knickabocker88 wrote:aq_ua wrote:knickabocker88 wrote:
I Still want to outperform the S&P. And if I want to reach my Fire Aspirations faster albeit maybe a little more riskier
https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-Youhttps://www.investopedia.com/terms/f/famaandfrenchthreefactormodel.aspHave you considered factor investing if you are comfortable taking incremental risk for returns? There are so many idiosyncratic events that can effect a single stock (basically uncompensated risk), while statistically speaking 95% of portfolio returns can be explained through the factor model. You can also implement these strategies fairly cheaply by sticking to ETFs and rebalancing yourself.
There is so much academic and analytical support that points to one of a few combinations of diversified portfolios being the most optimal investment strategy for the average investor that I tend to believe the question around which types of assets to invest in is essentially resolved. The bigger questions should be more about what exactly does that FIRE aspiration look like, what is a realistic time horizon for that given expected returns, how do you tax plan in the most optimal way, what is your failsafe, etc.
I'm a federal employee, so I can hedge a little bit.
If I make it and work until 57 and 62, I should have a 401K that should be worth north 1.5 million, a Federal Pension plan that should pay me about 4000-6000 a month and Social Security pay me another 2500 a month as long as I breathe.
Whats the point in having a nest egg if you cant enjoy it now.
Hopefully this bull market continues for another 10 years, I'm late in the game and I have a wedding that I'm paying for now. Just putting 500-600 every paycheck into the M1 pie.
The younger me didnt contribute to my 401k plan that had employee stock purchase program and a match.
The things you learn and understand at 33 that was never taught at 23.
Totally get it, and the peace of mind that comes from having a secure pension is rarity these days, so good for you.
There's no absolute truths in these things - I just raise the obvious questions, because that's the analysis I went through myself (I'm 43 so a decade ahead) and continue to go through. I grew up with almost a fear of money, because I saw my parents go from enjoying a comfortable lifestyle to having things repossessed, so preparing for the worst became a core philosophy for me. Only in the last few years with having younger children that I've focused more on new experiences together and allowing money to provide this.
Nowadays, my core philosophy is more around sustainability - of lifestyle, of spending habits, of savings habits, of thoughtfulness around the purpose, utility and value of having money. All of which is an intensely personal attribute and not one that can be prescribed.
I do believe, however, there are sort of broader facts that demystify and simplify concepts around money. The existence of "true alpha" or the ability to consistently beat the market is largely false. It's easy to get sucked up into the "other guy made a bunch of money on..." syndrome, which is basically tantamount to investing in an asset that has already run up and therefore offers lower expected returns, but also a significant amount of thought space that gets dedicated to an activity that doesn't really add value in the long run. Hence, the data driven conclusion that broad index ETF investing is the way to go to maximize utility. Unless of course the act of chasing new investment ideas provides utility or happiness - which certainly does seem to be the case for some.
Just one thing to consider though - because I see this a lot - is to think about the future purchasing power of a fixed payout figure. $100,000 received 30 years from now, assuming 2.5% inflation per annum, is worth less than $50,000 today from a purchasing power perspective. Are you ok with that or do you need to plan to fill that gap at all? This isn't meant to scare or cause concern - because human beings are amazingly adaptive creatures and will figure out ways to make things work not matter what. It's more about taking advantage of the abundance of time you have ahead of you (you are definitely not late to the game) to prepare and avoid any unnecessary surprises.
