The Education of Axel Heyst

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7Wannabe5
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Re: The Education of Axel Heyst

Post by 7Wannabe5 »

@jacob:

Well, I would never proclaim that money is evil, but I might casually note that Greed is a vice among many other vices. As a 7 on the cusp of 6, my personal vice mix on a very low functioning day would be Gluttony with a side of Shame/Guilt. So, for me/my type, movement towards Greed or it’s much more functional expression as Conservation of Resources is good growth. However, it is also the direction of disintegration for type 8 (roughly ENTJ/ESTJ.) These types do better heading towards 2 (The Helper.) The hard schism on the road to salvation might therefore be between those with initial primary extroverted direct drive to make money vs those with initial primary introverted direct drive to save money with the rest of us just doing curious loop-de-loops, like chubby girl who absent-mindedly wandered into the gym for super-fit people and somehow found herself entangled upside down in a piece of equipment with her lollipops now scattered just out of reach on the floor. Something like that.

Jin+Guice
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Re: The Education of Axel Heyst

Post by Jin+Guice »

@jacob: Thanks for your response. Confusion about investment was why I initially joined the forum 3 years ago and I’m still confused today.

What you said in this round of questioning has been very informative.

The salient points I took away are: Avoiding failure is much more important than finding success and learning the basics is, well, just sort of advisable.

This isn’t wildly different than other responses you’ve given, but hearing you rehash it is interesting.

@RF: I encourage you to learn about the monetary system and not forsake money. It’s possible to acknowledge that industrialization has done some wonderful things that help us everyday and inspire curiosity, w/o constantly sucking it’s dick. Money is a perversely good tool if it’s used for what it’s for.

Anyone with any imagination can see a path where we got penicillin and didn’t murder every fish. But that’s not what happened. You gotta soften some bald eagle eggs to get your root canal. It’s the world we live in and wishing it wasn’t won’t change that. Your best bet at change is understanding multiple perspectives and money is the only perspective a lot of people think in. It’s hard to talk to the people who’s minds you want to change if you don’t understand that the market mechanism is sort of beautiful, the feeling of power that money gives and the real fear that most people fear over running out of resources.

RoamingFrancis
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Re: The Education of Axel Heyst

Post by RoamingFrancis »

@jacob + @J+G:

Good points, thank you. In the past year or so I've drifted further and further in dirtbagERE, which has some merit to it, but if I want to make progress towards my real goals in life I will have to engage with the monetary system some more. I've sort of walked up to the edge of moneyless living, but realized my it's not conducive to my deepest goals, and has plenty of drawbacks.

The main challenge that lies on my path is developing homeotelic income and avoiding the salt mines. I don't have a college degree; I at least have some marketable skills, but I don't have enough working hours to get a reliable, stable income. As such, I'm kind of stuck as a farmhand until I figure out how to change this. I'm still 100% interested in permaculture and want to continue to pursue it, but I don't really want to be WWOOFing into my 30s and 40s.

I'm considering taking a "salt mines" job for a month or two this summer in order to fund the next leg of my journey. I know what I want to do going forwards, but there are a lot of logistical challenges in my path. I'm not sure if I'd have to go back to school to get where I'm trying to go. Regardless, the experience I've had with ERE and dipping my toe into permaculture has been informative and I will be building on this as I go forwards.

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

To be clear, my definition of dirtbagERE explicitly assumes a mastery of the monetary system. It just deemphasizes a Trad style accumulation phase, or more specifically rather it rejects white knuckling through distasteful w*rk.

The dirtbagEREr might (or might not) look like a hobo, but zhes got a bomber portfolio strategy and FU stash.

Qazwer
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Re: The Education of Axel Heyst

Post by Qazwer »

While of course any definition can be made by those who create the term. Why does dirtbagERE require PhD level knowledge of finance over other skills? I am thinking early YMOYL merely mentioning bonds. That became outdated but a non-optimal shift to 60/40 might be close enough. Then in 30 years it might be something else. But it does not have to be the best. It just can’t be the worst as defined by the goals of the individual.

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mountainFrugal
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Re: The Education of Axel Heyst

Post by mountainFrugal »

"Bomber portfolio strategy" evokes an image of a perfectly placed #2 BD cam with all 4 lobes evenly touching in a splitter crack (sorry for climbing reference for non-climbers). Managing the risk of a fatal fall through technical know how.

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

Haha mF nailed it.

I don’t mean the dirtnagEREr needs PhD investing level. They need whatever level of education is necessary to ensure their portfolio doesn’t fail/meets their strategy. basically, I’m not saying anything different about how one needs to approach their financial stewardship than what ‘normal’ ERE already implies. By ‘master the game’ I only mean ‘to the extent that you aren’t a tool of the game for the rest of your life”.

With dirtbagERE I’m only saying things about ones attitude/approach towards remunerative activities, which to me is just tweaking settings within the overall ERE framework. (DirtbagERE is a subset contained wholly within ERE, not a domain that has non-overlapping parts, as I conceive of it.) what one does with ones money once it comes in should be dealt with with the normal ERE approach of Renaissance Ideal skill/knowledge/wisdom etc.

(Which I’m currently lagging far behind in, so I have no basis to say anything more specific than that.)

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

A reflection based on the previous page and a half’s discussion, which I was in the woods during, which really helped to crystallize some notions for me with respect to my current perspective on money and investing.

I accept the premise that gaining sufficient competence at ‘the money game’ is worth a significant investment in time/attention in order to achieve FI with a reasonable assurance that my portfolio won’t fail.

I desire the freedom to pursue my interests and life’s work without overly worrying about money. I think it’s important for me to spend long period of contemplation, leisure as a necessary complement to work, experimentation, and also to be free from the cognitive leash of loyalty to any industry that signs my checks (Disciplined Minds, etc). Being able to do this more or less requires attaining FI, and a *secure* FI at that.

I am beginning to see investing related topics as inherently interesting. I’ve spent a lot of time trying to understand the world’s human, energetic, and materials resource systems, but I’ve almost completely neglected an understanding of the financial side. As such I’m blind to its influence and dynamics. I also see the potential positive intellectual feedback of an investing based approach: the acute concern with *not being wrong*, having skin in the game, a personal-life-impacting reason to care whether my assumptions about the arc of civilization/society/politics is correct, etc. More on this below.

My failure with Bodie had to do with not having sufficient context to make headway against the technical details. I had no idea if learning the ins and outs of bond return rates was going to be useful, so my brain dumped the information immediately. I’ll return to it, after exploring other more remedial sources (investing for dummies, history and philosophy of investing, multiple higher-level strategies/approaches, and just general investing “immersion” with the aim of gaining fluency).

The big attitude shift here is that, previously, I thought about investing with distaste and approached the ERE investing curriculum with a “okay fine, I can crank through these four texts and get it over with and then I can forget it”. Not an ideal learning perspective. My new attitude is this: investing is now simply another domain of intellectual inquiry (married to practice) that I’m into. There’s nothing to get over with - I’m going to be learning about this stuff for the rest of my life. The ratio of my attention I devote to it will change over time (frontloaded to “catch up”, then dropping to a maintenance amount, I’m thinking).

My position:
.At the moment I’m 100% cash.
.I intend to keep 2-5 years in cash on hand.
.I have ~100k in a rollover tIRA to play with, which is currently all in cash (it was in a TRP (?) at my old firm)
.It seems likely that I’ll earn $20-100k/yr for at least a decade, possibly 2, doing things I want to do anyways. I’d guess an average annual earn of 50k, hard to say though.
.I will aim to earn at least 20k/yr in order to avoid the medicaid hole. After that, I’ll only earn more if remunerable projects line up with my stoke.
.It seems unlikely that I’ll stop earning at least my CoL within 20 years. So my portfolio doesn’t have to be withdrawn from for a long time.
.My anticipated CoL is 1 jafi. I can see any given year’s burn ranging from 0.6j to 1.5j, depending on how acquiring land/a house goes, but my target average burn is <=1jafi. There’s some uncertainty to this due to my current lifestyle instability - I don’t have a year’s worth of data attached to a stable lifestyle to point at and project forward, because my past four years have bee all over the map. I’m essentially trusting to the idea that while I’m currently converging on 1jafi, it’s something I’ll be able to maintain / continue converging on regardless of what specifically my life circumstances look like.

So to summarize: I’m sitting on 100k, that I probably won’t have to touch for 20 years, that I’ll be adding 10-90k/yr to, and my CoL is ~1jafi.

I accept that “avoiding portfolio failure” should be my primary investing goal. This comes from my primary life aim, which stripped of specifics is “to retain freedom-of-action and live life on my own terms” (Boyd), to be an autonomous agent. (It occurs to me that this is an artifact of my current level of development and will change in the future; fine, but for now it’s what’ I’ve got).

My main concern is to educate myself quickly enough to begin executing some kind of plan, and avoid too much wealth destruction via inflation, without doing something I’ll regret later (like going all in on VTSAX right before the market dumps 80% and doesn’t recover for 20 years). So a primary education goal is determining a very conservative vehicle to stash my stash in, protecting it from inflation or market dumps, buying me more time to come up with something more sophisticated (or elegant, or wiser, or whatever). The point is that I’m acutely aware of how ignorant I am, and I want to protect myself against myself during my inevitable Mt. Stupid phase.

I just reread JL Collins the simple path to wealth. He’d have me dump everything in VTSAX and forget it. I’m not going to do that, at least not right now, although I might put a little in as a way to have some skin in the game and boost motivation for education. (That said, if anyone reading this is a time traveler from July 2009, can you please tell Axel2009 to go live in a box, break up with his then-gf, and dump his salary into VTSAX? Thnx!)

I see systemic / structural dysfunctions in world systems the likes of which no society/civilization has ever experienced. I’ve no idea how these dysfunctions coming up against the limits of reality will play out in the markets, or how they will impact conventional investing strategies, but I’ll be surprised if it’s “positively”. It seems to me that an extraordinarily difficult series of world events will require an extraordinary investing strategy to avoid portfolio failure. (As I write this, I’m thinking of Dmitri Orlov’s stories of people moving family wealth out of the collapsed USSR via smuggled art and collectibles, and how gypsies wear their portfolios as jewelry since they don’t/can’t use banks).

When I think of potential causes of portfolio failure, I think of:
.Massive market crash with no/very long market recovery
.hyperinflation
.Dissolution/balkanization of the US
.Widespread federal siezure or tax traps of certain kinds of wealth
.Cyber theft/crime (fire sale)
.Unexpected medical expenses

The other domain of circumstances that I think about imply unavoidable portfolio failure/irrelevance, but give me pause to consider how much of my $ I should dump into rapid skills training or equipment (straying into prepper territory here):
.Inescapable civil war
.Runaway climate change - rapid collapse of global civ - dash for the poles
.Widespread crop failure and famines

In other words, while it’s obvious that the market *has* always gone up, in order to err on the side of safety I assume the market is going to go *down* at some point in my life. A belief that the market always goes up despite some volatility seems to me to be a concise statement of the Myth of Progress, which I think is in the process of unraveling.

All that doomer stuff said, I assume that there’s some way to arrange one’s wealth such that it survives all but the most catastrophic scenarios, preserving one’s ability to act largely if not entirely as an autonomous agent. I find the challenge of cracking that intellectual nut extremely enticing. In fact, phrasing my investing goal in these terms seems to me to be key for tapping into motivation and stoke for this topic. With this framing, I can see investing not as a tertiary burden to be dispensed with ASAP, but rather a pursuit in quite excellent alignment with my purpose and life’s work.



I’ve already gone over this a bit previously, but it bears re-emphasis in case anyone is distracted by me bringing the topic up. I find thinking about potential worst-case scenarios to be a soothing intellectual exercise, similarly to how I find it soothing to think of a Plan B in case the boondocking spot I want is infested with rowdy teenagers. I don’t experience anxiety over the idea that the world might go to shit on my watch, and I don’t obsess over it. My decisions and ruminations are not fear based. They are “I don’t lose, and I don’t like to be in situations I wasn’t aware were possible” based. I’m familiar with how bad of an idea it is to dump a bunch of attention and money into an underground bunker stocked with ammo and cans of beans. I’m familiar with how wretched a lone wolf lifestyle would likely be. I’m also as familiar with the dysfunctions and frustrations of ecovillage/homestead/back-to-the-land life as anyone who’s never been in one can be, although I did grow up off-grid. Just no farming.

My life’s work/purpose relates somehow to understanding the crises facing humanity, and doing what I can to be helpful, in order to nurture/cultivate a future scenario that doesn’t suck as much as it otherwise might. In order to understand how to be helpful, what solutions to focus on, how to be effective, I have to spend a fair amount of time understanding the potential worst case scenarios that I’m trying to do something about. Thus, spending cognitive cycles on “doomer shit” is essentially a professional obligation.

I welcome criticism and engagement with respect to all that, but please understand that I’m not at the “omg you guys I just read that climate change is maybe gonna be like real bad? and also there’s a bunch of nukes laying around and maybe the gulf stream will reverse so maybe I should learn how to make a fire with a bow drill???” level anymore. I can be engaged with on the level of the work of Meadows, heinberg, c5, jmg, tainter, Orlov, Charles Hugh Smith, Catton, etc. Below that, and I’ll feel like you’re strawmanning me. Above that, I guess by definition I won’t understand what you’re saying - please cite your comments so I can read the appropriate stuff and catch up. :)

I think there is a range of possible futures in between the poles of “the market always goes up” and “we’re probably all going to asphyxiate soon during a global anoxic event anyways so YOLO”. I disagree with the sentiment that either the market is going to do what it’s always done, so just index and fuggedaboutit, or everything will be so bad it won’t matter what you do with your money, so just index and fugeddaboutit. Maybe I *will* index and fuggedaboutit, but I’m not educated enough yet to make that call. If I were a betting man, and I’m about to become one, I’d say the next 65 years (the rest of my life) is going to be unprecedentedly rough in terms of almost everything, including the market.

But who knows. I want to build a portfolio that does fine if I’m wrong, and doesn’t fail if I’m not. I see this goal as being very complementary to what I consider to be my life’s work and interest, that is, in understanding and *doing something* about the course of human society. I am aware of the naïveté of a lot of what I wrote in this post, which I see as a record of my current perspective that will be changing and (hopefully) becoming more sophisticated, aware, and informed.

RoamingFrancis
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Re: The Education of Axel Heyst

Post by RoamingFrancis »

Cool shit, man. Question: do you find that having a lot of money has an inflationary effect on your ego? I was reading this interview https://www.pbs.org/newshour/economy/th ... itigate-it and was thinking that if I do shoot for FI (rather than the moneyless flirtations I've been entertaining) I should put systems in place to mitigate the potential "money-making-you-an-asshole" effect.

Granted, it's a pop article, and I haven't dug into the research, but I think it's a question worth discussing in a financial independence community.

RoamingFrancis
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Re: The Education of Axel Heyst

Post by RoamingFrancis »

https://psycnet.apa.org/doiLanding?doi= ... .110.2.265

I found a relevant research article but I don't have access. I emailed my academic ally who gets me PDFs of these things XD

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

yeah good questions, i’d say;
Having ‘only’ 100k locked in a retirement account doesn’t make me feel rich.
Living in a dirty truck, in a dirty tent, wearing dirty clothes on a body that’s only been rinsed in mountain streams for the past few weeks, as a sort of “average lifestyle circumstances” with living in various diy metal box illegal microhomes on land i don’t own as my cushy living circumstances upgrade, does not lend itself to making one feel ‘superior’ to anyone really.
I can get a little frugal snobby thinking about people blowing fifty bucks at a pub on the regular.

But stepping back a bit, my guess is it’s not so much *having* a lot of money that makes people egotistical, it’s *spending* a lot of money as a way of demonstrating status. Since in our culture, almost everyone who has a lot of money also spends a lot of money, it can be different to tease apart the difference wrt causality.

ERE folk are different than “normal” high NW people. An ERE’r might have 33x or 50x or 100x, but they *spend* below the poverty level! Their Good Life is built on skills, not money, and they see money as a ticket to freedom, not as a demonstration of status, which is the more common perspective.

Still, might ERE folk be more egotistical than others? Maybe, but I’d guess if so it’s due to different factors (the pride that comes with skill and competence, a frustration at the low level of competence and strategic thinking of most people, including High NW people, etc). Can anyone possess high skill at something and not be somewhat prideful about it? Like, I genuinely think I’m better than 95% of BIM practitioners out there (my old profession, what I put 10khours into). Doesn’t mean I think I’m a better *person* though.

But our culture hammers into all of our brains that people who have indicators of high value are, well, of higher value, than people who don’t. And in our culture, indicators of high value are expensive cars, big houses, nice clothes, expensive haircuts, fine wine, etc. So people who spend their money on those things are trained by our culture to think they’re better than other people. And people who *can’t* spend their money on those things also assume that those people are better.

But that’s all in-the-Cave thinking, isn’t it. To the extent that a High NW ERE’er is outside-the-Cave, aka mature, aka developed enough to have deprogrammed all of that money=status stuff, we’d have to hope that they’ve avoided the ego-trap of ‘having money’, and don’t need to worry too much that that study applies to them.

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

Interestingly, the article leaves on the point that accountability is a great foil to corrupting power. So maybe these journals are a great way to avoid becoming an EREhole.

RoamingFrancis
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Re: The Education of Axel Heyst

Post by RoamingFrancis »

I think pride in skills is completely reasonable. Craftsmanship is qualitatively different from ego-based snobbery.

From far away, the paths of Rob Greenfield, Mark Boyle, Jacob, and Yvon Chouinard look very different. From a medium distance, they look quite similar; they seem to all be howlies with differences in degree. But from even closer, they begin to diverge once more and I can see that some of the subtler differences are in kind, not degree.

And though I was flirting with moneylessness, I've now decided to recommit myself to the TradERE path and include financial indepndence as a goal. And just deciding that mentally sends a rush of power and excitement through my veins. The thought of having a lot of money is almost sexually invigorating—and that's coming from an anarchist hobo monk!

I agree with the insights into social accountability, and as I move forward will look to build those systems into my life. Love the term EREhole, by the way. And of course, in all contexts where there are humans there will be imperfections. We just have to do our best to navigate them and be kind to each other. In the words of Leonard Cohen:

Ring the bell that still can ring
Forget your perfect offering
There is a crack in everything
That's how the light gets in

Qazwer
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Re: The Education of Axel Heyst

Post by Qazwer »

100% cash - yet concerned about risk of hyperinflation?

What I have switched to in my economic self education has been less math models and more economic history and comparative economics - the future might not be like the past but it might rhyme
Jonathan Levy
Liaqat Ahmed
William Bernstein (also overalaps with theory)
Peter Bernstein
Ron Chernow
David Graeber
Etc

Maybe you are looking for qualitative rather than quantitative ‘answers.‘I think you did a great job defining your goals in learning finance. Now you might want to translate that into a learning path to get there.

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

Ah yes that’s it exactly, I’m looking for qualitative education. Thank you for the list of authors.

100% cash only because I just rolled my 401k over a month ago and don’t know what to do with it, not because it’s part of any strategy or plan. I don’t even know if hyperinflation is something to take seriously - it’s just on the list of Big Scary Things that can happen to wealth that I don’t understand. It bears emphasis that I don’t know enough to make any kinds of informed decisions. Yet. Hence my plan to read read read.

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Ego
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Re: The Education of Axel Heyst

Post by Ego »

AxelHeyst wrote:
Tue Jun 29, 2021 12:04 pm
I accept that “avoiding portfolio failure” should be my primary investing goal. This comes from my primary life aim, which stripped of specifics is “to retain freedom-of-action and live life on my own terms” (Boyd), to be an autonomous agent.
I wonder if the goal of avoiding portfolio failure requires different investment savvy than the goal of winning at investing.

7Wannabe5
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Re: The Education of Axel Heyst

Post by 7Wannabe5 »

I think that one reason “asshole because money” does not play into ERE or even FIRE very much is that it typically requires more direct interaction with other humans within context you are making/saving/spending money. Wealthy people who have employees, tenants, servants, concubines, dependent nephew-in-law, etc. have more opportunity to be directly asshole-like or not. After his death, I learned about something truly asshole-like my mega-millionaire friend had done to one of his employees. She sued him and won $100,000, but he could easily afford it. I think being able to afford to be an asshole is bad for your soul.

white belt
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Re: The Education of Axel Heyst

Post by white belt »

Ego wrote:
Wed Jun 30, 2021 2:13 pm
I wonder if the goal of avoiding portfolio failure requires different investment savvy than the goal of winning at investing.
I’d say it’s more like investing to avoid portfolio failure looks a lot different than investing to get enormous returns (the risk appetites are quite different). Maybe an analogy is the startup entrepreneur vs the large corporation CEO. The former is focused on upside and will take risks (worst case is his company fails and he can just go back to a regular job or start another one). The latter at the helm of a large corporation has much more to lose but not as much to gain by taking risks.

Or think about the perspective among many YOLO investors in the Wall St Bets/Crypto crowd. These are people taking on enormous risks at the shot to become a millionaire with a relatively tiny portfolio. They don’t care about turning their $10k savings into $100k over the next 50 years, rather they care about turning $10k into $1 million in the next year. Many of them are employed full time and expect to lose all of their capital (“it’s just money”). This is quite different to a FIRE adherent who want to not have to work a job again.

For the ERE crowd, taking large risks for large payoffs just doesn’t make much sense when you are only spending ~1-2x JAFI. What would one even do with all that extra money?

In terms of strategies that might work for what @AH is trying to achieve, there are various versions of “all-weather” portfolios that are designed to preserve and even grow wealth in all economic conditions. They don’t offer enormous returns, but their aim is to keep you from losing your portfolio. Popular implementations include Ray Dahlio’s All-Weather Portfolio, Permanent Portfolio, Golden Butterfly, and the Dragon Portfolio. Of course one still needs to do their reading to be able to evaluate the feasibility of each one of these. The concept in all of them is to have a range of relatively uncorrelated assets that perform well in particular economic conditions.

Another analogy I’ve heard is to think of your portfolio like a soccer team with each asset having particular strengths/weaknesses like strikers, defenders, goalies. You wouldn’t make a team with all strikers, yet that’s what most people do nowadays by going all in on assets that benefit in economic boom times like stock indexes. In fact, if you look back through history people often suffer from recency bias and hold whatever asset class is popular at the time (Chris Cole’s Dragon Portfolio paper goes into this).

AxelHeyst
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Re: The Education of Axel Heyst

Post by AxelHeyst »

Ego, I watched the Viki Robinson interview you linked earlier. If I understand your purpose in pointing to it correctly, I’d say that my thinking around “not failing” vs “winning” at investing has to do with my sense that FI is only a step or an aid to having the human experience that is other-centered that I want to have.

Since I think I’ll earn enough money *incidentally* over the next decade or two that a 1-3% real return rate on a portfolio will cover me adequately, and I also find it in the realm of possibility that my life is going to cost well below 1 jafi at some point, I see no reason to invest much effort in wringing extra percentage points out of my return rate if it implies any added risk. The extra money should make zero difference in my life. What *would* impact my life is portfolio failure - if the tap runs dry and I have to drop whatever other-centered thing I’m focused on in order to worry about bread money.

white belt, I liked how you put it, and thanks for the pointers to those portfolio strategies.

Qazwer
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Re: The Education of Axel Heyst

Post by Qazwer »

If you are willing to hold investments for 20 years, EE bonds are great fit your goals. They pay very little up to that point and then return 2x what you payed for them.
https://www.treasurydirect.gov/indiv/pr ... glance.htm

You can ladder them - buy some each x amount of time so they come due at the time you want. You will never get rich with them but they may accomplish your goal.
Inflation estimates and taxation issues may play a role but worth considering as part of a plan.

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