Does being full-time investors help you getting better return?

[alertmeipp]

I have been wondering from time to time whether it's a good idea to quit day job to spend more time managing the stock portfolio.

would one get a better return?

does the stress of no salary change your investment style?

say you have a 100k job and 2mm stock holdings... would somehow spending more time with it create additional 5% return to make it worth while?

 

thoughts?

[Viking]

I have been ‘investing’ full time since i turned 40 (I am 59 today). Here are some quick thoughts:

1.) I love it (investing). Always have. There isn’t anything else (when it comes to work) that i would rather do. I have always put in the time.

2.) To do it full time you actually have to be good at it - over the long run good. 
3.) With hindsight, I had an ace in the hole for the past 20 years - Fairfax. This has been a big, big help.

4.) My investment returns did improve being able to devote 100% of my work time to investing. (My prior corporate job was super busy.)

5.) Until recently, I never approached the pivot from ‘day job’ to 100% investing as a permanent change. Mostly because when i started i didn’t have nearly enough. So i fully expected that i would need to find a new full time ‘real job’ a few years down the road. Except i was able to generate big enough returns that i never had to go back to a regular day job.

6.) My goal at the start of each year has been to make +8% per year. Modest but doable. My long term average annual return has been about 20%. I still have an 8% target at the start of each year. This helps to keep my stress level low.

7.) Spouse matters. Mine has always completely stayed out of my hair. Managing investments has always been a blue job in our house. Not pink. And definitely not purple.

8.) The biggest benefit of pulling the plug on my day job at 40 was the opportunity to spend more quality time with my family. At the time, my kids were 5, 3 and 2 years old. The last 20 years has been an absolute dream - from a family perspective. The five of us went out for Dim Sum today… still special.

Best of luck with whatever you decide.

Edited September 3 by Viking

[UK]

2 hours ago, alertmeipp said:

I have been wondering from time to time whether it's a good idea to quit day job to spend more time managing the stock portfolio.

would one get a better return?

does the stress of no salary change your investment style?

say you have a 100k job and 2mm stock holdings... would somehow spending more time with it create additional 5% return to make it worth while?

 

thoughts?

 

I think it really depends on your day job and other circumstances. If you like your job, I think the best of two worlds would be to keep it and just start working way less/part time. Otherwise you need to plan for a some alternative to investing activity anyway, since it could become really boring because you just have nothing exciting to do for a long time sometimes. Perhaps parenting could fit this quite nicely, but it is not totally stress free either, so sometimes you become overwhelmed, but I think it would still be better vs only investing, at least for me personally. Too much time may not necesarilly lead to a better outcome quickly, but you could feel too accountable for this to happen if investing was the sole activity. But I think all this is very personal and the best way to know is just to try:)

 

Edited September 3 by UK

[UK]

7 hours ago, Viking said:

I have been ‘investing’ full time since i turned 40 (I am 59 today). Here are some quick thoughts:

1.) I love it (investing). Always have. There isn’t anything else (when it comes to work) that i would rather do. I have always put in the time.

2.) To do it full time you actually have to be good at it - over the long run good. 
3.) With hindsight, I had an ace in the hole for the past 20 years - Fairfax. This has been a big, big help.

4.) My investment returns did improve being able to devote 100% of my work time to investing. (My prior corporate job was super busy.)

5.) Until recently, I never approached the pivot from ‘day job’ to 100% investing as a permanent change. Mostly because when i started i didn’t have nearly enough. So i fully expected that i would need to find a new full time ‘real job’ a few years down the road. Except i was able to generate big enough returns that i never had to go back to a regular day job.

6.) My goal at the start of each year has been to make +8% per year. Modest but doable. My long term average annual return has been about 20%. I still have an 8% target at the start of each year. This helps to keep my stress level low.

7.) Spouse matters. Mine has always completely stayed out of my hair. Managing investments has always been a blue job in our house. Not pink. And definitely not purple.

8.) The biggest benefit of pulling the plug on my day job at 40 was the opportunity to spend more quality time with my family. At the time, my kids were 5, 3 and 2 years old. The last 20 years has been an absolute dream - from a family perspective. The five of us went out for Dim Sum today… still special.

Best of luck with whatever you decide.

 

I have a very similar view and experience! Only I have started investing as a main job a bit earlier, with a more ambitious goals (min 10 percent, while beating the benchmark, but aiming at 15 percent CAGR over time), but ended up with lower results than yours (still confidently above my minimum though), which perhaps shows, that I am much more lazier, than you, as  input on FFH analysis perfectly illustrates:). I think the crux is to find/know what fits you and not too full for to long yourself if it is not!

 

Edited September 3 by UK

[Milu]

Hard to say whether my returns would be better or worse if I quit my full-time job. I recently turned 40, have a decent paying job as a software consultant, and have built up a nice portfolio through reasonable savings effort and good stock market returns. My main interest is researching stocks and managing my portfolio and I almost see my day job as as hobby to support my 'real' job of investing. I've optimised my career in a way that supports this, fully remote job, not too stressful, individual contributor (no interest in the hassle that comes from management). My goal was to optimise for the 'highest salary I could get for the least amount of effort' and I've mostly succeeded in that so far. So even though I have a standard 9-5 job, it really only ends up being about 3 hours of actual work a day, the rest of which I can allocate to going for walks, thinking, researching companies etc. I don't have a very active investment strategy, I buy infrequently and generally hold for the long term (10 years plus ideally). Portfolio is not quite at the level that would enable me to quit full employment yet, would likely need at least another double (so about 5 years at my current compound rate). I also have a wife and two young kids so it's nice to have the stable income arriving every month. I could potentially make more emotional decisions if investing was my sole income so for now I'm not in a rush to pull the plug on the job. 

 

[throw123]

I am toying with the idea. 40 next year and assuming i am able to generate 5-6pct p.a. I will be more than fine. 

Not sure that my investment returns would improve if i shifted to doing it full time, might actually cause additional stress.

 

My plan would be to be 75pct index funds (set and forget), and the rest I invest in individual securities to keep myself busy

[Redskin212]

Viking,

 

I like your framework and the conservatism to reduce stress.

 

6.) My goal at the start of each year has been to make +8% per year. Modest but doable. My long term average annual return has been about 20%. I still have an 8% target at the start of each year. This helps to keep my stress level low.

 

I have one question as you have been doing this for 20 years.  How do you allocate money to your "living expenses" or annual operating costs?  Do you set an amount annual aside or do you always have a large cash position to cover expenses?

 

Thanks

[Paarslaars]

I always wondered about the social aspect of it... is it not a lonely job?

I like having a job where I can talk to a bunch of people, covid drove me nuts after a few months.

[Milu]

8 minutes ago, Redskin212 said:

Viking,

 

I like your framework and the conservatism to reduce stress.

 

6.) My goal at the start of each year has been to make +8% per year. Modest but doable. My long term average annual return has been about 20%. I still have an 8% target at the start of each year. This helps to keep my stress level low.

 

I have one question as you have been doing this for 20 years.  How do you allocate money to your "living expenses" or annual operating costs?  Do you set an amount annual aside or do you always have a large cash position to cover expenses?

 

Thanks

Yes I'm also curious about this. For example let's say in Jan 1st of the new year you have a portfolio worth $2m, do you just sell $100,000 worth of investments and then use that to cover your expenses for the year, or are you constantly selling off small chunks throughout the year? Also are you selling off a proportional amount of each position, for example if you have 10 positions, do you sell a bit of each or subjectively decided on a specific stock to sell for covering your expenses? Probably lots of tax implications to consider as well. 

 

Curious as to how you approach this?

[throw123]

15 minutes ago, Paarslaars said:

I always wondered about the social aspect of it... is it not a lonely job?

I like having a job where I can talk to a bunch of people, covid drove me nuts after a few months.

haha its you folk that make me want to retire early

[UK]

26 minutes ago, Paarslaars said:

I always wondered about the social aspect of it... is it not a lonely job?

I like having a job where I can talk to a bunch of people, covid drove me nuts after a few months.

 

It is a lonely job and that is why I like it:). Working in office, but especially in a team and all these meetings were starting to drive me mad, so I moved to work from home in 2012 (later my wife followed, so for 5+ years we both can basically work from wherever there is a good internet), I could not be more happy about this aspect since. And I was not even driving to the office at the time, since I lived close and could reach it by walking. But still way more free time, less loss of energy. And you can always sociolize by meeting a person you like or just by going outside, but only if/when you also want it. Same as here at COBF:). But not like giving up your energy to some random jerk, who think he can bother you whenever he wants, you wish you have never seen in the first place:). But as with the other things, perhaps this is also very personal and lots of people enjoy and thrive in the office. 

 

Edited September 3 by UK

[UK]

9 minutes ago, throw123 said:

haha its you folk that make me want to retire early

[Xerxes]

@alertmeipp

 

I would probably blew everything away if I focus on the stock portfolio as a means to generate “income” because I left my job. 

[73 Reds]

11 hours ago, alertmeipp said:

I have been wondering from time to time whether it's a good idea to quit day job to spend more time managing the stock portfolio.

would one get a better return?

does the stress of no salary change your investment style?

say you have a 100k job and 2mm stock holdings... would somehow spending more time with it create additional 5% return to make it worth while?

 

thoughts?

Simple answer - no.  IMO you don't have nearly enough to quit your job and focus full time on investing.  One bad stretch and you're back in the job market.  And you'll feel the need to do "something" when often times doing nothing is your best course of action.

[frommi]

@Viking Your post made me look up when i started to work only part time. Funnily for me it also was when i started to perform really well investment wise (I thought that was just luck, but maybe i am more disciplined and systematic since than). So maybe this is another option for @alertmeipp

I work 3-4 hours a day for my old company (remote 4/5 days) and live the happy life with investment research, body workouts and family time the rest. 20% annual returns the last 4 years, while before it was 10% on average.

[Xerxes]

8 minutes ago, frommi said:

@Viking Your post made me look up when i started to work only part time. Funnily for me it also was when i started to perform really well investment wise (I thought that was just luck, but maybe i am more disciplined and systematic since than). So maybe this is another option for @alertmeipp

I work 3-4 hours a day for my old company (remote 4/5 days) and live the happy life with investment research, body workouts and family time the rest. 20% annual returns the last 4 years, while before it was 10% on average.

the issue is going part time, would actually means “spend going up”. I.e travel etc 
 

for me anyways. 
 

[brobro777]

Well that's what Charlie Munger did so maybe it works

 

 

[gfp]

In my experience (my last 9-5 paycheck was 24 years ago from a company called EnvestNet) as a full-time investor, I tend to keep more cash in my regular checking accounts earning next to nothing.  I don't try to optimize return on the cash or anything like that.  I might not always have a years worth of expenses sitting in there but it's way more than it "should" be or needs to be.  We have residential multifamily rental income that comes in near the first of each month, which is when many of my outgoing bills are drafted - roughly cancelling each other out.  I know other folks here like to do it differently, pre-pay expenses and have plenty of ready credit available for cash management / buying time, etc...  We just run it sub-optimally and sleep soundly.

 

Since I started as a full-time investor with no salary, there have been 3 major bear markets.  2001-2003, 2008-2009 and the blip in 2020 that turned out pretty benign.  I was lucky that at the beginning of my career I was focused on commodities and precious metals which were starting a bull market at that time (I am a reformed gold bug).

 

I started buying Berkshire a few months before the 9/11 attacks and purchased most of the original BRK position right after the market re-opened following 9/11.  I think a B-share was around $2000/sh at the time.  Might have dipped back into the 1900s.

 

That started me as a "value investor" or whatever you want to call being rational and careful with your investments.

 

To answer some of the questions on how do you get some cash - if my cupboards are getting low I sell a little of something, always considering the tax consequences, and re-fill the cash accounts so I don't have to think about it.  I tend to have more cash early in the year and less cash in December, absent any type of real estate refinancing or something like that.  

[73 Reds]

13 minutes ago, gfp said:

In my experience (my last 9-5 paycheck was 24 years ago from a company called EnvestNet) as a full-time investor, I tend to keep more cash in my regular checking accounts earning next to nothing.  I don't try to optimize return on the cash or anything like that.  I might not always have a years worth of expenses sitting in there but it's way more than it "should" be or needs to be.  We have residential multifamily rental income that comes in near the first of each month, which is when many of my outgoing bills are drafted - roughly cancelling each other out.  I know other folks here like to do it differently, pre-pay expenses and have plenty of ready credit available for cash management / buying time, etc...  We just run it sub-optimally and sleep soundly.

 

Since I started as a full-time investor with no salary, there have been 3 major bear markets.  2001-2003, 2008-2009 and the blip in 2020 that turned out pretty benign.  I was lucky that at the beginning of my career I was focused on commodities and precious metals which were starting a bull market at that time (I am a reformed gold bug).

 

I started buying Berkshire a few months before the 9/11 attacks and purchased most of the original BRK position right after the market re-opened following 9/11.  I think a B-share was around $2000/sh at the time.  Might have dipped back into the 1900s.

 

That started me as a "value investor" or whatever you want to call being rational and careful with your investments.

 

To answer some of the questions on how do you get some cash - if my cupboards are getting low I sell a little of something, always considering the tax consequences, and re-fill the cash accounts so I don't have to think about it.  I tend to have more cash early in the year and less cash in December, absent any type of real estate refinancing or something like that.  

Leaving a "job" to focus full time on "investing" has a lot of different implications.  If you love investing, effectively you are asking whether you have enough to retire.  In the case of the original poster, he would at least need to achieve a 5% greater return on his investment portfolio to make up for lost job income.  He would also need to consider lost job benefits, i.e., paid health insurance, 401k plan, etc..

 

You also need to determine your definition of "investing".  Are you a purely passive investor?  Or do you take a more active role, i.e, real estate, private equity, private lending, etc...  

 

For most, the question comes down to personal needs and lifestyle.  Its like asking how much one needs to be "rich".  The answer is not a uniform dollar amount, but simply being able to afford anything you want, whenever you may want it.

[Xerxes]

19 minutes ago, gfp said:

In my experience (my last 9-5 paycheck was 24 years ago from a company called EnvestNet) as a full-time investor, I tend to keep more cash in my regular checking accounts earning next to nothing.  I don't try to optimize return on the cash or anything like that.  I might not always have a years worth of expenses sitting in there but it's way more than it "should" be or needs to be.  We have residential multifamily rental income that comes in near the first of each month, which is when many of my outgoing bills are drafted - roughly cancelling each other out.  I know other folks here like to do it differently, pre-pay expenses and have plenty of ready credit available for cash management / buying time, etc...  We just run it sub-optimally and sleep soundly.

 

Since I started as a full-time investor with no salary, there have been 3 major bear markets.  2001-2003, 2008-2009 and the blip in 2020 that turned out pretty benign.  I was lucky that at the beginning of my career I was focused on commodities and precious metals which were starting a bull market at that time (I am a reformed gold bug).

 

I started buying Berkshire a few months before the 9/11 attacks and purchased most of the original BRK position right after the market re-opened following 9/11.  I think a B-share was around $2000/sh at the time.  Might have dipped back into the 1900s.

 

That started me as a "value investor" or whatever you want to call being rational and careful with your investments.

 

To answer some of the questions on how do you get some cash - if my cupboards are getting low I sell a little of something, always considering the tax consequences, and re-fill the cash accounts so I don't have to think about it.  I tend to have more cash early in the year and less cash in December, absent any type of real estate refinancing or something like that.  

you must have had a good few years as a part time investor in the 90s to decide to go full in. 
 

I don’t know if you can answer this (not too personal): in the past 24 years, did you ever go +40% on one single position if opportunity knocked ?
 

(or whatever % is considered significant for you)

[WFF]

I jumped to doing it full time for the past year or two, and thus far the results hasn’t been better, though I get to spend more time with family.  But financial results wise, it is not better,  but that is perhaps been really lucky in the past 7 years (3 years it was buyout of a major position, and 2 years it was special dividends that paid me more than my cost) don’t expect to repeat it.   It was probably more luck than anything, so it might be an unfair comparison. 

[gfp]

29 minutes ago, Xerxes said:

you must have had a good few years as a part time investor in the 90s to decide to go full in. 
 

I don’t know if you can answer this (not too personal): in the past 24 years, did you ever go +40% on one single position if opportunity knocked ?
 

(or whatever % is considered significant for you)

 

No, I was young and stupid and had low expenses.  I took the last two years of college tuition money (my entire net worth at the time) and started investing, switched to a few a-la-carte night classes in accounting (first two years were computer science major), don't have a university degree, made my first real money with that capital and Freeport McMoRan, which used to be based in New Orleans before the phelps dodge merger.

 

I was and am routinely over 40% in one position - I have often been very concentrated in one, two or three securities and the rest just dribs and drabs.  Also, 100% of my capital is taxable capital.  My wife has an old Roth-IRA but that is the only tax-deferred capital that we have personally.

[KCLarkin]

3 hours ago, Milu said:

Yes I'm also curious about this. For example let's say in Jan 1st of the new year you have a portfolio worth $2m, do you just sell $100,000 worth of investments and then use that to cover your expenses for the year, or are you constantly selling off small chunks throughout the year? Also are you selling off a proportional amount of each position, for example if you have 10 positions, do you sell a bit of each or subjectively decided on a specific stock to sell for covering your expenses? Probably lots of tax implications to consider as well. 

 

Curious as to how you approach this?

 

This is a bit of a nightmare, especially if you have your assets split between a variety of taxable and tax-free accounts. General advice would be to keep a "cash bucket" of say 1 year worth of expenses and top it up regularly (say quarterly). This keeps you from needing to sell assets in the middle of a drawdown. If I don't want to sell something, I sometimes use IBKR margin for cash management. You should also budget for a safe withdrawal rate. $100k on a $2M portfolio would be extremely risky unless you are willing to slash your spending during bear markets.

[UK]

6 minutes ago, KCLarkin said:

This is a bit of a nightmare, especially if you have your assets split between a variety of taxable and tax-free accounts. General advice would be to keep a "cash bucket" of say 1 year worth of expenses and top it up regularly (say quarterly). This keeps you from needing to sell assets in the middle of a drawdown. If I don't want to sell something, I sometimes use IBKR margin for cash management. You should also budget for a safe withdrawal rate.

+1. This is basically my plan as well.

[frommi]

Dividends cover all living expenses for me, but depends on what you invest in. 

I haven't checked the numbers but can imagine they are right, especially if you are a true value investor. Everything above the amount that is necessary to cover living expenses is invested in NCAV stocks or other value plays.