That is the counter argument to becoming ever more financially conservative with age. Most of the standard advice is given to people who have just enough to fulfill their financial goals so the advice concentrates in not running out of money before dying. That may not apply to everyone — especially people who having been diligent about FI since their youth are now in a good position, hopefully the future situation of readers frequenting your blog. If we estate tax the gain then successful people will consider the risk not worthwhile, buy government bonds, and their funds become one thousand dollar staples and two thousand dollar staplers.
This is how estate taxes disincentivise economic growth and longer term prosperity. Tell us about your story and at what age you reached financial independence.
How much was enough for you and how did you structure your portfolio? At the depth of the crisis I was below expenses. So I think I can now take a more holistic intergenerational approach, becoming aggressive again, in real estate for the time being. For people who have a lot of offsprings this is obviously a bigger and more open ended challenge.
There are, I think, a lot of articles you could write about how to teach our offspring to handle money properly. I, myself, feel clueless in that area. The world is moving ever faster. In the next twenty five years we will see more change than in the past fifty.
Making money during a bull market is easy. Here are the various ways to make money during the next downturn. Stock valuations look stretched. Real estate is. Since we can all agree that another recession is inevitable, I am going to go out on a limb and suggest that now is the time to plan for it.
Then, the next cycle is likely to be half that at twelve and a half years, and then six snd a quarter… Simple arithmetic implies a singularity, actually. Human growth is not only continuing but the rate of growth itself is growing. There has never been a time in human existence where worldwide growth was a sustained four percent — not even remotely close. And the rate of growth itself is on an ascending trendline.
That is the vastly different world our heirs will live in. What lessons can we teach them about money? Do you have any idea? Then there was the slow recovery. Hi Sam. Love your blog.
Good luck with market timing. Empirical evidence shows that it does not work. Anecdotal evedence will show than one lucky person did time it right one time. How about if you accumulate more and live off 1. That is more or less the Warren Buffet solution. Works for me. The solution to having more money by accumulating more money is a logical one. What do you think that is? The US is not that safe of an investment over years. It is the same logic as the sequence of return that terrifies new retirees. A black swan to the US is very realistic.
Like a volcano in HI or an earthquake in California. It will happen. The reason is as follow: world domination is a zero sum game. Winner one day, looser an other. Further having a multi national stock is not as safe as 10 country specific stocks. Absolutely double down when there is blood in the water.
What about buying rental property and potentially taking only a small hit on modest rent decreases? I miss your logic: if US is black swaned what will happen to your SP dividend? You are too sure that your US dividend will be forever while unsure if US will keep its position in the world. How is that? If you were to just live off the dividend yield of SPY, why not double or triple or quadruple the yield by writing covered calls against your stocks.
By adding some short deltas to your primarily long positions, it reduces your net longs and as a result adds a small hedge against the downside risks. What will cause a recession in 2 years? There is a student loan bubble and I have not convinced myself of any outcome. There are also mature real-estate markets. I did talk to a mortgage broker in LA last week and he is convinced of something happening in the next 2 years because he is seeing more less qualified loans being written like So what will cause job loss?
Infrastructure spending is likely, and tax cuts will have more impact in Italy is a problem child. There is even a 2nd phase of tax cuts planned. Do you?
For us, our biggest asset is absolutely our house I know, yikes. It seems we did get our house for a song. Our plan is to relocate closer to family with a baby due soon, it seems smart and cash out this house to buy something smaller. With our equity now, we can actually buy something outright with no mortgage or very little—seems like a smart move to shed the mortgage debt and streamline expenses. They think our house increasing in value is a sign we should hold tight.
But our mortgage payment is too high for our comfort and we are tempted by the prospect of ditching a mortgage altogether to help us start on a path to FIRE. If you can go mortgage free, go for it. It provides certainty.
But if you bought a house at the depth of interest rates then why not keep that cheap mortgage and let inflation and higher safer returns vaporize your debt payment and balance over a relatively short time? As I see interest rates and inflation rise I keep my low interest mortgages and celebrate the fact that the true cost and balance on my mortgages is being vaporized. What is being vaporized? It is the very investment money that the Fed forced investors to lend me at a low rate during the recession.
But heck the Fed forced you to lend it to me for a song just a few years ago. Sounds like you are very in the money and can afford the payment and a correction. But you might regret selling in an area like Seattle years from now.
I agree with the outlook, but for people who were positioned corectly the last decade or two, what actionable advice is there? How do you de-risk without losing a big chunk of your capital? My largest positions have negligible cost basis. De-risking can be accomplished by someone with an income or new money coming in, tough to do for a true retiree with a lot of gains.
I have also hoarded some cash though, in case good buying opportunities come up RE, stocks, etc.. Realizing that this most recent run in equities, real estate, etc. One strategy I plan to deploy to some degree is paying down existing mortgage debt 24 year, fixed rate loan with 4. Paying down the debt will be a clear net positive. However, in addition to moving money into less risky investments over next few years, as things turn down, I want to begin to incrementally redeploy money back into equities and real estate.
Knowing this will be my strategy, I do worry about relying significantly on the mortgage paydown because it will limit the amount of capital I have to redeploy during the downturn. Do you have any thoughts on benefit of paying down mortgage debt which also includes peace of mind vs. Paying down debt is always going to be a good thing IMO. Just be careful to not pay off so much and be left in a liquidity crunch.
The cash flow benefit will only be felt if you pay the entire mortgage off. Because it seems like using a combination of bonds locking yourself into inflation adjusted losses and shorting where nominal prices could rise while the value of companies decreases would be catastrophic in that scenario. Thanks for asking. Hence, this post serves as things to think about when the time comes.
I want the flexibility to take care of my son full time. Only got one shot at this. I will take a big hit when the next correction happens, but it comes with the territory of aggressively investing. What allows me to continue with my path is the simplicity of the plan. There comes a point when you have to be honest with yourself about the type of personality you have.