nash031
Thinks s/he gets paid by the post
I've read on here a number of posts commenting about how a certain person's portfolio is close to or has reached "critical mass." I'm curious as to how people define that and what they mean when they use this term.
I don't think it's equivalent to "FI." I think it's more along the lines of you're at the point where compounding (or just annual returns) have a greater impact on your portfolio than your savings rate.
In other words, if Investor X is saving $50,000 per year, and his portfolio reaches, say, $700,000, an "average year" return of 7% means he's earning $49,000 with no action, and thus he has reached "critical mass." Any growth after that and his returns have a greater (average) impact than his savings rate. (I hope to get here someday soon!!)
What do you call "critical mass?"
I don't think it's equivalent to "FI." I think it's more along the lines of you're at the point where compounding (or just annual returns) have a greater impact on your portfolio than your savings rate.
In other words, if Investor X is saving $50,000 per year, and his portfolio reaches, say, $700,000, an "average year" return of 7% means he's earning $49,000 with no action, and thus he has reached "critical mass." Any growth after that and his returns have a greater (average) impact than his savings rate. (I hope to get here someday soon!!)
What do you call "critical mass?"