Big numbers (serious question)

It hasn’t been a continuous bull since 1998, the year I got started.
Of course not. But it helps if there's a burgeoning market precisely when one's portfolio is already large, from decades of accumulation, than when it's only small, when one has only recently been starting out. So for example, building off of your numbers, the fact that the market did fantastically well in 1999, in hindsight didn't much help you. But that it did so well in 2023, and at least so far in 2024, did. For a person who started no in 1998, but in 2018, these recent years won't be all the helpful, because such a person hasn't yet accumulated much.

Alternatively, had you started in 1978 instead if 1998, you'd have benefited from the 80s and 90s bull market... somewhat. But then came the "lost decade" - a harrowing and caustic time - just when your portfolio would have been, by accumulation, at its largest. Had you been interested in FIRE say around 2010, after then having had 32 years in the market, it would have been a frustrating self-assessment.
 
Of course not. But it helps if there's a burgeoning market precisely when one's portfolio is already large, from decades of accumulation, than when it's only small, when one has only recently been starting out. So for example, building off of your numbers, the fact that the market did fantastically well in 1999, in hindsight didn't much help you. But that it did so well in 2023, and at least so far in 2024, did. For a person who started no in 1998, but in 2018, these recent years won't be all the helpful, because such a person hasn't yet accumulated much.

Alternatively, had you started in 1978 instead if 1998, you'd have benefited from the 80s and 90s bull market... somewhat. But then came the "lost decade" - a harrowing and caustic time - just when your portfolio would have been, by accumulation, at its largest. Had you been interested in FIRE say around 2010, after then having had 32 years in the market, it would have been a frustrating self-assessment.
All good points, agreed.

But it drives home the Vanguard and Boglehead philosophy I buy into…stay the course and invest over the long haul and don’t try to time the markets.
 
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I’ll also add on that the Boglehead and Vanguard philosophy is just one approach.

Many roads to Dublin. And our approach isn’t the route to the Uber wealthy. But we’ve done really well and I’m quite satisfied with where we’re at.
 
All good points, agreed.

But it drives home the Vanguard and Boglehead philosophy I buy into…stay the course and invest over the long haul and don’t try to time the markets.
Or to paraphrase:
Time in the market is better than timing the market.
 
Of course not. But it helps if there's a burgeoning market precisely when one's portfolio is already large, from decades of accumulation, than when it's only small, when one has only recently been starting out. So for example, building off of your numbers, the fact that the market did fantastically well in 1999, in hindsight didn't much help you. But that it did so well in 2023, and at least so far in 2024, did. For a person who started no in 1998, but in 2018, these recent years won't be all the helpful, because such a person hasn't yet accumulated much.

Alternatively, had you started in 1978 instead if 1998, you'd have benefited from the 80s and 90s bull market... somewhat. But then came the "lost decade" - a harrowing and caustic time - just when your portfolio would have been, by accumulation, at its largest. Had you been interested in FIRE say around 2010, after then having had 32 years in the market, it would have been a frustrating self-assessment.
Exactly. The extent of the "compounding" effect may depend on when one started saving (there's a sequence risk at the front end of this RE endeavor, too) and for how long. Those who already had nice nest eggs and whose AAs leaned heavily toward stocks during the bull markets rave about the compounding effect, while others have seen less eye-popping growth. At a couple of times in the earlier years of my accumulation phase there were bull markets that helped me feel I had recovered from the bears that preceded them, not that made me feel like I was a beneficiary of magical compounding. Compounding is a real effect over the long term, but it doesn't hurt to have had the good luck to have started saving at an opportune time and to ride the bull markets having already had a good amount accumulated.
 
Exactly. The extent of the "compounding" effect may depend on when one started saving (there's a sequence risk at the front end of this RE endeavor, too) and for how long. Those who already had nice nest eggs and whose AAs leaned heavily toward stocks during the bull markets rave about the compounding effect, while others have seen less eye-popping growth. At a couple of times in the earlier years of my accumulation phase there were bull markets that helped me feel I had recovered from the bears that preceded them, not that made me feel like I was a beneficiary of magical compounding. Compounding is a real effect over the long term, but it doesn't hurt to have had the good luck to have started saving at an opportune time and to ride the bull markets having already had a good amount accumulated.
No disagreement there.

But isn’t that what the FIREcalc calculator does? Looks at every prior scenario of equal duration you’re modeling and then gives liklihood of success based on the number of scenarios that fail for the exact reasons you cite?

If your spend, portfolio, and investment mix can survive all prior scenarios then its reasonable to conclude it should be in good shape to survive future scenarios.
 
No disagreement there.

But isn’t that what the FIREcalc calculator does? Looks at every prior scenario of equal duration you’re modeling and then gives liklihood of success based on the number of scenarios that fail for the exact reasons you cite?

If your spend, portfolio, and investment mix can survive all prior scenarios then its reasonable to conclude it should be in good shape to survive future scenarios.
Yes, that's what FIRECalc does, and each of the individual squiggly paths FIRECalc draws represents one possible outcome, some failing and others succeeding to significantly varying extents. I was only trying to make the point that those who found themselves on one of the more successful paths had good fortune in timing, and may be the ones who are singing the praises of "the power of compounding" the loudest.
 
Yes, that's what FIRECalc does, and each of the individual squiggly paths FIRECalc draws represents one possible outcome, some failing and others succeeding to significantly varying extents. I was only trying to make the point that those who found themselves on one of the more successful paths had good fortune in timing, and may be the ones who are singing the praises of "the power of compounding" the loudest.
Fair enough. That’s an accurate statement.

I’ll only add that sufficient time in the market and staying the course should afford nearly all market participants the opportunity to enjoy such compounding. But yes, some time periods are better than others.

It boils down to having a sensible plan and trusting it when things are going sideways.
 
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It might be uncommon but it's certainly realistic.

My youngest just graduated from university this spring and started their first job. Their savings rate in October - they share this with me voluntarily - will be 60-75%, and it should continue at that rate as long as they are in their current set up:

Living with older brother who only charges utilities for rent
Paid off / gifted car
Works from home
Cooks from scratch
Inexpensive hobbies
Gets bonuses at work due to doing a good job
Graduated debt free (state school, lots of scholarships, some grants, work study, living off campus)

Probably few young people have all of these combined, but individually they're pretty realistic.
Yes, I have to get out of the habit of personal bias. I see everyone as similar path: my first 5 yrs looked like this.

Graduated college (no debt)
No sibling(s) to shack up with first 2 yrs, so rent then...
Married
1 yr later starting family with 1st child
1st home
2nd child

Flieger
 
I’ll also add on that the Boglehead and Vanguard philosophy is just one approach.

Many roads to Dublin. And our approach isn’t the route to the Uber wealthy. But we’ve done really well and I’m quite satisfied with where we’re at.

That's a good point. We hear incessantly about "The Millionaire Next Door". But I've never heard about "The Billionaire Next Door". Slow-and-steady builds what might, without pejorative connotation, be dubbed upper-middle-class wealth. But it won't build mega-yacht and private-jet wealth (well, maybe a kit single-seater experimental jet...) It gets one, assuming good salary and a lifetime of frugality, into the bottom sliver of the top 1%... but it won't get one into the top 0.01%.

A good example is my professor-acquaintance, now in his early 70s. He's spent a lifetime enjoying a very comfortable private university academic salary, plus lucrative consulting. And he's a prolific founder of start-ups, some of which get sold for serious money. By the time that he sells, he nets maybe $5M from the deal... nice, and certainly well above the traditional level of academic lucre... but he's not going to appear on list of top 20 richest people in Los Angeles. Occasionally he'd bring in a truly wealthy person, playing the sycophant. He'd say to me, "See here, Diogenes, that guy over there, he's a billionaire! He's on the Board of Visitors of XYZ University, and has a pharmaceutical company, and just sold another company making a blockbuster chemo drug. Be extra nice to him!" I was wondering... what sort of unmentionable intimate acts would this gentlemen be willing to perform on his billionaire-friend, if the latter could be cajoled into leading the Series-A round? Definitely not Boglehead... though the last syllable, in the modern vernacular, seems fitting.
 

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