akratic's ERE journal
Right on, KevinW. My VP hubris has cost me over $3,000 in the past week. And sitting uninvested for the past year ended up costing me around $10,000. In other words I cost myself a year's living expenses by being slow to invest and then keeping a VP when I did invest.
But I'm okay with the way this played out (at least so far). Ending up 100% PP with nothing in the VP will be a simple, low effort, stable solution. As I think more about this, I may eventually end up reserving the VP for self-managed real estate plays and that's it.
By the way KevinW, thank you especially for your help with the PP. It was one of your posts on this forum that first got me excited about the PP, and I've found your advice consistently helpful both on this forum and on the crawling road forum.
Jacob changed my life for the better with ERE, and I believe you also did the same by introducing me to Harry Browne and the Permanent Portfolio. (And don't worry, I won't hold it against you if the PP somehow finds a way to tank.)
But I'm okay with the way this played out (at least so far). Ending up 100% PP with nothing in the VP will be a simple, low effort, stable solution. As I think more about this, I may eventually end up reserving the VP for self-managed real estate plays and that's it.
By the way KevinW, thank you especially for your help with the PP. It was one of your posts on this forum that first got me excited about the PP, and I've found your advice consistently helpful both on this forum and on the crawling road forum.
Jacob changed my life for the better with ERE, and I believe you also did the same by introducing me to Harry Browne and the Permanent Portfolio. (And don't worry, I won't hold it against you if the PP somehow finds a way to tank.)
@akratic
Thanks for your kind words. I've spent a lot of time obsessing over investing and the PP is the best solution I've found. I think the world would be a better place if the PP were more widely understood and used. If it weren't for craigr it would be absent from the web, which is the same as nonexistent as far as I'm concerned. But it's still obscure and misunderstood so my agenda, as it were, is raise its profile and clear up misconceptions.
A while ago I decided that investing debates were more trouble than they're worth, so I try to limit myself to providing references and answering questions. It's satisfying to know that the laid-back approach has helped at least one person.
All that being said, there can be no guarantees, so if, contrary to all the analysis and evidence, it does somehow blow up, the buck stops somewhere else.
Have you listened to the radio shows yet?
Thanks for your kind words. I've spent a lot of time obsessing over investing and the PP is the best solution I've found. I think the world would be a better place if the PP were more widely understood and used. If it weren't for craigr it would be absent from the web, which is the same as nonexistent as far as I'm concerned. But it's still obscure and misunderstood so my agenda, as it were, is raise its profile and clear up misconceptions.
A while ago I decided that investing debates were more trouble than they're worth, so I try to limit myself to providing references and answering questions. It's satisfying to know that the laid-back approach has helped at least one person.
All that being said, there can be no guarantees, so if, contrary to all the analysis and evidence, it does somehow blow up, the buck stops somewhere else.
Have you listened to the radio shows yet?
I downloaded all of the Harry Browne episodes, and I've listened to a few, randomly, based on the titles.
I wouldn't mind listening to the rest, but I don't normally listen to anything, neither music nor podcasts. I sold my ipod nano a year ago when I realized I hadn't turned it on for months.
I should also read Harry Browne's other books. I enjoyed Fail-Safe Investing and How I Found Freedom in an Unfree World.
In other news, I put 7.4% of my networth (1/3 of my 22% gold position) into *physical* gold coins (some Kruggerands, some Eagles). woop woop!
I also couldn't resist buying dividend stocks for the VP ahead of schedule, what with the market so beat up recently. So I'm fully invested. Bam!
In fact, I went overboard, and I need to chill out and let my cash position build back up. I also need to move my cash around into better places: I-Bonds, Rewards Checking, and SHY/SHV.
I wouldn't mind listening to the rest, but I don't normally listen to anything, neither music nor podcasts. I sold my ipod nano a year ago when I realized I hadn't turned it on for months.
I should also read Harry Browne's other books. I enjoyed Fail-Safe Investing and How I Found Freedom in an Unfree World.
In other news, I put 7.4% of my networth (1/3 of my 22% gold position) into *physical* gold coins (some Kruggerands, some Eagles). woop woop!
I also couldn't resist buying dividend stocks for the VP ahead of schedule, what with the market so beat up recently. So I'm fully invested. Bam!
In fact, I went overboard, and I need to chill out and let my cash position build back up. I also need to move my cash around into better places: I-Bonds, Rewards Checking, and SHY/SHV.
Investing was my biggest ERE hurdle for a long time. Now that my investments are basically in place, here's where I'm at:
current favorite ERE blogs:
- Lacking Ambition
- ERE
- MMM
- SMBC comics, sometimes. example #1 (monotony / dreams), example #2 (work anger)
current post ERE dreams, in no particular order:
- hike the Appalachian Trail
- live on a sailboat in the Caribbean (to start)
- enroll in a PhD program
- start a family
- start a company
- become the best Starcraft 2 player in the world
- keep accumulating for enough passive income to support more people
- keep accumulating to drive the withdrawal rate I need to a lower and lower percent
- live in another country (ideally in Asia)
- live in a cabin in Maine with lots of books and no internet access
current ERE goals:
1) Get back into shape. My health has taken a back seat to other parts of my life for the last two years, and it shows. Optimally I would lose 20 lbs of fat, and turn 5 more lbs from fat into muscle. This should be my #1 priority now, and I plan to attack it from all angles: diet, compound lifts, and cardio (swimming + DDR)
2) Stabilize spending. I believe I've run up the spending S Curve to the top part where I'm asymptotically approaching about the best I can do in this city. In particular, the following categories are about as low as they're getting: Housing, Travel, Health, Transit, Grooming, Possessions, Fun, Social Life. The two spending categories where I'm still spending in a way that is inconsistent with my values are 1) Food (too many trips to Subway, etc) and 2) Gifts (wedding presents are a huge expense that I feel obligated to give, even though I know it's a complete fucking waste)
3) Excel at work.
4) Keep on top of the investments. Rebalance. Make sure the asset allocation is working as expected.
5) I recently read a quote that went something like "One of my life goals was to build a house for my wife that she would love. The hard part was finding the right wife." Things have been going well with my girlfriend. I need to make sure they continue to do so.
current favorite ERE blogs:
- Lacking Ambition
- ERE
- MMM
- SMBC comics, sometimes. example #1 (monotony / dreams), example #2 (work anger)
current post ERE dreams, in no particular order:
- hike the Appalachian Trail
- live on a sailboat in the Caribbean (to start)
- enroll in a PhD program
- start a family
- start a company
- become the best Starcraft 2 player in the world
- keep accumulating for enough passive income to support more people
- keep accumulating to drive the withdrawal rate I need to a lower and lower percent
- live in another country (ideally in Asia)
- live in a cabin in Maine with lots of books and no internet access
current ERE goals:
1) Get back into shape. My health has taken a back seat to other parts of my life for the last two years, and it shows. Optimally I would lose 20 lbs of fat, and turn 5 more lbs from fat into muscle. This should be my #1 priority now, and I plan to attack it from all angles: diet, compound lifts, and cardio (swimming + DDR)
2) Stabilize spending. I believe I've run up the spending S Curve to the top part where I'm asymptotically approaching about the best I can do in this city. In particular, the following categories are about as low as they're getting: Housing, Travel, Health, Transit, Grooming, Possessions, Fun, Social Life. The two spending categories where I'm still spending in a way that is inconsistent with my values are 1) Food (too many trips to Subway, etc) and 2) Gifts (wedding presents are a huge expense that I feel obligated to give, even though I know it's a complete fucking waste)
3) Excel at work.
4) Keep on top of the investments. Rebalance. Make sure the asset allocation is working as expected.
5) I recently read a quote that went something like "One of my life goals was to build a house for my wife that she would love. The hard part was finding the right wife." Things have been going well with my girlfriend. I need to make sure they continue to do so.
Hi Akratic!
You may already have said it elsewhere, but I was wondering how you have implemented the equity and the bond parts of the portfolio. Any specific funds/ETFs/etc.?
Like KevinW the PP also is the best solution I've been able to find. But so far I can't resist searching for something better and trying to time the market though.
I haven't implemented the PP yet. But I'm getting there, slowly.
I used to be 100% cash but worried about the economy and in late 2009 started gradually buying gold. I stopped buying when I reached 80% cash, 20% gold. At that point there was a balance between my fear of owning too much gold and my fear of not owning enough gold. Gold has since done well and now I'm roughly 75% cash, 25% gold.
Now I hope to be able to buy stocks when they come down a lot (like when Dow/gold or PE10 gets really low) or when gold reaches 35%.
Maybe I'll buy long term bonds when they pull a Volcker...
I know it's folly to try to buy each PP component at historically interesting prices... and I realize that meanwhile I'm exposed to serious risks because I only own half the PP and am not diversified.
Care to share how you own shares and LT bonds?
You may already have said it elsewhere, but I was wondering how you have implemented the equity and the bond parts of the portfolio. Any specific funds/ETFs/etc.?
Like KevinW the PP also is the best solution I've been able to find. But so far I can't resist searching for something better and trying to time the market though.
I haven't implemented the PP yet. But I'm getting there, slowly.
I used to be 100% cash but worried about the economy and in late 2009 started gradually buying gold. I stopped buying when I reached 80% cash, 20% gold. At that point there was a balance between my fear of owning too much gold and my fear of not owning enough gold. Gold has since done well and now I'm roughly 75% cash, 25% gold.
Now I hope to be able to buy stocks when they come down a lot (like when Dow/gold or PE10 gets really low) or when gold reaches 35%.
Maybe I'll buy long term bonds when they pull a Volcker...
I know it's folly to try to buy each PP component at historically interesting prices... and I realize that meanwhile I'm exposed to serious risks because I only own half the PP and am not diversified.
Care to share how you own shares and LT bonds?
Bonds: 100% TLT
Equities: 60% RWMEX, 20% VTI, 20% VEU
(Gold: 67% IAU, 33% physical)
(Cash: not set up yet)
For bonds, I was going to purchase individual 30Y bonds on treasury direct, but it was delaying my initial investing, so I decided to just go with TLT for now.
For equities, I chose RWMEX as the least bad of some terrible 401k choices. VEU is bucking PP gospel a bit, but I think it's okay. RWMEX will become VTI when I eventually roll my 401k into Vanguard.
I use Vanguard for everything (except the 401k).
The returns have been pretty interesting since I set it up.
Equities: -8.53%
Bonds: +8.41%
Gold: +8.90%
Cash: +0% (not set up)
VP: -4.06%
Total: +1.05%
Equities: 60% RWMEX, 20% VTI, 20% VEU
(Gold: 67% IAU, 33% physical)
(Cash: not set up yet)
For bonds, I was going to purchase individual 30Y bonds on treasury direct, but it was delaying my initial investing, so I decided to just go with TLT for now.
For equities, I chose RWMEX as the least bad of some terrible 401k choices. VEU is bucking PP gospel a bit, but I think it's okay. RWMEX will become VTI when I eventually roll my 401k into Vanguard.
I use Vanguard for everything (except the 401k).
The returns have been pretty interesting since I set it up.
Equities: -8.53%
Bonds: +8.41%
Gold: +8.90%
Cash: +0% (not set up)
VP: -4.06%
Total: +1.05%
Jacob--I recall in the ERE book it mentions the need to break barriers and getting a PhD as an example. Granted, it has been a while since I read it. Of course, advice can change.
akratic--Enjoying this thread. I'm slowing getting over my gold reluctance and researching PP in depth.
Broadly, the information available on the ERE forums is truly amazing. I've gotten so many insights. Thanks again to all the contributors and Jacob for starting it all.
akratic--Enjoying this thread. I'm slowing getting over my gold reluctance and researching PP in depth.
Broadly, the information available on the ERE forums is truly amazing. I've gotten so many insights. Thanks again to all the contributors and Jacob for starting it all.
The PhD dream looks like this:
- work on an interesting problem
- surrounded by smart people
- get to try out teaching as a TA
- and get paid! ~$20k/yr
- until it gets frustrating or boring or uninteresting... then I can walk away without any consequences! (This is post ERE so I'd have FU money... and note that I want to enroll in the program but not necessarily finish it)
I lived for three months with a friend in the Economics PhD program at Harvard. Her life is basically: sleep in, work on interesting problems with little supervision, and hang out with ridiculously smart people that the school filters for her.
Unlike everyone around her, she's not racing for publications, or a tenure track position, or to graduate, or to please an advisor, or much of anything. She's already living the dream! I think she's on year eight of her PhD.
- work on an interesting problem
- surrounded by smart people
- get to try out teaching as a TA
- and get paid! ~$20k/yr
- until it gets frustrating or boring or uninteresting... then I can walk away without any consequences! (This is post ERE so I'd have FU money... and note that I want to enroll in the program but not necessarily finish it)
I lived for three months with a friend in the Economics PhD program at Harvard. Her life is basically: sleep in, work on interesting problems with little supervision, and hang out with ridiculously smart people that the school filters for her.
Unlike everyone around her, she's not racing for publications, or a tenure track position, or to graduate, or to please an advisor, or much of anything. She's already living the dream! I think she's on year eight of her PhD.
August 2011
== EXPENSES ==
I spent $389.65 this month on weddings. I don't even like weddings, so this is a travesty.
Otherwise things were good. Without the weddings, this would have been the best month ever.
Over the past two years, my fourth highest spending category after Housing, Food, and Travel has been Gifts. Grrrrr.
== INVESTING ==
I finally pulled the trigger this month and invested. Good timing on my part too, as my investments did great this month.
target monthly expenses: 0.33% of assets
actual expenses this month: 0.45% of assets
actual investment income this month: 2.61% of assets
In other words, my investing income this month was like five months of living expenses. I don't expect that to continue.
But now that I'm finally invested, I can finally start to taste FI/FIRE/FUME/ERE. Wheee.
== NEXT STEPS ==
I have a new addiction, which is to constantly check the google doc tab with live investing results and net worth numbers. I should stop this.
I also need to finish moving around the cash allocation of my portfolio.
And I need to get serious about getting back into shape. I've been making progress, but too slowly.
== EXPENSES ==
I spent $389.65 this month on weddings. I don't even like weddings, so this is a travesty.
Otherwise things were good. Without the weddings, this would have been the best month ever.
Over the past two years, my fourth highest spending category after Housing, Food, and Travel has been Gifts. Grrrrr.
== INVESTING ==
I finally pulled the trigger this month and invested. Good timing on my part too, as my investments did great this month.
target monthly expenses: 0.33% of assets
actual expenses this month: 0.45% of assets
actual investment income this month: 2.61% of assets
In other words, my investing income this month was like five months of living expenses. I don't expect that to continue.
But now that I'm finally invested, I can finally start to taste FI/FIRE/FUME/ERE. Wheee.
== NEXT STEPS ==
I have a new addiction, which is to constantly check the google doc tab with live investing results and net worth numbers. I should stop this.
I also need to finish moving around the cash allocation of my portfolio.
And I need to get serious about getting back into shape. I've been making progress, but too slowly.
I think I've run up the ERE logistic curve to the part where returns on increased effort start to diminish.
I've cut the expenses that I want to cut. I've figured out the investment plan and executed it. Things are essentially on autopilot now, although it will still take me over a year to hit my numbers.
Time for a new obsession?
I see two paths before me.
Path one is hedonistic indulgence. It is maximizing short term pleasure. It is living in the moment in a way that will provide fleeting happiness, and that's it. For normal people short sighted pleasure is maximized with things like bars, restaurants, and shopping, but for me it happens to be maximized by competitive gaming, and Starcraft II is the most competitive video game in the world.
Path two is investing in the future. It is going from decent shape to terrific shape. It is prioritizing activities and hobbies that will help me connect with interesting people, and also make me a more interesting person. It is fostering and building existing relationships. It is focusing on future rewards, ideally while doing things that are also enjoyable now.
I sometimes flip flop between these two paths. My natural inclination is to focus on the future with path two, but sometimes I seem to take it too far, and find myself on hedonistic path one binges.
Most people recommend a "balance" between these two paths, but balance is not really an option for me.
Path one is hedonistic indulgence. It is maximizing short term pleasure. It is living in the moment in a way that will provide fleeting happiness, and that's it. For normal people short sighted pleasure is maximized with things like bars, restaurants, and shopping, but for me it happens to be maximized by competitive gaming, and Starcraft II is the most competitive video game in the world.
Path two is investing in the future. It is going from decent shape to terrific shape. It is prioritizing activities and hobbies that will help me connect with interesting people, and also make me a more interesting person. It is fostering and building existing relationships. It is focusing on future rewards, ideally while doing things that are also enjoyable now.
I sometimes flip flop between these two paths. My natural inclination is to focus on the future with path two, but sometimes I seem to take it too far, and find myself on hedonistic path one binges.
Most people recommend a "balance" between these two paths, but balance is not really an option for me.