One of the biggest achievement of mankind was when people have changed from gathering to growing food. Later on cultures in the valleys of rivers like the Nile, Euphrates, Ganges and Yangtze started to flourish.
This has happened more than ten thousand years ago, and history has proven that great civilizations can only emerge from strong economies.
The discovery that you can grow your own crops, domesticate livestock had such a big significance that it only can be compared with the start of using of tools, the invention of wheel, or the free WiFi 🙂
Today’s post will be about emotions and how you should put them aside when making investment decisions. Investment is about numbers, percentages, ratios and other, factual things. There should be no place for emotions here. At the same time we continuously meet with emotional impacts that can affect our investment decisions. They can come from many sources: analyst up- or downgrades, the new super investing opportunity we hear from our neighbor, headlines of financial news, or the result of the presidential elections. These impacts can make you buy or sell assets, while such decisions should not be based on them. Let’s demonstrate this with an example:
Another month, another step closer to financial independence. In October our investment rate was according to the plan, adding nearly EUR 2,000 to our portfolio via share purchases. We’re in the middle of the Q3 reporting season and the results so far quite mixed with both positive and negative surprises. Overall the S&P 500 closed slightly lower this month, but due to the stronger dollar our portfolio had some small gains in euro. Let’s see the details!
In the previous post we have checked whether it worth to reallocate our portfolio during the wealth accumulation phase in case the stock market dips. That example showed that it doesn’t really worth the effort. Seemingly I am not the only one who was thinking about such strategy. Joe from retireby40.org (who is by the way a great example to prove that early retirement is achievable) had similar thoughts and asked how this strategy would work in the years of early retirement. Let’s see what the numbers show!
In the previous post we have checked some ideas that could be useful to consider when deciding about the portfolio allocation during the wealth accumulation phase. It became quite clear that based on historical data (which is of course never a guarantee for the future) it worth having a portfolio which is fully or at least heavily loaded with equities. How much weight is allocated to stocks vs bonds mainly depends on the risk tolerance and the time frame that you expect this phase to last for. In this article I’m trying to check whether it worth to keep a certain percentage of bonds just in order to reallocate them to stocks during market downturns.
In the previous parts we have looked in detail how various portfolio allocations might affect our retirement income. In each cases we started with a portfolio that has values USD 600k five years before the planned early retirement date. But unless you have 600k in hand, we need to earn it somehow. Let’s see how to get there!
In the first three part of the series it became quite clear that a portfolio consisting solely (or at least heavily) stocks provides the highest long term return, besides of the potentially serious deep dives during the investment period. Is it safe to say that if we want to perform the best during the first, wealth accumulation phase of our early retirement plan, we should invest all/most of our assets in equities? And if yes, is it true under every circumstances? What if the economy isn’t doing well for a long time? What if we are facing long periods of deflation? What if less and less people work in the economy? What if we were… Japanese?
This is the first month end since this little blog has been launched. From now onward I will give an update on where we are on the road to one million. I will let you know what investments were added to the portfolio, share the dividend income on a quarterly basis, and hopefully can demonstrate how every little step you make takes you closer to financial independence. Let’s see where we are now!
In the previous two posts I have checked the performance of 3 different portfolios from 2003/2004 up until today. I wanted to know how did the 2008/2009 financial market crash has impacted the early retirement plan of our imaginative friends. These examples already allow us to make some conclusions, nevertheless I am still searching for the perfect portfolio. Let’s see what part 3 will show us!
In the previous post we checked the performance of 3 types of portfolios and found big differences between them. Now let’s see how timing affects these portfolios. Why is it important? Because we can’t really influence it. Market crashes can happen at any time. It may be tomorrow, but stock prices can also continue growing for many years in a row. I want to find the perfect allocation that makes my portfolio as bullet proof as possible, without sacrificing too much potential returns. Furthermore what I would definitely like to avoid, is to jeopardize the sufficient income during the years of early retirement.