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.
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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.