Your Investment Road To FI

[ferco]

Just interested in knowing some of the investment roads others took to get to FI. Was it investing in stocks: buy and hold, day trading ; mutual funds, individual stocks. Real Estate. Very good paying jobs with good 401k investments over a long period ? And last but not least: Luck ??

What would be your advice to others starting in their 30's as a prudent investment roadmap, knowing what you know now.

[ziggy29]

As far as the FIRE through 401K route goes, pick an appropriate allocation, fund it as much as you can and let time work for you.

In your 30s, you still have time to find a public sector job with a pension that could provide a solid foundation for your retirement income in 20 years. Knowing what I know now, if I could turn back the clock 10-15 years I'd be doing that. Of course, there's no way to know the rules won't change in the future.

[gryffindor]

It's not just investments that will get you to FI ; in order of importance

Get a higher income by mastering a financially important skill
Keep your expenses low and "travel light"
Create a straightforward investment and savings strategy and stick with it

[dex]

Work
LBYM
Save
Preservation of capital
++++++
Understand:
Maximizing income
Minimizing expenses
Budgeting
Financial projections
Cash Flow
LBYM
Preservation of capital
Goal setting
Opposing social pressures

[OAG]

Quote:

Originally Posted by gryffindor It's not just investments that will get you to FI ; in order of importance Get a higher income by mastering a financially important skill Keep your expenses low and "travel light" Create a straightforward investment and savings strategy and stick with it

It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

[hankster]

Quote:

Originally Posted by OAG It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

Agree. My parents only earned between $25k and $35k/year for the past 20 years, yet they have managed to accumulate six figure savings using only bank savings accounts and CDs. They also paid cash for several vehicles during this period. A paid off home, simple tastes and LBYM have served them well.

[wildcat]

Quote:

Originally Posted by ziggy29 As far as the FIRE through 401K route goes, pick an appropriate allocation, fund it as much as you can and let time work for you. In your 30s, you still have time to find a public sector job with a pension that could provide a solid foundation for your retirement income in 20 years. Knowing what I know now, if I could turn back the clock 10-15 years I'd be doing that. Of course, there's no way to know the rules won't change in the future.

Are you saying that b/c of the recent downturn or is that what have always thought since you've reached FIRE?

I don't disagree per se. My pop didn't save much but had 30+ years in with the Fed & retired as a G-14. He doesn't have many worries these days.

For me, I find mega corp incredibly dull so I have always been worried how much worse it could be in a govt position. May not be true but that's what I often hear.

[unclemick]

Buy a lifecycle fund for your age - max all tax deferred options via auto deduct. When you get old retire.

And for heaven's sake - don't read books or over study/watch investments.

Faith, time and inactivity are the best investment strategies availible.

Heh heh heh - of course I'm a Boglehead. Starting 1966 - I made every investment mistake in the book except commodities.

[LOL!]

A well-paying job and a spouse that works. Our 401(k) plans have been mediocre, but we've always maxed them out. We also have been able to live off the salary of the lowest earner and invest the remaining after paying taxes.

No real estate gains, no pension, no killing in the stock market. But also no crises along the way either (unless you count the mere presence of 2 teenagers in the household). Just keep adding to the mutual funds and ETFs nowadays and plod along. We did pay attention to minimizing income taxes.

[ziggy29]

Quote:

Originally Posted by wildcat Are you saying that b/c of the recent downturn or is that what have always thought since you've reached FIRE? I don't disagree per se. My pop didn't save much but had 30+ years in with the Fed & retired as a G-14. He doesn't have many worries these days.

What I'm saying is that what seemed like the right choice 22 years ago doesn't seem like the right choice today when it comes to the quest for FIRE. But all we can do is make the best of the choices we've made, since we have no control over what was done way back then.

[CyclingInvestor]

Learn to be comfortable investing in stocks. Most of my friends (engineers, managers) had way too much in cash equivalents over the decades because their stomachs churned when they had 1-2 quarters of poor returns. As a result they are nowhere near retirement today.

Only have kids if you really want them. Incredibly expensive.

Try to keep work stress low. I usually had jobs (programming) I could do in my sleep, and never felt any performance pressure. I knew I had no management skills, so I refused to be pushed up that path.

[ziggy29]

Quote:

Originally Posted by CyclingInvestor I knew I had no management skills, so I refused to be pushed up that path.

High-five for that one. I'm exactly where I want to be on the corporate ladder: the highest rung below management.

In truth, there is no One True Way to FIRE, I don't think. But there are several characteristics that are common: one is a saving/investing discipline that doesn't waver, and another is a commitment to a simple lifestyle. Yes, it helps to be able to put 25% of your pay into investments for 25-30 years, but it helps just as much to learn to be content with less stuff, to get out of debt and stay out of debt, and learn how to live as cheaply as reasonably possible given your own situation.

[socca]

Quote:

Originally Posted by CyclingInvestor Learn to be comfortable investing in stocks.

Learn to be comfortable investing in bonds. Most of the people I know who have had significant exposure to equities ride an emotional roller coaster between euphoria and despair. Who needs it? Maybe you do or maybe you don't. I didn't, thank goodness.

Don't let the asset allocation mental virus guide your investment decisions. Thoroughly understand the difference between a stock and a bond. Reject the conventional wisdom and you'll usually do well.

[calmloki]

Learn to be comfortable investing in stocks.

Quote:

Originally Posted by socca Learn to be comfortable investing in bonds.....

Learn to be comfortable investing in rental property.

Main thing is, IMO, persist... persist long after others give up, flee because of a lack of monetary instant gratification, or move on to the latest high return vehicle (alpacas!!! Tulip bulbs!!).

get lucky in the life partner lottery.

[Nords]

Quote:

Originally Posted by ferco Just interested in knowing some of the investment roads others took to get to FI. Was it investing in stocks: buy and hold, day trading ; mutual funds, individual stocks. Real Estate. Very good paying jobs with good 401k investments over a long period ? And last but not least: Luck ??

Yes.

We started our investing careers in balanced funds, but as we became aware of the stability of our military income then we shifted more toward equities. Milevsky has much more detail in his book "Are You A Stock Or A Bond?"

When we started investing in 1982 we were paying 2-3% fees. Today we're paying about a tenth of that. I think expense ratios affect the returns of the average retail investor far more than asset allocation, let alone investment style.

B&H has worked out better than day trading only because we're not willing to put the effort into day trading. Day trading not only requires analytical intelligence but a huge sustained effort in collecting, analyzing, and executing. Ironically it's not worth the money, at least to us, and especially not when value investing works out almost as well.

Funny how this bear market has quenched the debate about active vs passive investing. This is exactly when the activists should be out cheering for their brilliant managers who are steering them through this mess.

The only reason we're landlords is because it's been more convenient to hold on instead of selling. Someday we'll hit the right intersection of price, timing, and opportunity. Until then we're happy to collect money that we never thought we'd see, despite the occasional week or two of frustrating labor to turn over a vacancy. But many times the return on landlording is less than the return on a long-term CD.

"Luck" was beginning our investing careers at the beginning of one of the world's bigger bull markets. "Education" and "persistence" were what kept us going.

A good 401(k) is nice to have mainly because of its match, and perhaps also because of its disciplined periodic investments. However there's nothing that a 401(k) can do that an investor can't do for themselves.

Quote:

Originally Posted by ferco What would be your advice to others starting in their 30's as a prudent investment roadmap, knowing what you know now.

Save more than you spend. If you want to ER then save a lot more than you spend.

It's always easier to reduce spending than it is to raise earnings. The possible exceptions to that aphorism might be advanced schooling/training and switching jobs/careers for something that's a better fit.

Find an investing style that works for you and stay within your circle of competence. Stick with assets that you're comfortable with. Be a landlord if you can tolerate the frustrations, otherwise the profits will never be worth the hassle. If investing is boring or painful then keep it simple and don't mess with it.

[kumquat]

I'll pick luck. I was lucky enough to:

1. get into a high paying field (IT when it was called DP)
2. move into mega-corp management
3. get awarded stock options
4. have stock not move until near expiry and then double annually for 3 years

I was also lucky enough that:

1. never went into debt other than small mortgage (depression era parents)
2. drove 'disposable' cars
3. found a DW with similar ideas
4. bought a condo for kids to use at out of town university, tripled in 7 years
5. maxed out tax free savings

All luck, some you can influence some you can't

[riskadverse]

LBYM
Focus on investing, looking for a system that will pay off consistently.
Maximize your investments into that system when you find it.
Cash out when the system no longer works.
Rinse and repeat.

[W2R]

Quote:

Originally Posted by OAG It is IMO "what you spend" that is the most important "part" of the deal. Many earn a very good income but if you "grow into your income" you may "learn" to spend more than is prudent (and LBYM). Live for today but save for tomorrow.

This is so true.

I am the "poster child" for someone who made a LOT of mistakes in investing, but who muddled through anyway mostly due to LBYM. See below; I probably should have been investing money in taxable accounts from 2002-2006 instead of buying and paying off my house during that time, since the market was soaring. I also was an idiot to invest 100% in equity funds for several years, though a lucky idiot. I should have bought a Corolla instead of a Camry Solara. I could go on and on. Retrospect is great. But it is possible to recover from mistakes if you just LBYM and keep doing the best you can with the money you save.

For me, what worked in 10 years starting at age 51 was:

(1) Get a job with modest 5-figure salary but good retirement benefits in an affordable location and and start living "like a student", on as little as possible while maxing out retirement accounts (these three things needed to be in place from the start). I had other job offers with better salaries, but chose federal employment because I was seeking job and retirement security.
(2) Pay off and destroy credit cards and other debt, traded in my junker car (worth $200 ) for a new Toyota paid for in cash; save up down payment for house and start looking for a house. (first 2-3 years)
(3) Buy a modest house, and pay it off (years 3-7)
(4) Build taxable investment accounts (years 7-10)

By year 8 I was already FI (at the level of LBYM to which I was by then accustomed) and just waiting for retirement elegibility and building my investment accounts. I had joined the ER Forum by that time since retirement was definitely on my horizon. As everyone here knows, during year 9 I came into an unexpected and substantial windfall although I was already financially independant before that happened.

My investment accounts have been solely in mutual funds, mostly index funds but some other diversified mutual funds as well. Is that the way to go? I don't know, but I didn't know beans about investing and I thought that would be a good way to diversify and spread out my risk.

I started my retirement accounts during the tech crash, and my asset allocation was almost entirely equity funds during the first five years or so (I figured I had to have b*lls of steel and take some very uncomfortable risks if I was ever to have any chance of ER). I lucked out as the market rose substantially during that time.Then I gradually transitioned to a very conservative asset allocation by the time I reached year 8 or 9.

The point I am trying to make is that LBYM, putting everything you can towards your goal in some manner, and blind luck with the market can compensate for a LOT of investment mistakes. This is especially true if you make a sincere effort to read and study at least a half dozen books from this list in order to learn as much as you can about investing.

[dizzy]

Quote:

Originally Posted by kumquat I'll pick luck. I was lucky enough to: get into a high paying field (IT when it was called DP) move into mega-corp management get awarded stock options have stock not move until near expiry and then double annually for 3 years I was also lucky enough that: never went into debt other than small mortgage (depression era parents) drove 'disposable' cars found a DW with similar ideas bought a condo for kids to use at out of town university, tripled in 7 years maxed out tax free savings All luck, some you can influence some you can't

Very similar story here. My megacorp run up was about 50x over the last 10 years of working. Once the idea of FIRE occurred to me, I systematically diversified on the way up as options vested. On occasion this looked foolish to colleagues who "let it ride", but I was basically out by the top in 08 to a 60/40 diversified boglehead portfolio. (Now its more like 50/50). No kids, and a frugal wife (with a state job with retiree health insurance ) helped a lot too.

I worked really hard, but it was definitely largely luck, (and enough sense to not get greedy and blow it!)

[CuppaJoe]

Grandpa, the banker, had a one-line mantra: "It's not what you make, it's what you keep."