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

[73 Reds]

17 minutes ago, james22 said:

 

Nah, the very point of the 4% SWR is that it has survived starting points of high valuation.

This whole discussion, while interesting, seems rather hypothetical if you ask me.  How many folks here want to retire early just to die with nothing after spending everything they ever had or be forced back into the labor pool?  If you're going to retire early, plan ahead, save enough so you don't have to worry about withdrawal rates and/or do something in retirement that generates more income or wealth.  Not trying to preach to anyone but most of us can determine whether we have enough without the need for algorithms.

Edited September 4 by 73 Reds
missed word

[thepupil]

45 minutes ago, james22 said:

 

Nah, the very point of the 4% SWR is that it has survived starting points of high valuation.

I mean we are discussing a real world example where one’s capital is clearly impaired only 25 years later. Starting with $1mm and ending with $400k $700k, or $1mm (different asset allocations) 25 years later is failure in my book…

[Munger_Disciple]

52 minutes ago, thepupil said:

I mean we are discussing a real world example where one’s capital is clearly impaired only 25 years later. Starting with $1mm and ending with $400k $700k, or $1mm (different asset allocations) 25 years later is failure in my book…

 

[james22]

2 hours ago, thepupil said:

I mean we are discussing a real world example where one’s capital is clearly impaired only 25 years later. Starting with $1mm and ending with $400k $700k, or $1mm (different asset allocations) 25 years later is failure in my book…

 

Real world example? How many portfolios are all equity in retirement? 

 

And how is ending even with only $400k after withdrawing $40k/year for 25 years in any way a failure? The 4% SWR assumes a 30 year retirement. You should even be able to double your withdrawals to ~$80k your final 5 years.

 

The 4% SWR is based on the historically worst-case scenario. Assuming you have an average sequence of returns, you should end up with something like $2.8M after 30 years.

 

Though again, in the real world retirees adjust their spending as they go.

 

 

No better discussion of SWR than: https://earlyretirementnow.com/safe-withdrawal-rate-series/

[Thrifty3000]

6 hours ago, thepupil said:

 

fair point. differences are less dramatic if doing this.

 

still higher but more like 

 

$720K 100% stocks

$812K 87% stocks 13% cash, bonds are depleted in 3 year bear market

$888K 87% stocks 13% cash, the "use cash after negative month method". 

 

the bottom line is a 4% WR is simply too high if you retire at the absolute peak of a bubble and stocks do nothing for a decade after that. 

In addition to a cash buffer I like to keep an untapped HELOC handy. If I need cash at a time when every security in my portfolio is substantially undervalued (like 2020) then I’ll just draw on the HELOC - for a few years if necessary.

[nsx5200]

39 minutes ago, Thrifty3000 said:

In addition to a cash buffer I like to keep an untapped HELOC handy. If I need cash at a time when every security in my portfolio is substantially undervalued (like 2020) then I’ll just draw on the HELOC - for a few years if necessary.

I'm in the middle of transitioning to part-time work as well, and have started applying for a HELOC that I plan to to use as a backup.  The thing that I find odd is the interest-only option, where you pay only the interest portion when you tap into it.  But with a regular HELOC, can't you just continue to tap/roll into it for the principal and interest portion, and essentially turn it into interest only?

 

In regards to simulating it, I think in a different thread, @bargainman posted two links to FIRE-based simulator/calculators that can reflect SWR probabilistically.  If you think doing it full time might increase the return rate, you can run A/B test on a small portion of the asset.  That way, you can experiment and validate without too much fear you run out of money if the experiment fails.  Baby steps...  As I think more about Buffet's investments, they're very conservative with bond-like returns but with a lottery for an upside, and that's probably the best way to invest insurance floats as well as money you think you need for retirement.

 

[SongDonkey.AI]

@alertmeipp Great topic, thanks for starting!

I recommend reading this great book about different perspectives of being full time investor: https://amzn.to/4cVc91y

[throw123]

1 hour ago, SongDonkey.AI said:

@alertmeipp Great topic, thanks for starting!

I recommend reading this great book about different perspectives of being full time investor: https://amzn.to/4cVc91y

ordered it

[UK]

Again, especially in the very begining, or if you just want to try out if things works for you, the best way I think this semi aproach of not going all in/out: just keep you current job, while reducing workloads or hours to a minimum, if possible, start working the same job partime or few days a week. I think Mohnish said, that when he decided to start his own business, he began working at 'just not to be fired' level:). Less to lose this way. If everything is awesome with investing, you will always can quit you job for good later, but with more confidence and less stress. Perhaps a year or two should be enought to decide. personaly I do not need or like office job, but retrospectively I think I harpd felt better, for many other reasons, if I had quitted it more slowly, with some 2-3 more years of 'transitory period':)

[rohitc99]

56 minutes ago, UK said:

Again, especially in the very begining, or if you just want to try out if things works for you, the best way I think this semi aproach of not going all in/out: just keep you current job, while reducing workloads or hours to a minimum, if possible, start working the same job partime or few days a week. I think Mohnish said, that when he decided to start his own business, he began working at 'just not to be fired' level:). Less to lose this way. If everything is awesome with investing, you will always can quit you job for good later, but with more confidence and less stress. Perhaps a year or two should be enought to decide. personaly I do not need or like office job, but retrospectively I think I harpd felt better, for many other reasons, if I had quitted it more slowly, with some 2-3 more years of 'transitory period':)

+1 and its amazing how low the numbers of hours for 'just not to be fired' level is in most companies. find a large, bureaucratic company for that 

Edited September 5 by rohitc99

[UK]

10 minutes ago, rohitc99 said:

its amazing how low the numbers of hours for 'just not to be fired' level is in most companies. find a large, bureaucratic company for that 

 

And after realising this, you may even reconsider quitting:). I was basically working as a freelancer at the time anyway, so there was no need to be a `bad employee' or anything like that. Just not saying yes to all projects/assignments and no to a few was almost enought for a start:)

 

 

[Saluki]

12 hours ago, james22 said:

 

Real world example? How many portfolios are all equity in retirement? 

 

And how is ending even with only $400k after withdrawing $40k/year for 25 years in any way a failure? The 4% SWR assumes a 30 year retirement. You should even be able to double your withdrawals to ~$80k your final 5 years.

 

The 4% SWR is based on the historically worst-case scenario. Assuming you have an average sequence of returns, you should end up with something like $2.8M after 30 years.

 

Though again, in the real world retirees adjust their spending as they go.

 

 

No better discussion of SWR than: https://earlyretirementnow.com/safe-withdrawal-rate-series/

 

I think you'd want to have enough that with your strategy it would increase without adding to it, even as you withdraw for your living expenses.  Do you know anyone who has a heart attack or stroke and survived?  In the US, even with health insurance, your last year of care if you suffer a major medical event will likely cost you more than all your previous medical expenses during your lifetime. You don't want to be confined to a bed and worried about that last $80k running out, or becoming a burden on your kids to pay just to keep you alive, or out of a state funded nursing home. 

[frommi]

44 minutes ago, Saluki said:

 

I think you'd want to have enough that with your strategy it would increase without adding to it, even as you withdraw for your living expenses.  Do you know anyone who has a heart attack or stroke and survived?  In the US, even with health insurance, your last year of care if you suffer a major medical event will likely cost you more than all your previous medical expenses during your lifetime. You don't want to be confined to a bed and worried about that last $80k running out, or becoming a burden on your kids to pay just to keep you alive, or out of a state funded nursing home. 

Imagine giving up a year of good life in your fourties for a little worry at the end of your life, thats a miserable exchange.

[Gregmal]

21 minutes ago, frommi said:

Imagine giving up a year of good life in your fourties for a little worry at the end of your life, thats a miserable exchange.

100%! I don’t get the mentality. It’s outrageously stupid everywhere but in the textbook which is written to shackle folks to their day jobs. 
 

Today my wife and kids are young and full of life. We get so much out of doing things together and enjoying life as a family. I wouldn’t trade one year of freedom now for 5 years or freedom 30 years from now. When the wife is…old. Kids are grown up and spend 90-95% of their time away from me living their own lives….this assuming all of us are still alive which sadly isn’t a given. WTF are people thinking lol

[thepupil]

23 minutes ago, Gregmal said:

100%! I don’t get the mentality. It’s outrageously stupid everywhere but in the textbook which is written to shackle folks to their day jobs. 
 

Today my wife and kids are young and full of life. We get so much out of doing things together and enjoying life as a family. I wouldn’t trade one year of freedom now for 5 years or freedom 30 years from now. When the wife is…old. Kids are grown up and spend 90-95% of their time away from me living their own lives….this assuming all of us are still alive which sadly isn’t a given. WTF are people thinking lol

 

I'm 98% certain I'll oversave and also inherit a fair bit (hopefully in like 30 years at which point I won't need any of it), but...if I run out of money because I retired 5 years earlier than I should have, then I let down 2 generations before me who set me up well and the next generation down for whom i become a burden. people live a long time now...

 

I don't really see how I'd be employable after leaving the workforce. I have no real skills (beyond my niche).  lacking money you're subject to the government; public healthcare, public education, public senior living facility. you become a ward of the state and subject to whatever the state offers you which I think you have to think is only declining with time. retiring w/some other low number is a bet on the benevolence and efficacy of the government whereas a bigger nut offers some escape hatches / alternative options to dying a state run facility. 

 

rightly or wrongly, people (including me), probably overweight the downside risks of running out of dough, but it is quite difficult to contemplate not having dough...I'm trying to balance the here and now a bit with the tomorrowmight spend about 2%-3% of muh net worth on a boat for next season....yea that's a market top 

Edited September 5 by thepupil

[Gregmal]

10 minutes ago, thepupil said:

I have no real skills

I think this is a bad attitude to have as it’s clearly selling yourself short. You’re smart, you can learn just about anything. It doesn’t cost much to start or take a stab at running your own business. Which sounds risky and intimidating but that’s just a mindset thing. Tons of stupid people make decent livings running their own businesses. Why couldn’t someone smarter?

 

And yea, go boat lol. Best part of recessions is you can buy expensive depreciating shit for not much cuz everyone else already lost their shirts.

[thepupil]

47 minutes ago, Gregmal said:

I think this is a bad attitude to have as it’s clearly selling yourself short. You’re smart, you can learn just about anything. It doesn’t cost much to start or take a stab at running your own business. Which sounds risky and intimidating but that’s just a mindset thing. Tons of stupid people make decent livings running their own businesses. Why couldn’t someone smarter?

 

And yea, go boat lol. Best part of recessions is you can buy expensive depreciating shit for not much cuz everyone else already lost their shirts.

perhaps to rephrase, I think I could do a lot of things but none that pay me nearly as well per unit of effort than the current niche. 

 

on the actual topic, I think about this a LOT. The answer is "I don't know". there are situations where I know that I would take more risk and bigger positions IF I had more time to answer various questions or do more work. To do the on the ground diligence that some people do here, or pore over years of filings and just generally be more comprehensive about diligence AND turning over rocks; I think the biggest difference if doing this full time is I'd try to expand the sandbox more and look at a wider variety of companies to always keep the portfolio fresh. maybe I wouldn't hold JBGS for 4 years or TFG for 11 and let those suck wind...maybe. But not doing this full time keeps me humble regarding my level of knowledge versus others, which I think may actually be a decent way to avoid impairing capital.

Edited September 5 by thepupil

[73 Reds]

35 minutes ago, Gregmal said:

I think this is a bad attitude to have as it’s clearly selling yourself short. You’re smart, you can learn just about anything. It doesn’t cost much to start or take a stab at running your own business. Which sounds risky and intimidating but that’s just a mindset thing. Tons of stupid people make decent livings running their own businesses. Why couldn’t someone smarter?

 

And yea, go boat lol. Best part of recessions is you can buy expensive depreciating shit for not much cuz everyone else already lost their shirts.

Absolutely.  You don't need "skills", rather find something of interest and then develop the skills you need.  Can't tell you the number of people I grew up with who were as far from book smart as one could be, but became hugely successful doing only one thing (mattresses, bagels, auto parts, liquidators, .... the list goes on and on. 

[Milu]

I'd say this also depends on the person's investment approach also. For people who have a large number of positions or lots of portfolio turnover then there may be some relationship between hours allocated to investing and overall results (although can't say for sure). For people like me who have about 5-10 positions, hold for 10 years+, and might get a big insight every once in a while it's not something you can brute force. In fact there's a case to be made that my results might get worse if I allocated all my day to investing, I might get compelled to do something when doing nothing is more likely a better approach.

 

I generally always have investing in my head, but there isn't any rigid structure I follow. I'll read the newspaper, read books, listen to podcasts, watch some youtube videos. Something interesting might come along once in a while that would cause me to read the annual report or listen to earnings calls.

Edited September 5 by Milu

[rohitc99]

5 hours ago, UK said:

 

And after realising this, you may even reconsider quitting:). I was basically working as a freelancer at the time anyway, so there was no need to be a `bad employee' or anything like that. Just not saying yes to all projects/assignments and no to a few was almost enought for a start:)

 

 

absolutely. There are so many people who are doing two or more jobs.   A lot of employees just coast along. 20 hrs a week of work takes you into the top 20% of these companies and if you can avoid meetings, even lesser

 

Dont join a start up or a small company where you cannot blend into the background

 

just show up, do your thing smartly and efficiently and be nice to people - i am sure a lot of people can work < 20 hrs/ week with that. with remote work, that frees up a lot of time to invest or do whatever else you want

[SharperDingaan]

Canadian reality checks ....

 

4% withdrawal rate. The latest that an RRSP holder can start withdrawing is on his/her 72nd birthday, and the minimum withdrawal is 5.40%. Goes up every year after that to 20%/yr when you're 95 or older, and it doesn't matter whether your portfolio is 100% equities, or 100% bonds.  https://www.woodgundy.cibc.com/en/reference/retirement-planning/rrif-minimum-withdrawal.html

 

Upon retirement most people will receive a retirement income consisting of some combination of private pension, CPP, OAS, GIS, interest/dividends, and a minimum RRSP withdrawal. Above $17,076 of total income/yr, GIS is clawed back at 50c in the incremental dollar. Above $74,000 of total income/yr, OAS is clawed back at 15c in the incremental dollar.

 

If you delay retirement until age 71, you might have $2,800/mo (33.6K/yr) in CPP and OAS. Assume $0 in taxable interest/dividends; if your RRSP is > $735K, your OAS is getting clawed back .... and if you suddenly need more money, the OAS claws back even faster. But .... if you had also had 10K in taxable interest/dividends, your OAS would get clawed back were the RRSP only > $553K.

 

But this is the COBF board! ...... what if you had been diligent, had invested 'wisely' over the years, and at age 71 your RRSP portfolio was $2M?  You would pretty much be f***** ! as your minimum RRSP withdrawal would be 108K/yr and rising every year - ensuring that your entire OAS was clawed back every year. Oops!

 

The takeaway here ? ..... throughout your investing life, systematically, and periodically, take $ off the table.  

 

SD

[73 Reds]

19 minutes ago, SharperDingaan said:

Canadian reality checks ....

 

4% withdrawal rate. The latest that an RRSP holder can start withdrawing is on his/her 72nd birthday, and the minimum withdrawal is 5.40%. Goes up every year after that to 20%/yr when you're 95 or older, and it doesn't matter whether your portfolio is 100% equities, or 100% bonds.  https://www.woodgundy.cibc.com/en/reference/retirement-planning/rrif-minimum-withdrawal.html

 

Upon retirement most people will receive a retirement income consisting of some combination of private pension, CPP, OAS, GIS, interest/dividends, and a minimum RRSP withdrawal. Above $17,076 of total income/yr, GIS is clawed back at 50c in the incremental dollar. Above $74,000 of total income/yr, OAS is clawed back at 15c in the incremental dollar.

 

If you delay retirement until age 71, you might have $2,800/mo (33.6K/yr) in CPP and OAS. Assume $0 in taxable interest/dividends; if your RRSP is > $735K, your OAS is getting clawed back .... and if you suddenly need more money, the OAS claws back even faster. But .... if you had also had 10K in taxable interest/dividends, your OAS would get clawed back were the RRSP only > $553K.

 

But this is the COBF board! ...... what if you had been diligent, had invested 'wisely' over the years, and at age 71 your RRSP portfolio was $2M?  You would pretty much be f***** ! as your minimum RRSP withdrawal would be 108K/yr and rising every year - ensuring that your entire OAS was clawed back every year. Oops!

 

The takeaway here ? ..... throughout your investing life, systematically, and periodically, take $ off the table.  

 

SD

Can't you maintain a fully taxable investment account?

[bizaro86]

1 hour ago, 73 Reds said:

Can't you maintain a fully taxable investment account?

Yes. Personally, I think the Canadian obsession with avoiding OAS clawback in retirement planning is a bit silly, especially on a site like this one. I'm planning on having income in my 70s well above the threshold...

 

Edited to add: although dividends in a fully taxable account are very bad for OAS clawback purposes because of how they are taxed. In Canada dividends are "grossed up" and then credited. Basically the idea is you include the corporations pre-tax income on your return and get a credit for the tax they already paid. It works out to a lower effective tax rate than regular income, but it does inflate your headline income for things like OAS clawback.

Edited September 5 by bizaro86

[SharperDingaan]

1 hour ago, bizaro86 said:

Yes. Personally, I think the Canadian obsession with avoiding OAS clawback in retirement planning is a bit silly, especially on a site like this one. I'm planning on having income in my 70s well above the threshold...

 

If you live mortgage free, have no debt (car, carried visa balance, etc.), have a spouse, and are healthy; WTF do you need a 74K/yr+ annual income for? You AND your spouse COMBINED will be hauling in 100K/yr+ ... and this isn't enough? Millions of working couples every year earn a lot less than that, and endure daily expenses that are a lot higher.

 

If you continued to work until age 70, you may have an OAS of around 900/mo ( $10,800/yr). On the next 72K (10,800/.15) of income above 74K you will pay an additional 15% in addition to your 32% marginal tax rate (Ontario) - or 47%+. Nobody who is retired wants to be paying 47%+, hence the obsession.  

 

Different POV.

 

SD

[Seoshin]

Reading this thread made me think what is the age demographic here in COBF. I'm in my late 20s and most active people here can be my father lol But really great insights and jotted some or a lot of them in my notes. Thanks guys! (or dads)