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Everything posted by EdLaFave

  1. I’ve spent months seeking out FIRE criticisms and cautionary tales, but I think this article will be the last that I read. If you’ve got 33x yearly expenses and are willing to go all in on stocks (or close to it) then I haven’t heard a reasonable argument for not pulling the trigger.
  2. I read his first 3 or 4 posts where he spoke from two different personas (MMM and the Skeptic). I fully understand he is trying to be an interesting showman and intentionally outrageous. I just don’t like it. I like my finances the same way I like my physics, math, and science. Teach me the facts, explain why it is useful, and show me how to apply it. If you attempt to play on my emotions (especially without thoroughly arguing/proving the facts), promise the world, or present yourself as some kind of savior...then I’m instantly going to dislike you and not trust you. It’s a hardwired physiological response. I also believe he is wildly out of touch with the circumstances of tens of millions (maybe more) of Americans. In the Playing With Fire trailer he said he accidentally built a cult. After reading those posts it seems hardly accidental. He seemed destined to be ignored or develop a cult like following...his presentation didn’t allow for many other outcomes. These quotes illustrate why I feel this way.. You will suddenly be able to fly freely through the world, free from having to work for a living, able to start living life as you choose, doing exotic things like spending time raising your young children, taking a 3-week vacation each month, or just enjoying understated shows of leisure like sweeping your driveway in pajamas at 11am on a sunny Thursday morning. Everyone can do it. But most people think they can’t because they’re still stuck in the Matrix. They blame “the economy” or other external factors, when really the only problem is they aren’t listening hard enough to Mr. Money Mustache. But there also a fine line between staying afloat and rising up quickly to become very wealthy. What if the person breaking even above found a way to save $10 a day instead of spending $25 more than she made each month? Even if you work in Wal-Mart, you make more money than I did, you get to walk around in a huge fancy store, and you can save almost everything you earn if you don’t get ridiculous and waste it all.
  3. One of the metrics I keep track of is my profits. I’m down 80k from my high watermark and I’m psychologically preparing to lose another 100k during 2019. If we hit a downturn I’ll be studying the emotional affect it has on me. So far I feel nothing about losses as long as I think about them in terms of dollars. However, if I think of losses in terms of how it affects my FIRE date (assuming a 5 year decline/recovery cycle), then I feel some real negative emotions. It’ll be an interesting ride and I look forward to seeing what affect a potential recession has on other investors. I will be staying the course simply because there isn’t another viable option.
  4. Took a quick glance at the market and we are in correction territory. I guess we will find out soon enough if we are heading towards bear market territory. If you believe in such things, the shiller p/e is a shade above 29, which is historically high and gives us plenty of room to fall. Once again, I feel like we are in the beginnings of a downturn.
  5. Today is the first time I read MMM’s blog and I was surprised by just how much I disliked it. Now I understand some of the people criticizing FIRE. I’m looking forward to that FIRE documentary though. @sschullo, any idea when that is coming out?
  6. Two reasons. When people hold concentrated risk, it is always interesting to see how it turned out. I love the threads on investment forums where somebody goes all in Tesla or shorts the S&P500. Having concrete comparison results makes the gamble more interesting. Also it sounded like you were happy with the performance when you had it and maybe a bit envious of the returns after you sold it. It looks like you should have felt the opposite...unhappy with the returns when you had it and happy you avoided subpar future returns when you sold it. Although I can’t say that for sure because my calculations used insufficient data (dividend data and time span data). At any rate, we agree. Total market index funds....buy them, hold them, and love them.
  7. The holding period isn’t explicit, but an investment in Vanguards S&P500 index fund nearly tripled in nominal terms from Jan 1998 to Dec 2015 (18 years). From Jan 2016 until now the S&P500 is up 42.3% compared to the listed 3M gain of 20.5%. ...although in both of these calculations it doesn’t sound like you’ve accounted for dividends in the individual stock whereas the S&P500 calculations do. So the 3M stock probably did better than described above. ...either way, what’s done is done and you’re so clearly right that concentrated risks are to be avoided with the use of total market index funds.
  8. What did they mean by that? My parents didn’t have money, which means they couldn’t teach me anything. I suspect children born into wealth have a huge head start on learning about money.
  9. I frequently day dream about a society that only steps away from personal free time to pursue activities that are truly necessary (healthcare, education, housing, utilities, food, art, safety, technology, etc). I suspect it would require an entirely different economic system. I suspect there will be more people than jobs and I suspect many won’t have the necessary skills or aptitude. I suspect we aren’t sufficiently civilized to deal with that possibility...I suspect we’d see movements to “cut the dead weight among us.” I imagine we’d have more success if virtually all of the work was done by robots...but maybe we’d just see even more wealth in the hands of whoever owns the robots. ...my view of people is dark. This thought experiment almost always turns to a dystopian future.
  10. The stuff you buy ends up owning you. A minimalist friend told me that their rule of thumb is to get rid of anything and to refuse to buy anything that: 1) Isn’t regularly used (maybe at least once a month) 2) Isn’t generating additional happiness/health/wealth. People think I’m crazy, but do we really need much more than clothing, shoes, toothbrush, dishes, phone/computer, tv/monitor, blanket, pillow, transportation, and a place to live?
  11. Option 1: Keep all of your available assets invested and add to your portfolio whenever you have surplus income. As a result, your portfolio always reflects your ideal asset allocation. Option 2: Keep a significant portion of your portfolio in cash and slowly invest the cash over a fairly significant time period (a year?). Your portfolio will initially be far more conservative than your desired asset allocation until it gradually falls in line. I’d argue option 1 isn’t employing a scheme, they’re just keeping a constant asset allocation. I’d argue option 2 is employing a risk mitigation scheme, which results in a drastically different and variable asset allocation for a period of time. In my mind these two approaches are sufficiently different that we can’t accurately say they’re both doing the same thing even if they both invest regularly. Sure, they aren’t in 100% direct conflict. I suppose one would have to use leverage to short the market to be in direct conflict, but their philosophies are sufficiently different in my view. If somebody needs to employ an inferior and illogical investment scheme to handle a very rare event (windfall) and if that scheme has a limited duration (a year?)...then I suppose they aren’t committing the worst sin, which is why I’ve never argued strongly that somebody shouldn’t do it. My passionate argument is more reserved for a semantic pet peeve and illogical behavior. However, I worry the need for the mental gymnastics stems from a portfolio that is too risky for them to handle. I use market timing to refer to any investment scheme that causes you to change your portfolio based on your perception of the market or your beliefs/fears/greed regarding the market’s fluctuations. Perhaps other people use a different definition. There are certainly more harmful forms of market timing than DCA. At least DCA has a fixed time window and doesn’t encourage taking risky/concentrated positions. I’ve felt the same way my whole life.
  12. DCA isn’t a method of calculation, it’s an investment technique. Words evolve and eventually mean whatever people use them to describe. In my view people are destroying the meaning of DCA just as they have the word “literally”. In my view, Wikipedia has correctly defined DCA. In my view, we don’t need a special term to describe investing on a regular basis whenever you have surplus income. That is by default, plain old investing. To withhold cash from the market for some future time out of fear the market will decline is called market timing. Within that subcategory there are lots of schemes of which DCA is just one. We really don’t need a term to describe non-market timers just like we don’t really need a term to describe non-diabetics (although perhaps there is one). That risk exists regardless of whether you have new money or existing money. Basing future actions on exactly how you got into a particular situation isn’t logical because you are where you are regardless of how you got there. To think otherwise brings us errors like the sunk cost fallacy. If I spent the last 10 years slowly building up a million dollar portfolio then there is a chance that tomorrow the market will begin a huge decline. If I inherited a windfall, spent the last six months DCAing, and now have a million invested there is an equal chance that tomorrow the market will begin a huge decline. If I inherited a windfall today then there is an equal chance that tomorrow the market will begin a huge decline. ...in each scenario, I have to decide today (and every day) what percentage of my assets should be invested in the market. Each scenario is absolutely identical. People would correctly criticize me as a self-destructive market timer if I moved my portfolio into cash with the intention of spending 6 months DCAing and they’d simultaneously and incorrectly consider me a reasonable investor if I kept an inheritance in cash and slowly dripped it into the market over six months. If people plan to behave differently in functionally identical scenarios, it reflects a misunderstanding of reality on their part. DCAing does provide risk mitigation, but using DCAing to mitigate risk isn’t reasonable. That’s what bonds are for and if the risk profile of your portfolio is too high for you to stomach 100% of your assets being invested then your asset allocation is inappropriate and you need more bonds. You don’t need to keep arbitrary percentages of your portfolio uninvested for arbitrary periods of time. You don’t need a portfolio with an arbitrary asset allocation that changes at arbitrary times to arbitrary degrees.
  13. Alright everyone, as they say, I’ve predicted 30 of the last 2 down markets...so is this the moment we begin our return to more (historically) normal prices for stocks? (purely rhetorical because nobody knows anything, this is just meant to commiserate with anybody feeling the pain of losses) The past couple months have been tough. I hope we’re all riding it out well!
  14. I don’t blame the author too much, but I was repeatedly told I couldn’t access my 401k penalty free until an advanced age and it discouraged the notion of FIRE or the use of a 401k. Luckily the FIRE and investing community provided the correct information.
  15. I wish the authors of these articles would be more knowledgeable. They incorrectly say it isn’t possible to withdraw money from your IRA/401k penalty free if you retire early.
  16. I totally understand why somebody wouldn’t get involved and I wouldn’t try to change their mind. However, for me personally, I think people are guaranteed to act unreasonably in certain circumstances. I don’t like the idea of allowing that improper reaction to stop other people/me from doing the right thing and sharing helpful/accurate information. I prefer to limit the fallout of an unreasonable/illogical reaction to the individual person having that reaction.
  17. EdLaFave


    I agree with the sentiment, but it has problems. People don’t have control over a declining market, declining markets are an ongoing event without a known end, stock market declines give you nothing in return aside from the fear of rising unemployment, invested assets are required for security/retirement, and invested assets are usually much larger than some of these items like purchases/sales tax. ...but maybe this framing is more effective than focusing on the temporary nature, inevitably recovery, and higher expected returns than the alternatives.
  18. I’m fighting a lost fight here, but this is one definition of literally per google: ”used for emphasis or to express strong feeling while not being literally true.” 🤷‍♂️ If DCA is investing regularly then I’m not sure what plain old regular investing would be.
  19. Dollar cost averaging is when you take a sum of money and instead of investing it all at once you invest it chunk by chunk over a period of time. Generally people begin to consider dollar cost averaging when they receive what they consider to be a large sum of money. Taking the surplus from each paycheck and investing it is NOT dollar cost averaging because at any given moment in time you’re fully invested. You’re not leaving money on the sidelines based on your fear that the market may decline. Many people frequently and erroneously use the term dollar cost averaging to refer to investing on a regular basis because you earn money on a regular basis. So the term is beginning to lose its meaning, like people using the word “literally” when the word they literally should be using is “metaphorically”. At any rate, DCA is statistically inferior, but it isn’t a terrible thing to do. However, if somebody is too afraid to put their assets in the market all at once then I question the appropriateness of their portfolio’s risk profile and/or their understanding of what they’re invested in and how markets function.
  20. Investing a sum of money into the market over a period of time has a lower expected return than putting it all in at once. Spreading the investment out over time is a mental fallacy. Every day we all decide what percentage of our assets should be in the market. Nobody ever chooses to take out a percentage and drip it right back into the market, which is exactly what you’re doing if you don’t invest it all at once. Market timing is bad for your financial health no matter what form it takes.
  21. If I were betting, I’d bet that the funds-of-funds will remain unchanged for now. However, I imagine they’ll be lowered at some point.
  22. I gotcha. It’s tough for the individual. In my experience, the generally agreed on wisdom is often terrible. So I understand the desire to turn to a pro. However, my experience also tells me the median pro is also terrible. Seems you have to become an expert in everything, which is why the internet is amazing!
  23. In 2016 the median household income was 59k. Whether it is done through roommates, family, or significant others...IMO, the best thing we can do for our finances is to fill as many rooms as possible with people who contribute to housing expenses. That actually reminds me of my childhood when that opinion was first formed. I grew up in Coral Springs (Ft Lauderdale area) and I lived one street away from a good sized community of black/Haitian folks. I remember white people would always look down on them and make snide/racist comments referencing the number of people that occupied each residence. I was amazed by the pride/racism that prevented these white folks from shutting up, listening, and learning because the blueprint was right in front of them (even though the residents probably didn’t have much choice).
  24. I’m still waiting for funds-of-funds to be reduced as well. No reason to add on so many basis points given that everything is Admiral now.
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