've seen.
In the end, though, it's your savings rate that sets your retirement date a lot more so than a hard-earned extra couple percent of return. Build a spreadsheet if you're skeptical. The ROI on frugality is 25:1.
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There comes a point where frugality can only take you so far and developing your career can only take you so far before it comes a burden and reduces your quality of life. I don't agree with everything Mmm advices I think it's too much and even though some will be happy doing it I would suggest that alot of people wouldn't be.
Want to be a bit more specific? For *most* people saving ~30-50% doesn't really require big lifestyle changes, it just requires being more intelligent and sophisticated about how/when they spend money. Every case is different, of course, but there are plenty of examples here of folks who save 75% or more who are very happy with their lives after coming from saving nothing in the past. It might look to deprivation to you to go for bike rides to picnic at the park instead of out for an expensive dinner or whatever, but if you actually tried it, you might enjoy it.
The easy and low-risk way to get to RE faster is to cut expenses. Full stop. Chasing returns is going to mean massively increasing the likelihood of not being FI in your chosen timeframe (or maybe ever).
-W
i reckon i could get to 60% - but 75% in the UK with house prices / rent prices i cant see happening unless you are a really high earner not living in the most expensive areas
i take home over £3k per month for example and lets say its £3k exactly 25% is £750 per month to live on - the average mortgages in this country are £700 per month alone roughly speaking and £3k a month is decent salary well above the average especially in my neck of the woods.
i have 6 month commit to a strategy - i must admit i am swaying to keeping it a sensible 100% stocks allocation its just which indexes i will pick
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Roommates, rent a place, house-hack, etc. 3k/mo doesn't sound like great pay to me but maybe I'm getting confused with the recent changes in the value of the pound. Or maybe people in the UK don't make much in general?
You can save crazy amounts if you really want FIRE.
Good luck with your investing.
-W
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Roommates, rent a place, house-hack, etc. 3k/mo doesn't sound like great pay to me but maybe I'm getting confused with the recent changes in the value of the pound. Or maybe people in the UK don't make much in general?
You can save crazy amounts if you really want FIRE.
Good luck with your investing.
-W
put it this way - the average is 1,700 per month and that doesnt include pension deductions or company shares of which i pay into before tax - i put 7% in my pension alone
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I purchased commercial property in Detroit in 2004...put $60,000 cash in, sold it in the end of 2014 and made an after tax profit of $1,200,000. That was sort of risky...
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I purchased commercial property in Detroit in 2004...put $60,000 cash in, sold it in the end of 2014 and made an after tax profit of $1,200,000. That was sort of risky...
lucky bugger!!!!
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put it this way - the average is 1,700 per month and that doesnt include pension deductions or company shares of which i pay into before tax - i put 7% in my pension alone
Holy crap, really? People are making take-home pay averaging ~$25k a year (again, exchange rates bounce around, but still)?!?
You need to move, I guess.
-W
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I purchased commercial property in Detroit in 2004...put $60,000 cash in, sold it in the end of 2014 and made an after tax profit of $1,200,000. That was sort of risky...
Commercial property in the downtown and Wayne State area (midtown) have appreciated a lot since Quicken Loans head Dan Gilbert bought up all the real estate in downtown. But that's a one time opportunity. I think that time has passed now, things have appreciated too much too quickly.
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I purchased commercial property in Detroit in 2004...put $60,000 cash in, sold it in the end of 2014 and made an after tax profit of $1,200,000. That was sort of risky...
Commercial property in the downtown and Wayne State area (midtown) have appreciated a lot since Quicken Loans head Dan Gilbert bought up all the real estate in downtown. But that's a one time opportunity. I think that time has passed now, things have appreciated too much too quickly.
Yep, that ship has now sailed and I personally think stuff is a little overvalued, but what the hell do I know. Those who say its silly to take a profit off table IMO are a little silly...or are strictly talking about long term Index investing.
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Where are you getting this BMV:IVV from? That's not the right IVV fund/exchange. Here you go.
https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1496779200000&chddm=991576&chls=IntervalBasedLine&cmpto=NYSEARCA%3ASSO&cmptdms=0&q=NYSEARCA%3AIVV&ntsp=0&fct=big&ei=PbY2WcnzJcGB2AaH_paYDg
Haha! You're buying IVV on the mexican stock exchange! BMV!!
Woops! I stand corrected. Thanks.
Here's some better graphs, accounting for total returns.
https://static.seekingalpha.com/uploads/2015/3/7/30945655-1425709960220003-Dane-Van-Domelen_origin.png
As you can see, it's a bit of a crapshoot whether the leveraged will beat the index over any given time period. Crashes are enhanced 3x too, so it's extra hard to catch up if you start out in one.
Finally this data does not include the fact that management fees are a lot more for leveraged funds.
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put it this way - the average is 1,700 per month and that doesnt include pension deductions or company shares of which i pay into before tax - i put 7% in my pension alone
Holy crap, really? People are making take-home pay averaging ~$25k a year (again, exchange rates bounce around, but still)?!?
You need to move, I guess.
-W
It's 2200 Dollars a month mate for the UK average (1700)
My mortgage is currently less than the average so moving won't help and also costs a fortune to move.
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Even though the average UK mortgage is GBP 750, it is possible to have a below average mortgage, by buying a smaller place, buying in a cheaper area, or renting a room (reduces net payment to mortgage). That doesn't mean that Jamese20 can do better without compromise, only that some people can.
When people are feeling sorry for UK earners do consider that we don't pay for healthcare, we also tend to work shorter hours than in the US, and our property taxes are more stable and generally lower.
I'm comfortable putting more in emerging markets because they are somewhat unloved, but I'd be more inclined to look for a global small cap index than the FTSE 250. If you like the FTSE 250 then go for it.
If there was a way of getting a guaranteed high return over 10 years, everyone would do it.
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Even though the average UK mortgage is GBP 750, it is possible to have a below average mortgage, by buying a smaller place, buying in a cheaper area, or renting a room (reduces net payment to mortgage). That doesn't mean that Jamese20 can do better without compromise, only that some people can.
When people are feeling sorry for UK earners do consider that we don't pay for healthcare, we also tend to work shorter hours than in the US, and our property taxes are more stable and generally lower.
I'm comfortable putting more in emerging markets because they are somewhat unloved, but I'd be more inclined to look for a global small cap index than the FTSE 250. If you like the FTSE 250 then go for it.
If there was a way of getting a guaranteed high return over 10 years, everyone would do it.
Yup, also as we both know a cheaper area than 750 per month is a huge sacrifice in the country once you start getting to that level you are talking about some of the poorest parts of the country that's if you are starting out like I have on the property ownership.
I Have a family now so renting a room out to someone is out the question and that would also be a sacrifice and reduce quality of life
As I say there comes a limit to where these changes reduce your overall happiness and quality of life
The reason I suggest the ftse is because our £ is alot weaker now so buying international shares is alot more costly than staying in the UK and this could be the case easily for the next decade with brexit maybe even longer
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Yes, a £750 mortgage for a family is more difficult to reduce than a £750 mortgage for an individual.
The FTSE makes more sense (IMO) for someone earning and spending in GBP (I wasn't sure where you were based when I first replied). I also feel that international stocks are expensive (in GBP) following the currency crash. I have some home bias, not because I think the UK will necessarily do better than elsewhere, but because if the UK does well then my spending is going to get more expensive (and possibly after I've stopped earning).
The FTSE 250 probably tracks the cost of living in the UK better than the FTSE 100, all the oil and big banks have a trickle down effect, but unless you live in Aberdeen or London the relationship is more tenuous.
Would you consider relocating or downsizing when you reach FIRE or your child(ren) leave? IMO there are some lovely more affordable places in the UK where property is cheap because they are remote or far from employment centres. Again, it won't be suitable for everyone, but it gives you the chance to cash out on some of those mortgage payments.
The highest impact changes I've made (that could have gone wrong) were moving to a new job that was a stretch for my skills and in a shit location, and buying houses that needed work and doing them up.
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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).
I would agree that this is very Risky , but I would also think that in you can stay put for 10 years - you'll make quite a bit on this!
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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).
I would agree that this is very Risky , but I would also think that in you can stay put for 10 years - you'll make quite a bit on this!
I bought a grand total of one ETH coin a week or so ago. It's certainly more interesting to check than my index funds!
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I bought a grand total of one ETH coin a week or so ago. It's certainly more interesting to check than my index funds!
doesn't matter, your 1 ETH will likely appreciate 3x by the end of the year :) bitcoin just broke $3,000 today, but slid back a bit.
2017 is the beginning of mainstream crypto adoption.
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Why does the appreciation of crypto currency imply the success of crypto currency?
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Why does the appreciation of crypto currency imply the success of crypto currency?
I don't think it does, but I would also argue that the converse of that statement is likely true: the success of crypto currency would (likely) imply the appreciation of crypto currency.
Appreciation could come from speculation, independent of the adoption of the currency (success).
Widespread adoption will require a lot greater volume of transactions be conducted per day, which will, assuming a constant velocity of money and a largely fixed money supply, mean the price of the currency would have to appreciate substantially.
*For a benchmark of what widespread adoption of bitcoin or another cryptocurrency would look like in terms of increased transaction volumne: right now bitcoin has about $800M in transaction volume a day. Visa has ~$20B. UnionPay (the chinese alternative to Visa/Mastercard/AmEx) does a bit more than Visa, and there are a bunch of other payment processing companies out there.
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I agree that transaction volume = success.
Does appreciation imply that when merchants receive payment in Bitcoin, they opt to maintain the funds in Bitcoin rather than converting them back to their home currency? That also sounds like success to me.
What does not sound like success is speculation. I think of Bitcoin as a "country" in which certain goods/services can be purchased, like Switzerland. The Swiss franc has appreciated substantially because many people have opted to convert some Euro to hedge against currency collapse. This has been quite hard on Switzerland's many export industries (population of Switzerland is about 8.3 million, about 10% of neighbor Germany)
Bitcoin merchants aren't nervous about Bitcoin's appreciation because they adjust their "bitcoin" prices to keep the effective dollar price constant. When this changes, it will be a major victory for bitcoin (or whatever crypto-currency can achieve it).
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I agree that transaction volume = success.
Does appreciation imply that when merchants receive payment in Bitcoin, they opt to maintain the funds in Bitcoin rather than converting them back to their home currency? That also sounds like success to me.
Well I think in part the problem is that bitcoin (or whatever crypto-currency) could become different kinds of successes. Let's call these Paypal success (using them to make payments but not to store wealth), Gold success (making them to store wealth but not really to make payments), and Dollar success (both). One wouldn't say "paypal will really be a success once merchants stop pulling the money they receive in credit card payments back out into their bank accounts." Of the three, I think paypal success is the lowest hanging fruit. But cryptos may go nowhere. They could first achieve paypal or gold success on their way to dollar success, or they could achieve either paypal and gold success but not go further than that.
The advantage cryptos have relative to mastercard/western union/paypal/etc is that the cost of processing payments is faster, transactions settle much faster, and merchants don't have to secure the payment information of all their customers or face liability. Sellers also don't have to deal with fraud and chargebacks, although this is offset by the concern for consumers that if someone steals your private key, you cannot close your account and dispute the charges.
Until bitcoin values are equal or less volatile than the value of the dollar, or merchants are paying the bulk of their suppliers or employees in bitcoins, I imagine they will continue to convert any payments they receive right into dollars. The people who run retail businesses and the people who have the interest, resources, and risk tolerance to speculate on currency markets are largely non-overlapping groups.
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Pretty sure most would consider starting a business to be the highest risk/reward investment.
Obliviously in rare cases it can lead to tremendous wealth. Nearly all of the richest people in the world own a business or have in the past. It requires a massive upfront investment of time and or money upfront.
I've watched a friend on and off working on starting a new business and it looks incredibly back breaking and stressful. Not to mention that he and part of his family have put up $100's of thousands of dollars into to pay for piece to built and higher contractors to get things going.
And at the end of the day you have zero guarantee of long term return and stand a good chance to go belly up at some point and get nothing.
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Geron (GERN), or any pre FDA approval biotech.
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I have shares of Fanny Mae (FNMA).
The current value is more than double what I paid. If the lawsuits filed by hedge fund managers to force the government to relinquish dividends back to the share holders are successful, the value will skyrocket. If not, it will continue to pay no dividends and be worthless.
Big risk, potential big reward.
P.S., I don't have ALL my eggs in that basket, just some.
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As an update to this thread... I have an account with a mix of SPY and some 3X leveraged funds. Over the past 12 months I'm up 150% +. High risk, but nothing compared to the reward!
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10yrs is still a long time. Index the heck out of it. Keep looking at ways to save on the spending end and pound every bonus into the market. People keep saying future returns will be below average and we keep crushing the shit out of it. Just get as much money into the market as you can and you may find your goal is easily met in 10yrs.
I would rather do that than try something really risky and be the 70yr old at the pub shit faced and with a sad sad sad story to tell about how they were almost rich and almost retired early.
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k-vette, have you read this bogleheads thread (https://www.bogleheads.org/forum/viewtopic.php?t=5934&postdays=0&postorder=asc&start=0) it nicely highlights the downside of high risk / high reward.
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i dont know how anyone gets to save 75% of their income unless you are literally spending nothing, so most i assume are relying on market returns to FIRE?
I think this is a problem that can be tackled many ways. You could invest high risk, and gamble your way to FI.
But, if you can't envision saving 75% of income, you either have a spending problem, an income challenge or no desire to compromise on location/job/hours etc.
For what it's worth, I'm very pro EM lately, I think the world is changing and there is certainly a middle class of consumers to emerge in Asia and Africa - the days of the UK dominating are long over, and as for the US influence, only time will tell.
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75% is commendable. I cannot get all the way there.