wolf's journal

Where are you and where are you going?
wolf
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Re: wolf's journal

Post by wolf »

singvestor wrote:
Thu Jan 09, 2020 12:08 pm
Your saving rate and discipline are an inspiration. 88%, wow!
Thank you! And I am inspired by your discipline in investing. It was partly your monthly investment chart, that lead me to start dca investing.

wolf
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Re: wolf's journal

Post by wolf »

Jin+Guice wrote:
Thu Jan 09, 2020 1:02 pm
Are you below a 3% SWR for current expenses? Is that a new development? If it is, congrats! I know it's not your current goal, but I think that in some sense it's a goal that unites us all and it deserves a clink of the champagne glasses whenever someone crosses that
Thank you! Yes, I has been below 3% for some time with current expenses. It unites us definately.

Jin+Guice
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Re: wolf's journal

Post by Jin+Guice »

@c_L: Interesting. I just don't find 100% of my free time to be pleasurable. There's no day I'd wake up and chose to go to work, but being forced to occasionally makes my life better. I enjoy the structure, not being totally in charge, working with other people and participating in something that most other people are participating in for most of their lives (working). It's nice to have something to tell other people's parents too I guess. I know these reasons are not very ERE, but what ERE does for me is gives me control over how I structure work in my life. I don't want to work for 2 weeks, 2 months, 2 years? Fine. I know I will want to work for pay again at some point. I don't know if I ever will go back to full-time work, but I hope I can find something I enjoy enough to do it for 40 hours a week for a few years. I don't expect all of those hours to be pleasant.

classical_Liberal
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Re: wolf's journal

Post by classical_Liberal »

Jin+Guice wrote:
Thu Jan 09, 2020 6:35 pm
I just don't find 100% of my free time to be pleasurable.
I doubt many people do. The first month of semi-ERE I was pretty close though. The last couple of weeks I was probably hovering around 50%. Since commiting to a contract in less than a month, the new urgency with my time has brought me back up some.

Still, even a really good day at work I'm only, maybe, 50% satisfied. At least in the past, we'll see if it's better with all this time off. Still, if I have to work some to bring my free time satisfaction and motivation up, working may be worth it just for that reason. Even if work is never better than free time... If that makes sense.

Of course the best thing would probably be to mix the two somehow, but I don't know if I can do that.

fingeek
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Re: wolf's journal

Post by fingeek »

wolf wrote:
Wed Jan 08, 2020 12:52 pm
Yes, if I define FI with a WR below 3%, then I could declare myself FI. I would prefer the term „runaway mode“ in my situation, though, because I am deliberately coasting to FI. For me FI means achieving an actual passive income that exceeds my actual expenses plus health care plus margin of safety plus a budget for extra hobbies/projects. With that definition of FI, I am not there yet.
@fingeek: what does FI means to you?
Ah, so if we had to shoe-horn it into a definition it would probably be fat-FIRE (but wolf's fat-FIRE version, which would still be very tight and efficiently run :-)).

FI means to me "Be able to leave work if I wanted to" and further "Prove to myself that if I left work, we could still survive ~comfortably", and further still "No longer be financially tied to work". I think I'm there or thereabouts - The test year off has given me a ton of confidence in progressing my mindset. I now feel like I *could* leave work if I wanted to.. I would have a small £-gap to bridge, but I'm confident I can do that by doing side gigs/contracting or part-time baristaFI type jobs.

wolf wrote:
Wed Jan 08, 2020 12:52 pm
... First and foremost, money is not the end game. It is just a means to an end (for me)...
... And I generate that income with work I really enjoy. But my mindset shifts slightly, as you maybe noticed...
... Instead I started focusing on other things in life, e.g. BARM, ULAL.

I call it web of goals and processes because for me there are two operational modes in place and each of them has its own aspects (advantages/disadvantages). First approach would be goal-oriented. And second approach is process-oriented. For me personally a system is larger than that web of goals and processes. I like to make goals (milestones, deadlines, etc.) because it feels good to achieve them. And I like to build processes (habits, routines, etc.) because it provides some identity.

@fingeek: And regarding your „web of systems/processes“, how do structure it? What does it consist? What are the elements, etc?
This is a really good point, and my mindset has only really shifted in the last 1-3yrs (slowly) away from money. I've been focusing on building my peer group and getting out more, as this is showing to increase my people-capital resources and biz opportunities that are coming from it. Overall it's helping me become more resilient which I guess is what I'm optimising for now (Are we all?). I find that if I don't have goals, I'm pretty weak and unmotivated, and with that and the processes I definitely agree it's what provides some of my identity too. I feel like the financial aspect of my web is fairly mature, but my other resource-gathering aspects are average to non-existent. In many areas, I don't know what I don't know and so I'm a way away from building an overall mature web... All part of the fun I guess! :)

wolf wrote:
Wed Jan 08, 2020 12:52 pm
@fingeek: How many hours do you want to work part-time? Can you work from home? I would recommend job crafting for that, because as an introvert it feels great to work some days silently in a quiet environment.

Yeah, I am also quite curious how that withdrawal rate based cash flow system will influence my mindset. I‘ll let you know.
I do work from home, and I have job crafted quite a bit so that I'm not micromanaged. I don't know yet what (or why) I'm looking for in part-time. My highest value is still freedom and I think that's why I'm still optimising in the way I am. Part-time with a good wage seems like the next best logical step I guess.

wolf
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Re: wolf's journal

Post by wolf »

Short update on investing.
My equity portfolio is down 30%. My bond portfolio is down 5% (Emerging Markets Bonds)
I bought some stocks on March 13th (bad timing). And I sold some bonds with a minor profit on March 13th (good timing).
I increased my cash buffer by selling risky bonds (Emerging markets / Developed Markets corporate bonds).
I am invested with 30% of my NW (ex-house). So I got 70% in cash.
During the next few years I want to stay course with DCA. Maybe this will change, depending on ongoing developments.
Additionally I want to invest max. one time per month manually. I try market timing with several indicators, such as volatility, sentiment, Birds-Eye-View, PE-/PB-Ratio, etc.

wolf
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Re: 2019 review and 2020 outlook

Post by wolf »

fingeek wrote:
Wed Jan 08, 2020 10:50 am
The prevailing wisdom is to just add money straight away and not DCA - "Time in the market beats timing the market". If you've decided to invest slower because you think you can read the market then that's fine of course (Though Lars Kroijer followers would contest this).
In retrospect I was totally lucky that I started investing with small portions via DCA. If I had invested all straight away, that would be really bad in the short term. DCA was/is a mitigation against such (unknown) downside risk, especially in high CAPE situations.

fingeek
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Re: 2019 review and 2020 outlook

Post by fingeek »

wolf wrote:
Wed Mar 18, 2020 12:50 pm
In retrospect I was totally lucky that I started investing with small portions via DCA. If I had invested all straight away, that would be really bad in the short term. DCA was/is a mitigation against such (unknown) downside risk, especially in high CAPE situations.
Ha ha yes, I was thinking of this discussion as I was checking my NW this week - Quite bad in the short-term for me :).

_bb_
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Re: wolf's journal

Post by _bb_ »

@wolf - thank you for the time and energy you've put into this, describing your respective processes has provided a lot of food for thought!

Now that you've transitioned to active management, I am interested to learn more about the specifics given where you are at in your journey (practicing withdrawing). Are you focused on passive income from dividends, or are you aiming for continued capital appreciation (beating the index)? Will you invest in individual equities outside of Germany and the EU?

wolf
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Re: wolf's journal

Post by wolf »

Thanks for commenting _bb_

I actively manage my portfolio, but I don't just pick stocks. I use also ETFs. So far I invested some money in German stocks, but I want to hold also ETFs.

I'm still learning in regards to investment, especially in times like COVID-19 with its impact on the economy.

Since I started my ERE journey a few years ago I thought of several different investment strategies and portfolio allocations. And I can't say that my current strategy and portfolio allocation is still valid in a few years.

For years I didn't invest, because I was very risk averse. Then I started DCA'ing last year into stocks. Now I'm about 30% with those. That hurts. And I have to learn to manage my feelings and behavior. There have been many lessons learned and will be for sure.

My main goal of investing is to generate passive income, that covers my living expenses. I'm more focused on cashflow now, than I was a few years ago.

I don't want to give any specifics, because it's still a process. And I totally would not call myself an investment expert.

But I can say that I don't plan to invest in individual equities outside of Germany, due to tax reasons. Everything else is open at the moment.

Nevertheless, I'm into diversification, non-correlated assets, fundamental and sentimental indicators, risk management, cashflow systems, risk mitigation of sequence of return risk via Equity Glidepath.

wolf
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Re: wolf's journal

Post by wolf »

End of Q1 2020 financials

Expenses p.m. = 550€
(without health insurance)
(expenses will be lower during the upcoming months, because I cancelled public transportation)

Savings Rate = 90%
(extra high due to a one-time special income)

Withdrawal Rate = 2.2%

YTD NW change = -1,8%
(without the one-time special income my YTD NW change had been reduced much more)

Cash% = 85%
(due to a very low investment quote, ergo very low passive income cash flow, I'm not FI at the moment in my point of view)

Forskaren
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Re: wolf's journal

Post by Forskaren »

isn’t the science quite overvelming against stock-picking and market timing? Why 85% cash?

wolf
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Re: wolf's journal

Post by wolf »

I sold bonds in order to invest into equities. And yes, science tells you that. Most of my portfolio asset allocation should be in broad index funds, so I am stockpicking with <15% of my portfolio. And regarding market timing I'd like to try it with some money. If I only succeed 60% of the time, I am fine with that. But basically I am DCA'ing in the upcoming years.

Forskaren
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Re: wolf's journal

Post by Forskaren »

60% right means 0.6*0.6=0.36. E.g. 36% right with two decisions. By the way 60% is very good, just not enough. Good that you only using a small part to do that.

“ Sharpe concluded that an investor employing a market timing strategy must be correct 74% of the time to beat the benchmark portfolio of similar risk annually”

https://www.investopedia.com/terms/m/markettiming.asp

“1. You have to be right twice.
Not only do you have to buy at the right time, you have to sell at the right time”

https://halpernfinancial.com/views/why- ... oesnt-work

You can probably find better references.

jacob
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Re: wolf's journal

Post by jacob »

Forskaren wrote:
Wed Apr 01, 2020 2:16 pm
60% right means 0.6*0.6=0.36. E.g. 36% right with two decisions. By the way 60% is very good, just not enough. Good that you only using a small part to do that.
That is not how the math works. Performance is not measured in probabilities but in expectation values. Outperformance is the difference between your decision and the markets summed over the entire probability space.

There are two conclusions from this. If all payouts (including the negative ones) are the same, then outperformance statistically happen as long as your edge is >50% as long as you make enough trades. This follows from the law of large numbers. -> The payout converges on an increasingly narrower Gaussian with a positive mean. This is how quant based algorithms work.

If payouts are wildly different, interesting things happen. For example, one can be, say, wrong 97% of the time and still win as long as the payout the remaining 3% is spectacular. This is, for example, how a roulette wheel works for the house. It also describes OTM short option strategies (buying insurance on extreme events at a discount). This also describes a stock picking strategy with tight stops trying to hit ten baggers---most trades lose money but the few that don't make up for all the losses.

Forskaren
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Re: wolf's journal

Post by Forskaren »

@Jacob
Of course it was an oversimplification. What do you think about the work by Sharp that you have to be 74% right? I guess it includes limits on how you make your trades. Is it that you have to either be in 100% cash or 100% in stock index at a given time compared to someone always 100% in stock index?

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Re: wolf's journal

Post by jacob »


wolf
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Re: wolf's journal

Post by wolf »

I reviewed my investment activities during the crash until now. And I must say that I made many errors. Most of all I didn't hold onto my investment plan, but reacted instinctively, emotionally, intuitively.

It was wrong to sell during the crash and near the bottom. I accepted losses. I underestimated the reactions from governments, institutions, etc. I didn't know the enemy (in regards to Jacob's quote). I missed the whole rally during the last weeks.

But is it wrong to buy now after this huge rally, as it was wrong to sell during the crash and around the bottom? I think so.

I'll have to adapt my investment strategy to my personal psychology, etc.

What I definately figured out, that I'm good at earning and saving money, but not investing it. I'll have to find a suitable investment strategy for me.

2Birds1Stone
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Re: wolf's journal

Post by 2Birds1Stone »

There are many relatively stable asset allocations one could stick to in order to sustain a 2.2% WR, even outside of the USA. Every time I've tried to time the market and outsmart it, I've gotten burned. Eventually realizing I don't have the stomach for large losses, and keep a relatively light exposure to stock ETF's, with the rest of my assets being in a long CD ladder, bonds, and precious metals.

You're in an amazing position wrt your spending and savings rate. You don't need to take on so much risk from high equity exposure, but some is prudent at any given time, no matter where we *think* the markets are headed.

Now sure how helpful this is being based in Germany, but worth a shot to mess around with https://earlyretirementnow.com/2018/08/ ... s-part-28/

His whole series on WR% is excellent reading.

classical_Liberal
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Re: wolf's journal

Post by classical_Liberal »

Don't beat yourself up too much @wolf. I stuck to my plan, but I was assuming at least 6 months of buying opportunities. I only had about 1 month at my acceptable pricing levels, and only managed to get about 12% of the cash I wanted invested. If it makes you feel any better I think it's a real possibility we may test the lows again once earnings and GDP numbers come out over the next two quarters. At least I'm kind-of hoping so.

Anyway, it never goes exactly how we plan. Live and learn.

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