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Mrs. Thriftyskate and I are still getting our ‘stash together. That is part of the irony of MrMM-type living. While you yourself live frugally and wisely, you take all the money you save and invest it in companies that cater to people who wallow in extravagance and vice. This makes you incredibly wealthy, but you never spend any of the money.
By many measures, the markets may not be ridiculously overpriced right now, but they sure aren’t cheap. Corporate earnings have not been growing at the same blistering pace they were a couple years ago, things seem to be slowing down. I’ve been very happy that I made the change which simplified things dramatically. The definition of a good stock can be entirely different between for different people.
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The markets gotta suck for a few years before I have a real loss compared to giving money to uncle Sam. I’m pretty conservative and don’t like having debt so that’s why I’m trying to pay it off as soon as I can under my circumstances. Maybe once I start working and earning more, I’ll go (now it’s more like 70 % on mortgage and 30 % in index funds). I’m a single mom living in northern Europe and due to our country’s very good social security system, I’m able to only work part-time , leaving me enough time to be with my 2-year old.
- Since 50% of my income goes to retirement anyway I don’t need to make six figures to live.
- The macro efficiency of markets comes from real people responding to real inefficiencies on a more micro level.
- 10% is nice, but 100% would make you super rich in short order.
- You say you have been investing in individual stocks for 30 years.
- I’m early on my journey to financial freedom and – no matter how many times I hear this message – it always give me a sense of comfort.
Some of them are there, for now, more than 10 years. Once a year I do short summaries of my positions, the posts are called “My xx stocks for 20xx”. You might want to look at the last one to see which positions I am very comfortable with and which positions are shakier. The tax differences are a bit smaller now that dividend tax rates are the same as long term capital gains, but they are still real.
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The high individual tax deductions plus things like monthly children’s money results in a tax rate of nearly zero/null/nada for a family with two kids and 40k Euro in yearly dividend income. They would produce an initial ~13% income tax but when you consider the generous children’s money that is nearly zeroed out. As a German living in the US I still prefer the US blue sky, warm beaches and wide open spaces in this beautiful country but in Europe, Germany is better for Mustachians than most other places. I’m familiar with the Shiller PE and appreciate you posting the link. History tells us the average bear market from this level will easily take us back below 1,000. Fortunately, you and I will both be happy when we get there.
In other words, hens may appear overpriced compared to cows, but if the milk prices crash next year, suddenly those “cheap” cows can’t pay the bills. Without understanding the future prices of eggs AND milk, assessing the intrinsic value of cows and hens is just a guessing game. Justin, you’re absolutely correct that you should not buy stocks when the market is overpriced.
Please do read the article that @Damo linked to. The way most of us use the term “market timing” is exactly the way @Damo uses it which is the same way you do – trying to figure out if a class is overpriced and waiting until the price drops. I consider myself quite knowledgeable of investing and am familiar with cost averaging, but was unaware of that specific data you quoted. Thank you, that’s really interesting to see just how effective it is and might just help me convince my family members to finally follow suit with me on this stuff. Explains why you should still put money in tax-deferred accounts even if you’re planning to retire early, because you can get it out early if needed. I really love all the great information you post and the amazing debates after your articles.
It seems cheap, but gets cheaper and cheaper. It seems that there are too many satellites and that over time the cost of launching a new satellite with greater and better functions is lower.
In fact, I’d say this is the most BADASS portfolio idea I’ve ever come across. That graph shows the market is still somewhat “expensive”, but it doesn’t let me predict the future enough to forego stocks altogether. Expensive stocks just mean you’ll get lower average returns – not negative ones. For me, a 3% return over 10 yrs isn’t that enticing.
I think I may choose to ‘retire’ earlier than expected, but still mess around working hours a week so that I don’t have to spend down the portfolio, and let it just grow. Or like I decided, I will get more enjoyment out of the money by taking at 62 rather than 70 as my health is much better now than what I expect it will be in my 70’s. Right now I am drawing at 62 and maintaining a part time job to fill in as supplemental income so as to not have to make major withdraws from retirement at this time. You admit that you retired in 2011, and the market has gone up a good bit since. That has a huge affect on how much easier it is to handle these down times. Regardless of the fact that the market does this, and you shouldn’t be scared by it, you have to also take into account that there is some luck involved in the year you decide to retire.
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But you do notice the 40% cash, just in case. In order to do this, you have to be able analyze stocks and design your own portfolio. You have to have faith that your own analysis is correct, and will come through in the long run. Do I still have plenty of money, and plenty of profits? Momentum is a well known market anomaly, which sources it’s fuel from, amongst other possible candidates, price action / technical analysis.
BTW, I’m a big fan of the blog and don’t mean to be argumentative. I simply think this is context tokenexus crypto exchange your readers should consider. But, with the MMM and FI way, you are buying time and freedom.
Many of those 500 companies have profits earned oveseas. This is neither good or bad, it just depends on what you want. 1) I’m not a US or British citizen so some restrictions apply as to what kind of packages I’m allowed to invest in. The aforementioned high rate is the vanguard S&P 500 equivalent available to non US/Britons. Long time reader and advocate for your brand of lifestyle and philosophy .
And the dividends need to be both sustainable and growing over time. Few people will have this amount of capital – so for them the value of their shares matters. The downside risk on them can be quite high if you’re buying at anything other than a clear bottom. But if you are buying at or near a clear bottom, then yes, you xm forex broker review have very little downside risk and tremendous upside. Still, probably not something to bet the farm on if you’re a conservative investor with diverse interests outside of investing. All that is being discussed here is buying stocks when they are at fair and low prices, and buying other things when they are overpriced.
Living with a man who was very spendy didn’t help, either. I really wanted to save but didn’t know how. Stocks seemed too risky and I knew nothing about index funds. So I put away some of the money in a regular savings account, and with the rest, participated in the life update process for a number of years.
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I definitely see this this downturn as a normal and somewhat welcome occurence. I’m glad I started keeping some of my money in cash last year. Goes against your advice, but even Warren Buffet agrees that cash is the best hedge and noone should have 100% of their money invested this far into a bull market.
There are so many opportunities that people just don’t take advantage of. As a side gig, I’m currently buying houses in the countryside to fix them up to sell them to Dutch people who are looking for affordable houses with more than 10 sqft of lawn around them. I even showed quite a few people the numbers and pretty much said I found a gold mine and they should get a shovel and dig.
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Stocks have been on an almost uninterrupted climb since I started this blog in 2011, which may have given beginners an unrealistically rosy picture. But now we’re seeing a more natural pattern, and I’m glad. Because this actually means more wealth for all of us.
I agree with you both – now is not the time to plow a substantial amount of cash back into the market. It is hard to get excited about putting money into the market when all typical valuations measures (Shiller 10 PE, GAAP PE, Stock mkt / GDP, etc) show that the market is being valued very highly. In addition, earnings continue to fall and financial engineering via non-GAAP pro forma earnings is back in vogue….. My point is that you can never know what the financial future will be. But you can build a portfolio that is low cost , simple to maintain , provides SUPERB stability and generate excellent returns.
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In the meantime, I’ve implemented many MMM strategies so my low cost of living helps offset lost dividend income, etc., while I wait patiently and sleep well. Stocks might certainly continue their climb, but there’s less reason for me to believe so these days. I moved from investing in mutual funds to investing in individual stocks years back because I thought many stocks had very poor fundamentals (PE, price/sales, debt/equity, etc). These days, even using my stock screeners, fundamentals are so poor, it’s hard to find any stocks that meet even my most minimum standards of the past. If I can’t find individual stocks worth their salt, why would I invest in the market as a whole? I can tell you, the ONLY reason I would, is that the FED continues to play bailout and prop up.
I don’t see any reason why any Countries stocks will always have an upwards trend. To me there is always the risk of things not improving by the time one retires. Personally, I have been using my investments to lower my cost of living (e.g. solar, geothermal,electric cars). This is still risky, but it at least guards me somewhat against not being able to pay my bills if I lose my job.
It also makes it harder to spend money frivolously. Beyond lowering cost of living it is very difficult to determine how to invest. I’ve arum capital overview been trying to put money into things that have some intrinsic value (real estate/commodities/etc), but even these have obvious risks.
I also wanted to realize some losses from a tax perspective. For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. Go ahead and click on any titles that intrigue you, and I hope to see you around here more often. I’d hate to work at desk for 30 years only to have the market completely crash the day after I retire.
I’m early on my journey to financial freedom and – no matter how many times I hear this message – it always give me a sense of comfort. Rationally, I know there is absolutely not reason to panic, but I can’t keep myself from the occasional painful flinch when I see my numbers drop. As a former ridiculous over-spender, I can also easily relate to the message of buying “on sale”. I’m just glad these days “a sale” means sinking more into investments at a good price vs. buying yet another shirt to toss into the closet or another toy to further clutter my kids’ rooms. The issue is skill takes a long time to show and it’s hard to tell luck apart from skill. Many people believe they have the intellectual and emotional capacity to beat the market and they try to pick out individual stocks.
