I thinking carving out a base and then moving up there, buying everything in cash, means I'll have enough freedom to be riskier with investments.
buying everything in cash increases your risk profile - having a mortgage or using credit cards decreases it.
I think I am a bit more ok with risk since I already have low expenses. Also, being a Dave Ramseyer is making me a lot more conservative in other aspects of my life. E.G. building an emergency fund, getting rid of all debts, seeking to not have a mortage etc. etc. I think this sort of hedge is, in effect, my "bond".
incorrect having a mortgage acts more like a bond than not having one.
Do I really have to explain why I need an emergency fund? In case I need money so I don't have to pull from my investments and prematurely drain them. I won't use debt for this since I don't want credit cards. I'm self-aware enough to know that if I kept CCs for the sake of "emergencies", I'd overuse them.
doesnt have self control to use credit cards but thinks they will have self control to be 100% stocks in a down market.
I, in general, just assume there is nothing free in finance. You pay for something somewhere. Be it paying with the increased risk of making a mistake or being more cavalier if using a rewards card. Or increased risk over all of your assets when leveraging a house. If you can't see exactly how you are paying something, then you probably just aren't modeling things properly.
if nothing is free in finance then there are two sides to a risk equation you continual bring up risk when leveraging a house but i dont think you actually understand what the risks are on both sides of the equation please elaborate on what risks effect both owning a house outright vs investing and holding a mortgage
I see moresoe that, if you use a credit card, you have a 7% probability of making money off of it.
please show data to back up this statement b/c its ridiculous
Also I trust the data. I'm a Data Scientist. Why wouldn't I.
much data has been presented here and you've laughed in the face of it - yet another reason i dont believe you personally could stick to a 100% equity play withdrawing 4% in a down market
The idea is to get your base expenses as minimal as possible giving you the freedom to make sensible but risky investments.
If I can at any point only need to pull out 500$ a month, what will I care if the market falls 30% on 2 million dollars.
please elaborate on this b/c this isnt a 4% SWR its a 0.3% SWR - you're all over the place here dude.
And I see it this way. The math is great. But day in and day out I do question how much of it actually applies. Spending money is easy and sticking to a budget is hard.
if you dont think the math applies to using a credit card or a mortgage how does it apply to a 100% stock allocation and a 4% SWR.
Here is my thinking. I'm not confident many people can even know when they are spending properly. In my experience, human beings are unreliable narrators. We intend to take a certain course of action and then actually take another. This tends to be oberservable from the outside but isn't apparent to us. I think this is especially true in finance. This is why rewards programs exist, and make a ton of money. No one intends on going into debt or even holding a balance. But several people eventually do, including those that are good with money. Everyone thinks they are the select few that is better than the population.
so your logic that we're irrational when it comes to spending with credit cards and observations made by outside observers only applies to debt and spending and doesnt apply to your idea that you could maintain a 100% stock allocation at a 4% SWR.
"Not let emotions get in the way of finance." I think that is a fools errand.
so if you truly believe this then its hard to imagine how you could hold 100% stocks with a 4% SWR. then a few posts later you said this again
So if it helps, after read Early Retirement Now's paper, I will probably go 100% Equities.
One of the issues with ETFs is they are too liquid, despite being a long term investment. You can enter and exit them with the click of a button. OR you can just change allocations. It is too easy to time the market, and therefore the likelihood of doing so increases. I see a lot of people scoff at this, but I honestly wonder how many actually will adhere to perfect behaviour in the future.
ETFs, especially broad market etfs, might not properly price their underlying securities. Eventually, as they grow in popularity, they could cause ineffeciencies in the market that others could take advantage of. This is interest since means, in order for them to work, not everyone can use them. But I also worry of what would happen in the future if another type of investment becomes popular and it becomes compelling to leave them, at which point we are at the first problem.
I think some of the assumptions people make about active traders not beating the market doesn't factor in if the are actually trying. It could be the case that many are focusing on more conservative or dividend portfolios for clients that are investing later in life. So really they are not trying to beat the market. Then again, I just believe this because a certain youtuber said, I don't know if it is true or not.
now we have an entire post about ETFs when you should be saying index funds. - again more education needed if you plan to stick to a 100% stocks with 4% SWR.
I see it a bit differently. Rather, if you want to invest and attempt to beat the market, you need to accept a higher amount of risk. This risk can come from several factors, be it more volatile stocks, use of advisors with higher fees, or the inevitable amount of errors you would make in the learning stage of investing.
use of advisors with higher fees - this has been proven with data over years to be a fools errand. again more education needed