Join Early Retirement Today
Reply
 
Thread Tools Display Modes
KISS. Or just Stupid?
Old 04-18-2011, 06:30 PM   #1
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
KISS. Or just Stupid?

Hello. I’m a bit of a lurker, and due to all the excellent input from the members of this forum, I have read some of the reading list, many ‘links’ to articles, and have become much more determined in my desire to look after my own finances.

I (and DW) have decided to become less reliant on the rat race, and are in the process of moving to a fulltime RV type of existence, which will include some part time / casual work. We have sold both of our properties. By September, our cash worth will be $950K (Aussie; slightly more in USD). This will literally be in cash. No other investment other than work pensions which total approx $150k and are not included in our calculations.

We want our first year of freedom to be reversible. So if we can’t do the travel thing we can access our capital and re-buy a property (possibly in the UK to make use of a good exchange rate / low prices.) So for the first 12 months or so, I am shy about putting the money into ETF’s / portfolio due to the short term issues of needing the capital back / market volatility.

So to the KISS bit. I covered this in my ‘Hi I am’ thread, but now its real, I’m getting nervy and would love some sort of 'reassurance' as to our plans. I can put the money in the bank for 12 months, fixed currently at 5.8%. I will keep $50k or so in an ‘unfixed’ account for expenses (currently paying 6.5% variable) which will allow for our spending plus contingency money. At 4% WR (which covers tax, medicare, and spending), I am only leaving approx 1.8% for inflation which I am prepared to do for one year.

At the end of year 1, I will have more money than when I started, and will re-look at ‘proper’ investments. The other option is to put the lot into a 5 yr fixed deposit (currently 7%). This doesn’t allow for the option of getting my cash back within 5 years, but at least its safe, and gives me a WR of 4% (assuming no work which is unlikely) with 3% inflation. All accounts are Govt guaranteed. I expect work will reduce our WR to nearer 3%.

It just feels wrong, at 43 and 47 yrs of age to be putting everything in cash. Am I going to missing out on the start of a world boom in the next 1-5 years? Hence am I being stupid?
Sparkie67 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-18-2011, 06:39 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Quote:
Originally Posted by Sparkie67 View Post
It just feels wrong, at 43 and 47 yrs of age to be putting everything in cash. Am I going to missing out on the start of a world boom in the next 1-5 years? Hence am I being stupid?
I am sure that you know that no one can know the answer to this. Hence the usual instructions to have a litle of this, and a little of that, and a little of the other.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 04-18-2011, 06:50 PM   #3
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by haha View Post
I am sure that you know that no one can know the answer to this. Hence the usual instructions to have a litle of this, and a little of that, and a little of the other.

Ha
I know. I guess i'm just trying to weigh up short term needs vs possibly reduced gains vs safety. Like everyone else .

I've just never had a large sum of money before and a bit apprehensive as to the right thing to do. I suppose sticking it in the bank at least buys me time to get my confidence up if nothing else!
Sparkie67 is offline   Reply With Quote
Old 04-18-2011, 06:50 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 4,366
If you may truely need the bulk of it after just one year, your plan sounds good to me. I'm normally 100% equities and in retirement (though DW isn't quite yet), but one year is too risky for anything beyond cash and short term bonds. If it really feels bad to do that, try 15% equities so that you don't feel like you're missing everything.

On the other hand, if you only need half of it back in a year and will invest the other half after that, then I'd be happy investing that half now.
Animorph is offline   Reply With Quote
Old 04-18-2011, 06:52 PM   #5
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
Trying to time the market usually doesn't work out. What makes you think next year will be better than this year?
__________________
Work is something you do to get enough $ so you don't have to....Me.
73ss454 is offline   Reply With Quote
Old 04-18-2011, 06:52 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sarah in SC's Avatar
 
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,566
You can always set up a DCA type thing (dollar cost averaging) where you put money back into the market at intervals so you don't torture yourself with whether it is a good time to get back in.

I agree, it feels wrong to put everything in cash at ages 43 and 47.
__________________
“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is offline   Reply With Quote
Old 04-18-2011, 07:00 PM   #7
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by Animorph View Post
If it really feels bad to do that, try 15% equities so that you don't feel like you're missing everything. On the other hand, if you only need half of it back in a year and will invest the other half after that, then I'd be happy investing that half now.
Quote:
Originally Posted by Sarah in SC View Post
You can always set up a DCA type thing (dollar cost averaging) where you put money back into the market at intervals so you don't torture yourself with whether it is a good time to get back in.

I agree, it feels wrong to put everything in cash at ages 43 and 47.
Thank you. I think these ideas may be the solution. Having not 'invested' before, I think i'll need to bite it and see, bit at a time. Whether I do that in the first year, or after that i'm not sure. My gut thoughts are that changing lifestyle is hard enough without the worry of money in the very short term.
Sparkie67 is offline   Reply With Quote
Old 04-18-2011, 07:01 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 4,629
I'm wondering if you would really spend the entire $950 a year from now? That would buy a lot of house in my neighborhood.

Maybe you could trim your "worst case" cash needs to something below $950k and go long term with the rest.
Independent is offline   Reply With Quote
Old 04-18-2011, 07:04 PM   #9
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by 73ss454 View Post
Trying to time the market usually doesn't work out. What makes you think next year will be better than this year?
Nothing really. I don't want to time the market as such, more time my entry into it, based on my headspace/circumstances rather than the market. The market talk in Oz is totally conflicted - some say the boom will continue here; as many say it won't. I don't really know enough to pick sides
Sparkie67 is offline   Reply With Quote
Old 04-18-2011, 07:10 PM   #10
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by Independent View Post
I'm wondering if you would really spend the entire $950 a year from now? That would buy a lot of house in my neighborhood.

Maybe you could trim your "worst case" cash needs to something below $950k and go long term with the rest.
I think you are right. As long as the housing 'bubble' doesn't keep going. It's leveled off a bit now, but it grew approx 30% in the last 18 months alone. But we are both open to a move to a cheaper location / country so i'm sure we can trim a few $100k's of that. Thanks
Sparkie67 is offline   Reply With Quote
Old 04-18-2011, 07:42 PM   #11
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
Quote:
Originally Posted by Sparkie67 View Post
Nothing really. I don't want to time the market as such, more time my entry into it, based on my headspace/circumstances rather than the market. The market talk in Oz is totally conflicted - some say the boom will continue here; as many say it won't. I don't really know enough to pick sides
If you're smart you won't pick a side. No one knows what is going to happen with the market. If anyone did they'd be real rich real quick.
__________________
Work is something you do to get enough $ so you don't have to....Me.
73ss454 is offline   Reply With Quote
Old 04-18-2011, 08:01 PM   #12
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by 73ss454 View Post
If anyone did they'd be real rich real quick.
It seems that some do get real rich real quick. Why don't they tell us exactly how they did it?
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 04-18-2011, 08:04 PM   #13
Thinks s/he gets paid by the post
73ss454's Avatar
 
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
Quote:
Originally Posted by GregLee View Post
It seems that some do get real rich real quick. Why don't they tell us exactly how they did it?

Because it would come with a jail term.
__________________
Work is something you do to get enough $ so you don't have to....Me.
73ss454 is offline   Reply With Quote
Old 04-18-2011, 08:08 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
While I would agree that all cash at your ages doesn't make a lot of sense, what you are really talking about is to be in cash for a year or so until you know how your RV adventure sorts out and then redeploy the cash into a more permanent portfolio. 5.8% government guraranteed souds pretty good to me, and the extra 1.2% doesn't seem worth tying up the funds for 5 years in your circumstances. Enjoy your RV adventure!!! Best of luck.
pb4uski is offline   Reply With Quote
Old 04-18-2011, 08:19 PM   #15
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by pb4uski View Post
While I would agree that all cash at your ages doesn't make a lot of sense, what you are really talking about is to be in cash for a year or so until you know how your RV adventure sorts out and then redeploy the cash into a more permanent portfolio. 5.8% government guraranteed souds pretty good to me, and the extra 1.2% doesn't seem worth tying up the funds for 5 years in your circumstances. Enjoy your RV adventure!!! Best of luck.
Thank you for the good wishes. I think what you say is right and everyone who has replied is essentially saying the same thing I think. That is, for a year or so its probably okay. Long term its not sensible. If I'm unsure, do a little bit of 'investing' now, while preserving a 'bail out' amount that i can get back guaranteed. Then, jump in, bit by bit if necessary.
Sparkie67 is offline   Reply With Quote
Old 04-18-2011, 08:58 PM   #16
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,872
I think your plan sounds good. I'd stay away from the 5 years saving plan as it locks up your money and you state that you might need it to buy a house once the RV thing is done. That plan would also make me lean towards safe investments to protect the principal that you need to pay for the house. Also you have Govt guaranteed interest that is more than enough to cover your expenses, that sounds like the way to go. You also have plenty of time to worry about investments. Stick it in the saving account, live of the interest and enjoy your RV.
nun is offline   Reply With Quote
Old 04-18-2011, 09:16 PM   #17
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by nun View Post
I think your plan sounds good. I'd stay away from the 5 years saving plan as it locks up your money and you state that you might need it to buy a house once the RV thing is done. That plan would also make me lean towards safe investments to protect the principal that you need to pay for the house. Also you have Govt guaranteed interest that is more than enough to cover your expenses, that sounds like the way to go. You also have plenty of time to worry about investments. Stick it in the saving account, live of the interest and enjoy your RV.
Thanks for the input. We're hoping the RV thing will be a go for many years, but I'll obviously have a better idea about that in a year or so. .
Sparkie67 is offline   Reply With Quote
Old 04-19-2011, 12:28 AM   #18
Thinks s/he gets paid by the post
 
Join Date: Sep 2009
Location: Hong Kong
Posts: 1,688
If you have a short term need, then high quality/government guaranteed short term investments with fixed payouts like bank deposits, CDs etc is the safe course. The rates you quote are pretty good compared to what is available in a lot of other places.

In the longer term, it would be a good way to lose a lot of the real value of your savings to inflation, but that's a different question.

Even with shorter term investments, you still face:

1. a currency issue - you hold AUD (?) and may wish to invest in GBP in a year's time - which currency are you going to hold? What will happen to your plans if the exchange rates move against you?

2. a property price issue - what happens to your plans if property prices in your chosen market appreciate during the period when you are on the sidelines?

I'm not making any predictions here, but would the combined effect of a weaker AUD/GBP FX rate and a rise in UK house prices have the potential to affect your plans?

Good luck with the ER and enjoy the experience.
__________________
Budgeting is a skill practised by people who are bad at politics.
traineeinvestor is offline   Reply With Quote
Old 04-19-2011, 01:41 AM   #19
Recycles dryer sheets
 
Join Date: Oct 2010
Posts: 51
Quote:
Originally Posted by traineeinvestor View Post
1. a currency issue - you hold AUD (?) and may wish to invest in GBP in a year's time - which currency are you going to hold? What will happen to your plans if the exchange rates move against you?

2. a property price issue - what happens to your plans if property prices in your chosen market appreciate during the period when you are on the sidelines?

I'm not making any predictions here, but would the combined effect of a weaker AUD/GBP FX rate and a rise in UK house prices have the potential to affect your plans?

Good luck with the ER and enjoy the experience.
Thanks for taking the time to reply. Currently the exchange rate is at about 65 pence to the AUD; historically it is about 45 pence/AUD. This may change but i don't there would be too much movement. Its better for me I think to hold the cash as AUD to gain an income in the short term.

House prices, especially in the UK are unlikely to be doing much any time soon. Whilst I am concerned of the changes re currency / property, I think it is a lesser concern for me in the short term than not having a 'safe' income for 12 months.

I may edge my bets and buy a cheap property in the UK (hold some cash in my UK sterling account or 6.5% variable AUD account for this purpose) before the year's up. I guess I can always part mortgage it / rent it to free up the cash again / provide income. Too many options! An Aussie house would require fulltime work to provide an income given their prices - something I'm keen to avoid
Sparkie67 is offline   Reply With Quote
Old 04-19-2011, 06:55 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,318
I too like the 1 year plan. Those rates are good. You can dip your toes into the RV world. If you like it you can start diversifying next year with a bit more principal than you have today and drive off into the sunset. If you don't like it you can evaluate your UK buying opportunities, go back to work, whatever.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I feel STUPID! Really STUPID! :( NW Landlady Hi, I am... 21 07-10-2010 10:47 AM
Kiss the inheritance goodbye rocketdog FIRE and Money 21 07-11-2009 12:10 AM
Dividends, KISS, please LeatherneckPA FIRE and Money 0 06-10-2009 01:09 PM
How stupid can you get? FinallyRetired Other topics 10 09-22-2007 01:12 PM
KISS 3 fund portfolio ferco FIRE and Money 2 01-18-2007 11:46 AM

» Quick Links

 
All times are GMT -6. The time now is 12:05 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.