Hi there! 32 and tired of the rat race

nbw888 said:
Yes, it is all a risk, thus all a gamble in essence! Diversification is no more of an "investment" then. It is just a safer bet. We are simply comparing focused gambling vs. diversified gambling!:)
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Good luck with that.
 
nbw888 said:
Yes, it is all a risk, thus all a gamble in essence! Diversification is no more of an "investment" then. It is just a safer bet. We are simply comparing focused gambling vs. diversified gambling!:)
Click to expand...
Over the life of this board we've watched a number of posters share their portfolio compositions. I have no idea how many "Hi, I am..." threads I've read over the last seven years but I'd safely say it's over a thousand.

The portfolios that are diversified among the typical asset classes are pretty boring. Nobody gets excited about them. They mostly go up. Sometimes they go down. People retire on those portfolios anyway and they appear to live happily despite the lack of excitement.

Every hundred posters or so, one comes along who's figured it all out. It doesn't matter what the assets are-- stocks, options, commodities, AI trading programs, even online poker. They're sure that this time they have it right, whatever "right" may be. They know the industry, they work for the company, they trust the execs, they've backtested all the way to the 1700s, they personally did the programming. They have the edge. Everyone else's concerns & comments are appreciated but [-]ignored[/-] unenlightened, scared, or just plain boring.

The only thing those posters' portfolios had in common was a lack of diversification. You can probably see where I'm going with this.

We talk about the risks, but no one listens. They're in a hurry to get to ER, they know there's plenty of upside, they'd have to pay a big tax bill, "just one more year", they're absolutely positive that they're being compensated for their risk (so far!), ad [-]nauseum[/-] infinitum. Sometimes they're polite about it, sometimes they're defensive, sometimes they're downright hostile & rude. But mostly they're serenely amused at our inability to "get it" about this diversification thing.

Then a black swan swoops down onto their portfolio. With a bad case of diarrhea.

So although I'm preachin' to your choir, I'll mention for the benefit of the other posters the names Poyet, VaCollector, Dixonge (who BTW has a most excellent blog going on his post-options travels) and... I'm sure there are one or two others who have hands-on diversification experience to share with the class.

Brewer's been on the stage or in the wings of some of the decade's most spectacular financial flameouts. Right now he's being so polite that it hurts to read his posts. If he thinks you should be buying puts then you should be buying long-dated ones to hedge most of your portfolio, and you should be buying new ones as they expire. Go [-]cheap[/-] OTM 10%-15% if you're serenely confident of your market perception, but pay the insurance premiums now.

Or, as he said, you could always use the "Good luck with that" strategy.
 
Hey, Nords, he will keep his own counsel. Maybe it will work out for once, he will make a ton of money, manage to keep it and spend eternity kicking it on the tropical beach of his choice. Million to one chances pop up nine times out of ten, right?
 
Nords, I appreciate your viewpoint. In no way do I think that I have it right, or have found the secret and only I "get it". Only time will tell. I do have confidence in my research to date, and unless someone can give me a concrete thesis on why my position is mistaken beyond "what if...", then I will continue on my path with confidence that I have made a solid and educated decision.

I'm always open to new input and ideas to think about. I do not skew facts to what I want them to be, but simply for what they are. If you or anyone has insight that will prompt me to rethink my sector positioning, I would be most appreciative of that insight.

Brewer, I'll be sure to invite you to my private island one day and you will have your pick of nude supermodels to serve you drinks and give you foot massages!! :cool:
 
Nords said:
Feh, after watching the last batch of flaming crashes I felt obligated to try.

I'm done here. Anyone else want to give it a go?
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I'm very aware that this trade will end someday. A bubble is brewing. It will crash and burn most definitely. I simply do not think that the time is now though.

As for diversification, I am simply not that person. I have always been, and probably will be prone to take big risks in life. That's just my style, and I'm fully comfortable with it and take responsibility for the consequences of those risks.

I do not take your words for granted. Thanks again for your insightful advice.
 
On a different topic, but relevant to the information you posted, isn't there any way you can outsource or delegate some of the more mundane aspects of your consulting work? Yes, you'd have to pay someone else for it, but it might be worth it if it frees up more of your time for the more substantive work and/or makes your life more manageable and maybe even a bit enjoyable. If you are stuck in a job where someone else is forcing you to work insane hours that is one thing, but complaining about burnout when you are self-employed and making the kind of money you must be to pile up so much regular and long-term savings/captial seems a bit counter intuitive. YOu are obviously smart and skilled. Apply some of those smarts and skills toward learning to delegate more effectively and you might reach your ER goals even sooner, and enjoy the path to them even more.

lhamo
 
Nords said:
Feh, after watching the last batch of flaming crashes I felt obligated to try.

I'm done here. Anyone else want to give it a go?
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Well, keep a bag of marshmallows, a pack of hotdogs and a toasting fork handy. That way you be prepared for a weenie roast over the smoking embers or over the nude firedancer on a private island.
 
Nbw, I could offer you all kinds of plausible reasons why you might be wrong. Experience with other absolutely convinced posters suggest that it would be a waste of time for me and an annoyance for you. So I hope your investing strategy works out, but I will decline to try to dissuade further.

I will observe that I have some similar tendencies to yours. I run what most forum members would view as an aggressive/concentrated portfolio and I take significant risk. That said, a few years ago I realized that I had acumulated significant capital and needed more than a vague notion of my endgame. I realized that I needed to relocate and that I was not far from my goals so long as I do not blow it. I started diversifying and reducing my total risk, and I am moving to my eventual retirement destination under the auspices of a job transfer. My portfolio went from pretty much all equity with huge concentrations (typical of my early accumulation years) to 30% cash/CDs/bonds, 5% (and growing) hedged/merger arb funds, and the balance a gradually more diversified equity portfolio. I now try to limit individual names to less than 10% of the total and single sectors to 25% (I am slightly over my sector limit). Over time, I will look to whittle down my largest exposures as I approach my goal.

You may be looking at this and thinking I am giving up a ton of return. There is some give up, but I am getting something in return: much greater certainty that I will meet my goal in an acceptable amount of time. I am far enough along that I do not wish to have to start over again.
 
nbw888 said:
I honestly don't see any realistic scenario that can get the government and our currency out of the mess it is in.
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Then you should be looking at other ways to bet against the dollar. Chinese equities would be one way. Still high-risk, but at least you'll be spreading the risk over multiple wild horses. Mining is all very well, but at some point in a collapse, the demand for new precious metals will drop off too.
 
nbw888 said:
Nords, I appreciate your viewpoint. In no way do I think that I have it right, or have found the secret and only I "get it". Only time will tell. I do have confidence in my research to date, and unless someone can give me a concrete thesis on why my position is mistaken beyond "what if...", then I will continue on my path with confidence that I have made a solid and educated decision.

I'm always open to new input and ideas to think about. I do not skew facts to what I want them to be, but simply for what they are. If you or anyone has insight that will prompt me to rethink my sector positioning, I would be most appreciative of that insight.

Brewer, I'll be sure to invite you to my private island one day and you will have your pick of nude supermodels to serve you drinks and give you foot massages!! :cool:
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No... nobody can give you a 'concrete thesis' on why your position is mistaken.... because you believe it is not....


Back when I was getting my MBA I had a friend who insisted that the gold standard was the best thing in the world and that the US should go back to it... I asked one of my professors what is the best argument that I could use to convince him that he was 'mistaken'..... The prof asked me one question 'does he really believe in the gold standard?'... I said 'yes'... his response, 'there is nothing you can say to change his mind'.....


Your mind is made up... nothing will change it... no amount of PHD research or portfolio analysis by Noble prize winners will do a thing to your thinking (even though most people would consider them a 'concrete thesis')....


Now, saying that... who knows if you will make a lot of money or not... I sure do not and there is no one on this board who does.... (hint: that includes you)... There are a lot of people who took the risk that you are taking and a number has paid off very well (say if you put all your money in Microsoft in the early 80s and let it ride)... but the research in concentrated portfolios usually leads to the opposite...


As Brewer said "good luck with that"..... and as Nord said "I'm done here"...

Just to not end in snarkiness... I really do hope it works out for you....
 
I am not going to try to change your mind, even though we have several friends who will be working into old age because of their conviction that their idea was the thing to put the majority of their money in, which of course didn't work out, or they are upside down on a big mortgage that they were going to sell to finance their retirement etc. but to each his own.

My question is what is your lifestyle like and what do you want it to be? What is your life outside of work? If you work that many hours do you have time for friends and family? Is there a partner and children in the equation? Because life is not just about money but about living and being part of the world around you. You can never get your 20's and 30's back but when you are 60 or 70 most start to lose the ability to do some things just because you wear out, and many have not been able to live that long. Life can be pretty lonely and not very satisfying if you don't figure out how to spend time doing things besides being a wage slave and accumulating a big pile of money.
 
Thanks everyone for your replies. Thank you again for your concerns over diversification.

I am always interested in new viewpoints, so if people have thoughts or arguments against my positions, I welcome them. I'm not some ego driven idiot that will maintain my way of thinking at all costs. I accept reality for what it is, not what I wish it to be. If I'm wrong, and the facts given to me make sense and I need to change things accordingly, I am all for it. I'm trying to make money to be financially free, and I frankly don't care if I make it in gold, silver, microsoft, cow dung....it makes no difference to me!

To answer regarding working too much and enjoying life now, I agree that you have to take time to relax with family and friends and enjoy yourself.

As for my lifestyle, I think it's overall pretty good. I don't have any kids yet (one day though!), and I'm in a relationship with an ICU doctor, which works out well for us, since we are both quite busy people. We do find time to travel, go out to dinners, spend time outdoors, and I try to do one weekend camping/fishing trip a month usually. I grab lunch with friends when I can, go out to bars once a week with my buddies...I find a couple hours here and a couple of hours there.

I treat myself to nice things if I want them, and I'm not a saver to the max. I enjoy the money I earn, but also save it too.

The thing I've come to realize is that saving and having a bunch of money in a retirement account doesn't mean a thing. You can't even access it until you're 65 years old, and who knows if you'll even be alive then. I still have to deal with difficult clients, run to meetings, put out fires, etc. in order to make money and pay the bills. I'm not financially free. I cannot delegate the work I do to other people, because I am being paid for my artwork and design services, so I'm the one that has to do it.

My new goal now are to start focusing on passive income streams such as income producing real estate. I'd be grateful for any advice or wisdom on real estate or any other great ways to generate passive income!

Thanks everyone for all of your thoughts.
 
Are we going to get a Robert Kiyosaki pitch now?
 
nbw888 said:
Is your ego bruised because I didn't take your advice to diversify? :confused:
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Not hardly. Its just that there is a certain pattern with new posters here and when someone comes in touting the merits of an asset class with strong recent performance and then suddenly switches to phrases mostly used by hucksters and late night infomercials, I have an inkling of what I might see next.
 
nbw888 said:
The thing I've come to realize is that saving and having a bunch of money in a retirement account doesn't mean a thing. You can't even access it until you're 65 years old...
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Wrong, very wrong. That isn't the correct age, and there are two exceptions, including one that will allow you tax-penalty free access to your retirement money at any age.

Your above statement is an example of why you're taking such a whoopinspankin' on this board. It is obvious you need additional education on financial matters. I'm confident your investing style will almost certainly provide that for you as we all learn from our mistakes - especially the really financially painful ones.
 
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I would just give it all away and become a monk if I were you.............:)
 
Although the OP may not take the counsel of Brewer, Nords, et al on this thread, it is incredibly useful to those of us who continually contemplate our diversification plans and the direction of the US and global economy.

Brew and others, thanks very much for your impressive insight into why these kinds of posts make me sweat. I still remember so vividly reading about (don't mean to pick on him, but it was one of the first that stuck with me) Collector's bank stock. And his return to work.

I just can't imagine thinking I'm smart enough to predict things in my spare time. Hell, I only work 40 hours a week (in the biz no less) and wouldn't have bandwidth to read enough to reach any kind of firm assurances that commodities are all I want to own.

There are some real gems in here about why we diversify and why our risk tolerances change, not only with age, but also with circumstances. Thanks, y'all.
 
Hi NBW,

One thing I don't understand about your diversification argument. You seem to be under the impression that diversification has to hurt your returns. But that's not always the case, it primarily just reduces risk.

Is there any reason you can't diversify into other asset classes that are equally risky that you also think has a high likelihood of returns?

i.e. you think both Precious Metals is the hot sector, but you also think that Emerging Markets and Small Cap International also have a high likelihood of returns. Instead of putting all your chips on Precious Metals, also spread them around to other sectors with high expected returns. It would still be a very risky, very aggressive portfolio, but now you aren't placing a single bet where you'll either win big or lose big.

There's a reason you aren't (presumably) putting all your money on a single stock in Precious metals. And that's because it's not worth the risk of being wrong on a single stock. That same philosophy applies to also splitting money in other high growth sectors; whatever you believe those sectors will be.

Regardless, best of luck on your portfolio.
 
Ah, you just like the thing about alien anal probes resulting in investing prescience.
 
You! Up there on the ledge! Please don't jump!
 
HornedToad10 said:
Hi NBW,

One thing I don't understand about your diversification argument. You seem to be under the impression that diversification has to hurt your returns. But that's not always the case, it primarily just reduces risk.

Is there any reason you can't diversify into other asset classes that are equally risky that you also think has a high likelihood of returns?

i.e. you think both Precious Metals is the hot sector, but you also think that Emerging Markets and Small Cap International also have a high likelihood of returns. Instead of putting all your chips on Precious Metals, also spread them around to other sectors with high expected returns. It would still be a very risky, very aggressive portfolio, but now you aren't placing a single bet where you'll either win big or lose big.

There's a reason you aren't (presumably) putting all your money on a single stock in Precious metals. And that's because it's not worth the risk of being wrong on a single stock. That same philosophy applies to also splitting money in other high growth sectors; whatever you believe those sectors will be.

Regardless, best of luck on your portfolio.
Click to expand...

Don't confuse a risky portfolio with either win big or lose big.... it might not move at all.... for years....
 
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