The Intersection of FIRE and Disney

[RamblingMad]

I'm hoping that by starting while DD's young (she's 14), she'll have the habit instilled into her before she goes off on her own. As an only child, everything we have will go to her anyway, but I know it can be quite the juggling act when you have more than one child in trying to figure out what's fair and I don't envy that position.

I found this graph for starting a Roth at age 15 vs at age 25 where the inputs are $1000 per year contributions for 4 years (i.e. 15-19 vs 25-29) then no further contributions, and money earns 7% annually:

View attachment 393713

Nice. But the reality is that since 99’, the only asset groups to return 7% or greater have been REITs, gold, and oil. The S&P returned 5.6% annualized. You would have had to time the market to make greater returns in equities or made some great stock picks. However, the average investor over the same time period only made 1.9% annualized returns.

The problem with these charts is that the average person is a much worse investor. Warren Buffett showed how badly hedge funds performed over the last decade in his 2017 annual report.

However, starting as early as you can makes sense. Figuring out where to invest your money is hard.

 

[platamama]

Nice. But the reality is that since 99’, the only asset groups to return 7% or greater have been REITs, gold, and oil. The S&P returned 5.6% annualized. You would have had to time the market to make greater returns in equities or made some great stock picks. However, the average investor over the same time period only made 1.9% annualized returns.

The problem with these charts is that the average person is a much worse investor. Warren Buffett showed how badly hedge funds performed over the last decade in his 2017 annual report.

However, starting as early as you can makes sense. Figuring out where to invest your money is hard.

I thought the 7% seemed too optimistic as well, but the figure was more to show that the compounding value of time was the key variable leading to greater sums. And that makes sense if you go by the Rule of 72 and understand that the growth is exponential.

Bogleheads would have you go with 3 or 4 funds and be done with it. I'm slowly coming around to thinking they are right, and will be making adjustments to simplify our portfolio over time. It is hard when you have some successful individual stock picks and feel like you're giving up something for the simplicity of a Lazy 3 Fund Portfolio. But investing shouldn't be emotional. If I had to do it all over again, I'd go the Boglehead route and dollar cost averaging.

As to your previous question of getting 5% returns as a guarantee, I've got nothing. Sorry, I wish I did.

 

[crisi]

Nice. But the reality is that since 99’, the only asset groups to return 7% or greater have been REITs, gold, and oil. The S&P returned 5.6% annualized. You would have had to time the market to make greater returns in equities or made some great stock picks. However, the average investor over the same time period only made 1.9% annualized returns.

The problem with these charts is that the average person is a much worse investor. Warren Buffett showed how badly hedge funds performed over the last decade in his 2017 annual report.

However, starting as early as you can makes sense. Figuring out where to invest your money is hard.

It really depends on which period you grab - go a year later and you get much better returns - since 99 was the peak of the dot com bubble and 2000 was a crash. You have to be very careful of what dates someone chooses to calculate a rate of return because that can make a huge difference between a head start on return and a setback around the first corner. (I started doing my serious investing in 2000 after the crash, and then again in 2009 after the crash, and I've had about 13% returns - but then, while I don't actively trade, I also buy most of my stock when its on sale - BP after the gulf spill, WellsFargo after their scandals, my favorite for a long time was Netflix every time Reed Hastings was an idiot (which was pretty often. And for the past few years I've been doing more selling than buying - not much has been on sale).

 

[RamblingMad]

I thought the 7% seemed too optimistic as well, but the figure was more to show that the compounding value of time was the key variable leading to greater sums. And that makes sense if you go by the Rule of 72 and understand that the growth is exponential.

Bogleheads would have you go with 3 or 4 funds and be done with it. I'm slowly coming around to thinking they are right, and will be making adjustments to simplify our portfolio over time. It is hard when you have some successful individual stock picks and feel like you're giving up something for the simplicity of a Lazy 3 Fund Portfolio. But investing shouldn't be emotional. If I had to do it all over again, I'd go the Boglehead route and dollar cost averaging.

As to your previous question of getting 5% returns as a guarantee, I've got nothing. Sorry, I wish I did.

I like John Bogle’s book. He sets forth realistic expectations. And he’s usually right.

I hold some individual stocks to keep me engaged. For example, I have a small position in Disney.

Over the last ten years, I have only managed to grow my money 9% annualized.

My interest now is in asset allocations outside of just equities and bonds. I did good in preferred in the 2000s. I’m slowly getting into REITs.

What I struggle with now is where to allocate new capital. I save about a third of my income. That’s the easy part. What’s tough is figuring out where to allocate it.

 

[RamblingMad]

It really depends on which period you grab - go a year later and you get much better returns - since 99 was the peak of the dot com bubble and 2000 was a crash. You have to be very careful of what dates someone chooses to calculate a rate of return because that can make a huge difference between a head start on return and a setback around the first corner. (I started doing my serious investing in 2000 after the crash, and then again in 2009 after the crash, and I've had about 13% returns - but then, while I don't actively trade, I also buy most of my stock when its on sale - BP after the gulf spill, WellsFargo after their scandals, my favorite for a long time was Netflix every time Reed Hastings was an idiot (which was pretty often. And for the past few years I've been doing more selling than buying - not much has been on sale).

What you basically are saying is that it’s all do to timing. This is really hard to do consistently.

 

[piccolopat]

Thanks, so how long did it take you to save that two years of income? Did you stop contributing to the retirement during that time?

It took me about 6 or 7 years. I put any work bonuses and all tax refunds into this along with as much savings as I could swing. I continued to fund my 401k during this time so it was a bit of a challenge but in the end well worth it. If I hadn't done this, I would still be working and doing a 5 hour a day commute.

 

[SouthFayetteFan]

What’s the plan to handle inflation, especially healthcare costs, and lower expected returns over the next ten years?

I’m struggling to find investments that will return more than 5% to me annualized over the next ten years.

Nice. But the reality is that since 99’, the only asset groups to return 7% or greater have been REITs, gold, and oil. The S&P returned 5.6% annualized. You would have had to time the market to make greater returns in equities or made some great stock picks. However, the average investor over the same time period only made 1.9% annualized returns.

The problem with these charts is that the average person is a much worse investor. Warren Buffett showed how badly hedge funds performed over the last decade in his 2017 annual report.

However, starting as early as you can makes sense. Figuring out where to invest your money is hard.

I like John Bogle’s book. He sets forth realistic expectations. And he’s usually right.

I hold some individual stocks to keep me engaged. For example, I have a small position in Disney.

Over the last ten years, I have only managed to grow my money 9% annualized.

My interest now is in asset allocations outside of just equities and bonds. I did good in preferred in the 2000s. I’m slowly getting into REITs.

What I struggle with now is where to allocate new capital. I save about a third of my income. That’s the easy part. What’s tough is figuring out where to allocate it.

What you basically are saying is that it’s all do to timing. This is really hard to do consistently.

I'm not sure what your goal is in joining in here, but it seems most of your comments are either slightly argumentative, braggadocios, or have a negative tone. (If I'm reading a tone that isn't there, I apologize...but perhaps you might want to adjust the approach a little bit). We're just a nice little corner of the DIS where people are focused on reaching FIRE. I know we can't control who comments here and who doesn't, but we started this to encourage each other and have meaningful positive discussion - perhaps you might enjoy r/financialindependence more over on reddit.

As for me, I'm just going to keep saving 50% of my income, I'm going to put it all in VTSAX (yes a little nod to u/ALL_IN_VTSAX on reddit), and I'm going to be able to retire early. And I'm going to keep contributing to our fun little FIRE community here

 

[SouthFayetteFan]

I just watched a very interesting video of a talk JL Collins gave: https://www.youtube.com/watch?v=T71ibcZAX3I

I've always liked his blog (especially the stock series). I had never actually heard him talk - his voice is smooth and soothing. It's actually an hour long video...and I literally just listened to the entire thing (a great way to pass an hour at work, haha!). He just sounds like a SUPER intelligent human being and just a very positive individual.

I think I need to make this my vacation book this summer: The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life

 

[alryan]

It took me about 6 or 7 years. I put any work bonuses and all tax refunds into this along with as much savings as I could swing. I continued to fund my 401k during this time so it was a bit of a challenge but in the end well worth it. If I hadn't done this, I would still be working and doing a 5 hour a day commute.

Thanks, that is exactly why I asked the question. My DH is 12 years from retirement, so while it isn't something I need to be doing right now, it's not that far off. Since I work part time part of our retirement strategy is me working more when kids are done with high school if need be. So maybe that could be something that we could do to save toward this cushion. 5 hour a day commute, that's brutal! Congrats on your retirement and getting rid of that!

 

[crisi]

What you basically are saying is that it’s all do to timing. This is really hard to do consistently.

Not really. The market is really hard to time on a micro level, but fairly easy on a macro level...anyone who has watched economic cycles can see that we are due for a major downturn - and have been for a few years. So don't buy stock now - you might miss some gains, but you won't take the huge loss. Likewise, while its hard to spot the absolute bottom of a market, it really isn't hard to see that it has gotten better than the worst and buy in then. It isn't hard to know that British Petroleum isn't going anywhere in the next ten years and buy on a spill, and when you follow a specific stock (like I did with Netflix for a few years, I don't any more since I think its played out for gains), you can tell a market overcorrection to bad news from a decent company. I've had a few failures as well...but surprisingly few that I've actually LOST any money on when you factor in the dividend payments (and I tend to buy - with a few exceptions like Netflix - dividend stocks where I'm pretty sure I'm going to be getting 3-7% in dividends - making getting to a 10% yield pretty easy).

 

[SouthFayetteFan]

I just watched a very interesting video of a talk JL Collins gave: https://www.youtube.com/watch?v=T71ibcZAX3I

I've always liked his blog (especially the stock series). I had never actually heard him talk - his voice is smooth and soothing. It's actually an hour long video...and I literally just listened to the entire thing (a great way to pass an hour at work, haha!). He just sounds like a SUPER intelligent human being and just a very positive individual.

I think I need to make this my vacation book this summer: The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life

A few highlights from the video...

Check out the 13 minute mark...just a funny comment about VTSAX

Check out the 29 minute mark...and listen about market timing for 3 minutes or so

My favorite part here: The group of investors that performed best within an individual fund was DEAD PEOPLE (because they didn't try to "time the market")
​

I also like his phrase "Time IN the market is more important than trying to time the market"

 

[RamblingMad]

Not really. The market is really hard to time on a micro level, but fairly easy on a macro level...anyone who has watched economic cycles can see that we are due for a major downturn - and have been for a few years. So don't buy stock now - you might miss some gains, but you won't take the huge loss. Likewise, while its hard to spot the absolute bottom of a market, it really isn't hard to see that it has gotten better than the worst and buy in then. It isn't hard to know that British Petroleum isn't going anywhere in the next ten years and buy on a spill, and when you follow a specific stock (like I did with Netflix for a few years, I don't any more since I think its played out for gains), you can tell a market overcorrection to bad news from a decent company. I've had a few failures as well...but surprisingly few that I've actually LOST any money on when you factor in the dividend payments (and I tend to buy - with a few exceptions like Netflix - dividend stocks where I'm pretty sure I'm going to be getting 3-7% in dividends - making getting to a 10% yield pretty easy).

Nice.

I’m buying PE firms and REITs for the higher dividends and distributions. I don’t know when this market is going to turn. I have 35% in 3 and 6 month Treasuries that I bought at auction through my broker. It gives me dry powder for when this market turns.

It’s tough being at the end of the cycle.

 

[SouthFayetteFan]

Some of this recent investment discussion is way more complex than the primary tenet of the FIRE investment strategy.

I think JL Collins said it best: Buy VTSAX, Buy as much as you can, Buy it whenever you can, and hold it forever...

And so that's what I do, and it works...

 

[speedyfishy]

I put SO's IRA all in VTSAX. His 401k is in the vanguard 2060 target date fund. I know I need to do a three fund portfolio with this. I know I want 90% stocks, 10% bonds. Im struggling with the allocation I guess for US and international stocks. If anyone wants to share any advice or what they are in, that would be helpful. This is all so new to me. Also, the ROTH should all be in stocks and more bonds in the 401k, right?

 

[1st*toright]

A few highlights from the video...

Check out the 13 minute mark...just a funny comment about VTSAX

Check out the 29 minute mark...and listen about market timing for 3 minutes or so

My favorite part here: The group of investors that performed best within an individual fund was DEAD PEOPLE (because they didn't try to "time the market")
​

I also like his phrase "Time IN the market is more important than trying to time the market"

Haven't had a chance to watch the video, but my dad, who has managed his own investments for 30+ years just decided to pretty much stop trading on his own account. He said that for 25 years he was able to beat the market by following financials and trading in sectors that he understands (he has an economics degree), but for the past 5 years, the market has mostly done better than he has, so he's going to go to managed funds instead. He said he has done best by simply not freaking out when there is a downturn.

I guess you could say he was a FIRE guy long before FIRE was a thing - he retired from his career at 50 and has spent 20 years doing various kinds of consulting/other business ventures while traveling to see his grandkids and doing charitable work he cares about. I thought he was normal retirement age when he retired (your parents always seem old to you), it didn't occur to me until literally this minute what he managed to accomplish... 4 kids through college and retired at 50.

 

[SouthFayetteFan]

I put SO's IRA all in VTSAX. His 401k is in the vanguard 2060 target date fund. I know I need to do a three fund portfolio with this. I know I want 90% stocks, 10% bonds. Im struggling with the allocation I guess for US and international stocks. If anyone wants to share any advice or what they are in, that would be helpful. This is all so new to me. Also, the ROTH should all be in stocks and more bonds in the 401k, right?

First off...I'm All in VTSAX...i.e. no bonds, no other funds...just gimme more VTSAX...

That said, if you like the 2060 target date fund but want to "do it yourself" to lower the expense ratio that's pretty easy to do:

• Target 2060 info is here: https://advisors.vanguard.com/web/c1/fas-investmentproducts/VTTSX
• It is made up of the following:
  Rank Fund % of fund
  1 VTSMX (VTSAX investor version) Total Stock Market Index Fund Investor Shares 54.10%
  2 VGTSX Total International Stock Index Fund Investor Shares 35.90%
  3 VTBIX Total Bond Market II Index Fund Investor Shares 7.10%
  4 VTIBX Total International Bond Index Fund 2.90%
  Total 100.00%

So here's some additional thoughts:

• VTSMX = VTSAX 0.04% exp ratio if you put in enough money for admiral shares.
• VGTSX is the same as VTIAX I believe 0.11% exp ratio (which are also admiral shares).
• VTBIX is available only as an underlying investment within other Vanguard funds (i.e. I don't think you can buy it) and it has a sister VTBNX which also are closed off but have an even better expense ratio (institutional class)
• VTIBX is not available but it's sister VTABX 0.11% exp ratio (same fund in admiral shares I believe)

All that said...I'm just all in VTSAX with it's awesome 0.04% expense ratio, LOL!

 

[speedyfishy]

First off...I'm All in VTSAX...i.e. no bonds, no other funds...just gimme more VTSAX...

That said, if you like the 2060 target date fund but want to "do it yourself" to lower the expense ratio that's pretty easy to do:

• Target 2060 info is here: https://advisors.vanguard.com/web/c1/fas-investmentproducts/VTTSX
• It is made up of the following:
  Rank Fund % of fund
  1 VTSMX (VTSAX investor version) Total Stock Market Index Fund Investor Shares 54.10%
  2 VGTSX Total International Stock Index Fund Investor Shares 35.90%
  3 VTBIX Total Bond Market II Index Fund Investor Shares 7.10%
  4 VTIBX Total International Bond Index Fund 2.90%
  Total 100.00%

So here's some additional thoughts:

• VTSMX = VTSAX .04% exp ratio if you put in enough money for admiral shares.
• VGTSX is the same as VTIAX I believe .11% exp ratio (which are also admiral shares).
• VTBIX is available only as an underlying investment within other Vanguard funds (i.e. I don't think you can buy it) and it has a sister VTBNX which also are closed off but have an even better expense ratio (institutional class)
• VTIBX is not available but it's sister VTABX 0.11 exp ratio (same fund in admiral shares I believe)

All that said...I'm just all in VTSAX with it's awesome 0.4% expense ratio, LOL!

Wow, thank you so much for this and the breakdown. I had no idea. I could find the % of what the target fund was made up off lol. I’m so clueless.

Are you not worried about diversifying a bit more? I know VTSAX is the total market but you don’t want any international?

Also, are you AllinVTSAX on Reddit?

 

[SouthFayetteFan]

Wow, thank you so much for this and the breakdown. I had no idea. I could find the % of what the target fund was made up off lol. I’m so clueless.

Are you not worried about diversifying a bit more? I know VTSAX is the total market but you don’t want any international?

Also, are you AllinVTSAX on Reddit?

I am not All_In_VTSAX but I agree with him obviously...

Scattered thoughts and links on VTSAX:

• https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
• jlcollins stock series: https://jlcollinsnh.com/stock-series/ (especially the 3 parts below):
  • https://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/
  • https://jlcollinsnh.com/2012/05/09/stocks-part-v-keeping-it-simple-considerations-and-tools/
  • https://jlcollinsnh.com/2012/05/12/stocks-part-vi-portfolio-ideas-to-build-and-keep-your-wealth/
• Basically...100% VTSAX when you're solely in the "Wealth Building Stage" and then transition slowly ultimately to an allocation of 75% VTSAX and 25% VTBLX once you are in the "Wealth Preservation Stage" See here: https://jlcollinsnh.com/2018/09/25/what-we-own-and-why-we-own-it-2018/
• Some random comments from the prospectus and blogs:
  • The Fund seeks to track the performance of a benchmark index that measures the investment return of the overall stock market.
  • The Fund employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The Fund invests by sampling the Index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.
  • VTSAX is loaded with US companies that are fully international in their operations. Indeed many generate well over half their revenue and profits overseas. So it provides exposure to expanding world markets. This trend will continue to expand as the international economies around the world continue to grow and prosper. Accounting standards and transparencies in the US remain the envy of the world. Less funny business to worry about. Direct international investing introduces currency valuations into the mix and that is a whole other level of risk that needs to be considered.

 

[speedyfishy]

I am not All_In_VTSAX but I agree with him obviously...

Scattered thoughts and links on VTSAX:

• https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
• jlcollins stock series: https://jlcollinsnh.com/stock-series/ (especially the 3 parts below):
  • https://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/
  • https://jlcollinsnh.com/2012/05/09/stocks-part-v-keeping-it-simple-considerations-and-tools/
  • https://jlcollinsnh.com/2012/05/12/stocks-part-vi-portfolio-ideas-to-build-and-keep-your-wealth/
• Basically...100% VTSAX when you're solely in the "Wealth Building Stage" and then transition slowly ultimately to an allocation of 75% VTSAX and 25% VTBLX once you are in the "Wealth Preservation Stage" See here: https://jlcollinsnh.com/2018/09/25/what-we-own-and-why-we-own-it-2018/
• Some random comments from the prospectus and blogs:
  • The Fund seeks to track the performance of a benchmark index that measures the investment return of the overall stock market.
  • The Fund employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The Fund invests by sampling the Index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.
  • VTSAX is loaded with US companies that are fully international in their operations. Indeed many generate well over half their revenue and profits overseas. So it provides exposure to expanding world markets. This trend will continue to expand as the international economies around the world continue to grow and prosper. Accounting standards and transparencies in the US remain the envy of the world. Less funny business to worry about. Direct international investing introduces currency valuations into the mix and that is a whole other level of risk that needs to be considered.

Thank you so much for the help. I’m going to do more research. I’m going to keep the IRA in VTSAX but maybe for the 401k/Taxable do VTSAX and 10% US bonds. I’m nervous being all in stocks. That would work out to me being 7.5% in bonds.

 

[SouthFayetteFan]

Thank you so much for the help. I’m going to do more research. I’m going to keep the IRA in VTSAX but maybe for the 401k/Taxable do VTSAX and 10% US bonds. I’m nervous being all in stocks. That would work out to me being 7.5% in bonds.

It's definitely a personal decision - the best think you can do is research, make an informed decision and then STICK to your plan. If it was the right plan, it will be the right plan when stocks are up and the right plan when stocks are down. What JL Collins will tell you is, most people actually under-perform their own plans because they try to "tweak" it to time the market. (i.e. this is why dead people outperform living within an individual fund...because they don't try to jump in and out to time the market)!

Of course, I'm 100% VTSAX and if stocks go down, I keep buying, and if stocks go up, I keep buying. I completely ignore the market ups and downs from a daily, weekly, and even monthly perspective...I'm in the most diverse index fund in the world and I practically own a piece of every publicly traded business in the USA with many of them doing business internationally as well. Some may say an 80/20 or 90/10 bond portfolio would actually outperform 100% VTSAX (and that may be true) but I don't have to worry about re-balancing or any of that stuff. Simple is fantastic and so I stick to my plan