SWB's path to financial independence

Where are you and where are you going?
SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Oh, and the foreclosure auction was cancelled. I don't think it's going to get relisted. That was both a sigh of relief and a little bit of sadness.

Western Red Cedar
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Re: SWB's path to financial independence

Post by Western Red Cedar »

SavingWithBabies wrote:
Sun Mar 19, 2023 4:56 pm
My focus going forward is to do at least 4 sessions of ~30 minutes each per week. I'll probably just do it daily because that is easier although my wife did pick up some weights so I could alternate "cycling" with weight lifting (after doing some research to find back-friendly lifting guides).
Good luck on the exercise regime. I find regular workouts and time outdoors is a nice way to complete my "stress cycle" with professional responsibilities and a nice way to shut down my brain for a bit.

What is wrong with your back? FWIW, regular lifting actually helped relieve some of my back pain by strengthening my back/core and addressing some muscular imbalance.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

I herniated a disc in my lower back. It was a huge ordeal. I ended up having surgery (discectomy) which went well. That was a bit more than 10 years ago. Maybe I'm wrong but I kind of think a discectomy, while done with great technique and high tech equipment, is a kind of "hope for the best" approach as they snip off the part(s) of the disc that herniated out. At the time, artificial discs were still going through FDA approval. You could get one done in Germany for ~$25,000 USD inclusive room and board. When I was discharged, I was basically told I should never lift more than 35 pounds and they didn't put an end date on that. I did do physical therapy and a number of painful years doing pilates to improve core strength. Then I got lazy and tired of aching from pilates. I still focus on my tightening my core when important.

I live in slight fear it's going to come back. It kind of crept up on me last time. I didn't know what was going on. So now when I feel any of those types of sensations, I get worried it's coming back but it has been a good decade. The good news is it looks like spinal fusion has a lower success rate than artificial discs so if it happens again, maybe next time it'll be an artificial disc on insurance. If not, now I have the funds to consider the option of doing medical tourism if it's the best choice (and I'm not incapacitated like last time with my leg stuck in one position for two weeks).

There is a whole long backstory to it with lots of drama but I tried to keep it brief. My overall theory on why it happened to me is that I'm a big strong guy and I could get away with not using my core correctly for a long time until it caught up with me. Toss in way too much time sitting at a computer along with a year that I did way too many things that were, in retrospect, hard on my body and...

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Progress

I've been thinking about this for a while. At one point, we reached a high of ~90% of goal. I realized, after the fact and we had dropped down quite a bit, that if I had sold at that point and held cash the end goal was in hand within a couple years of working. I'm nearing that point again although we're not quite up to those levels (more like 80% to goal).

On the one hand, this seems like a fallacy because even if we get to goal, we still need to keep the bulk of our funds invested in order to grow with inflation and to see the necessary return on average over time (ie the 4% thinking).

On the other hand, it seems largely factual. I anticipate we're going to boomerang around the goal. As in, we are getting close to it but the oscillations of net worth are below the goal. So intuitively, I want the oscillations to be around the goal so the average is the goal. Stepping back from that though it's clear this is over thinking it to some degree because in the end, if you're at 95% or 102% it doesn't really matter over a long period of time particularly if you still have the option to work a bit more or trim your spending.

So I do nothing. Just observe this and think about it. Oh, and there is some fallacy there in that I would have had to known I was at the top and I didn't of course until after the fact. That I understand however, unless one is unlucky, there is usually the 2nd, 3rd, 4th, etc. time around.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Progress: 82% ($1,315,000 / $1,600,000)

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

I slacked this year and didn't do the quarterly estimated tax payments (to federal and state). I wanted the flexibility of holding cash although didn't end up taking advantage of it. So taxes just took a big bite and I went ahead and also paid the 2023 Q1 estimated taxes. So for 2023, I'm going to just pay quarterly to avoid the penalty fees and be more accurate in the numbers.

Also, I think I'll split my progress into two lines -- the basic progress to being FI (ie $1,200,000 although it's a rough estimate) and the progress towards the boat (setting that at $400,000 although hoping to spend less and it includes more than just the purchase price as inevitably a used boat purchase particularly for liveaboard will require spending some money shortly after purchase).

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Progress: 71.8% ($1,150,000 / $1,600,000)

Investments down a bit plus taxes took a bigger chunk than expected (I forgot I rebalanced some long held brokerage investments at the beginning of the tax year). I decided to keep up with quarterly tax payments this year so that was another chunk too as the first quarterly taxes for the current year were also due.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Progress: 102% ($1,631,000 / $1,600,000)

We hit our goal number abruptly due to AMD going up in value. I'm taking the long weekend (Monday is a holiday in the USA) to think it all over.

Work-wise, I'm not planning on stopping immediately as everything moves a bit slower with a family with planned holidays and so forth. Plus I actually enjoy my work when I can ignore some aspects of it and it's been fun lately. It's also an amazingly low friction place to work (which might change as the company grows). So going to keep going on that front while we figure things out.

ertyu
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Re: SWB's path to financial independence

Post by ertyu »

Congratulations!!!!

thedollar
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Re: SWB's path to financial independence

Post by thedollar »

Up almost 500,000 in a month? That's insane. How much of your portfolio is AMD?

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

@thedollar Yeah, it's a uh... A bit too exciting although I've become used to it for the most part. My portfolio is basically:

62.5% AMD stock
15.5% AMD options - all LEAPs but I think I'm roughly breaking even on LEAPs with some very red (due to buying at or near peak) and others very green (due to buying in dips)
22% mutual funds (VTSAX, VFIAX, VTIVX, VFORX)

So nearly 80% exposure to just AMD. That's what I really need to make a decision on. I think AMD has an amazing road ahead of it as the growth is mostly unrealized but I have to balance that with how it's been a meme stock and how volatile it can be as it seems to be a favorite of day traders, hedgers, etc. I don't expect a stock to follow perceived value fully (especially my perceived value) however AMD goes on random benders of being disconnected from reality (I think mostly in the negative direction but then again, I'm a bit biased here). But I'm a big believer in their tech and the long term value.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

This is from one of my drafts yesterday when I tried to write about hitting goal:

Growth/value-wise, I think AMD still has immense opportunities that will increase their value as a company. That said, the stock market plays AMD in ways that are very confusing. I think it's a very popular stock for day traders and people doing option wheels and so forth. But it might also be due to the reality that AMD is still meeting it's potential. Hardware-wise, they are executing top notch and are in multiple industries:

- CPU-wise they have a much tech than Intel. Intel has been able to keep a foot in the water. But a lot of dirty games Intel played in the past to be the dominant CPU-vendor required a lot of cash. And Intel is stumbling greatly and no longer has the cash to blow. Examples of this were companies like Dell that were practically Intel-only. And to some degree, until AMD turned things around, this made sense. However today, the processing power per watt is solidly won by AMD. As is the ability to scale up to a huge number of CPU cores which is very important in the data center market (along with the watts). But with all that said, AMD is still making in roads on the CPU market. They have roughly 20-30% share and they will likely get 70+% before Intel turns things around. Although Intel could always surprise us.

- AI-wise, they have MI250 and (upcoming) MI300 which is based around tech AMD acquired by purchasing Xilinx. This hardware will help more with inference instead of training. So basically, when you have a trained model and want to scale it up to thousands of users, you can use the AMD tech instead of GPUs. Here, AMDs potential is going up from basically 0% as their GPUs have not been able to compete with Nvidia for machine learning/AI. They are slowly catching up but efforts are hampered by software (more about this later).

- Datacenter-wise, they have the CPU perf per watt and scaling mentioned earlier but they also acquired a company focused on moving the network layer into the server instead of having separate networking equipment (ie Cisco -- guess this could be a short Cisco long term thing). The whole move here is to lower the total cost of ownership by simplifying the hardware aspect of the data center deployment by removing the need for lots of expensive and maintenance-requiring networking equipment. This will be huge for cloud providers but companies with onsite data centers will benefit too.

So a lot of the potential of AMD is unrealized. They still have small fractions of the total markets they are in. The software is an issue however they are focused more around an open source approach and big companies do not want to be beholden to Nvidia so help with this will come from multiple big industry players (Microsoft, Meta, Google, some well-funded startups like OpenAI, etc -- it'll be interesting to see if Apple does anything here but we won't find out until years later due to how secretive they are). So the software story will hopefully get better. It already is...

From a value-investing perspective, the PE ratio of AMD is atrocious however they are writing off the cost of acquiring Xilinx and will be for some time. For a while, it was super low but with the recent run up, forward PE ratio is 44.91 and regular PE is 552.3!?!?!?! I wonder how many people using stock screeners to filter down their investment options never even see AMD since the merger!

So that is the story for staying with the investments as is. I think there is a very good chance of greater future returns.

But do I want to stay on the roller coaster or play it safer? That's what I'm thinking about this weekend. For AMD to get where they are today from practically being bankrupt is amazing. But along the way, it became a meme stock and the ongoing odd trading activity around it and the long periods of disconnect from the stock price to how AMD is executing (which probably happens with any stock) are disconcerting. But AI is going to be huge and AMD has immense opportunities there.

theanimal
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Re: SWB's path to financial independence

Post by theanimal »

Why not do both? Take some big profits and keep a small percentage of your allocation in the company.

thedollar
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Re: SWB's path to financial independence

Post by thedollar »

Putting 80% of your savings in a stock with a PE of 500+ during what may be an AI "bubble" is more than a bit risky.

You've basically won the game and hit your goal. Why not reduce the position to say 20% max. and the rest in index funds? Do you have to pay capital gain taxes if you sell the position?

xmj
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Re: SWB's path to financial independence

Post by xmj »

Congrats & GFY! :)

Now that you've won you'll probably want to introduce some bog-standard risk-management (aka "sell half [at double]") to make sure those gains last happily ever after.

loutfard
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Re: SWB's path to financial independence

Post by loutfard »

Congratulations on your winning lottery ticket! Now go and exchange it. In other words, sell asap.

Taking your chips off the table is harder than winning. It's the hardest part of the game. You can do it!

DutchGirl
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Re: SWB's path to financial independence

Post by DutchGirl »

Time to stop gambling, indeed. Quit while you're ahead. Sell most and diversify into like 75% stocks and 25% bonds/other.

jacob
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Re: SWB's path to financial independence

Post by jacob »

A few years ago, we had one or two crypto multi-millionaires on the forum who proceeded lose their millionaire status when BTC declined by 2/3. I wonder how they felt about that. Live by the sword, die by the sword, maybe.

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Lemur
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Re: SWB's path to financial independence

Post by Lemur »

Only expressing what Lemur would do: If you hit your FI target, then just sell. If you still love AMD, then just invest new money from your job.

Congratulations!

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

I appreciate all the replies and thoughts. I'm obviously struggling with something that I have two very different viewpoints on (locking in being done versus being right about my investment option). I agree there is a way to satisfy both needs by selling the majority and retaining some AMD. I'm still thinking it through (just how much to sell and when) but I don't want to wish I'd sold and end up having to work for another N years. I sort of experienced that in Nov, 2021, when we hit $1.4M and I realized if I'd cashed out at the top (yeah, hindsight so not really meaningful), I could have just worked for two years longer and hit goal. So yes, I'm going to rebalance.

@thedollar's question about taxable vs non-taxable is top of my mind. The AMD exposure is basically:

- 37% non-taxable
- 63% taxable

For taxable, the gains are:

Stock: $175,372.44
LEAPs: -$118,570 + $78,255 = -$40,315 (ouch! I meant to buy in more during the recent dip but it started running)

So $175,372.44 - $40,315 = $135,057.44 total taxable gains. Fairly sure that is correct however I need to double check the cost basis transferred over correctly when I moved some accounts around a while ago. Which is a 17% gain on taxable investments.

So this isn't so much lottery tickets as some losses (basically educational costs learning about options) and shoveling a lot of money into the stock market (past 2.5 years have been most I've ever made per year, not FAANG levels of compensation for my experience but up there). I have to admit I thought there were more gains. The reality is, I was really really red on the LEAPs for quite a while and I kept slowly buying in (I meant to buy in more while AMD was down most recently but it started going up and I always have a hard time buying when the stock is going up). I was able to maintain my sanity by not focusing on the losses. Honestly, I think that was actually a good thing to learn as it was worrying at first and then I just let it go.

Tax-wise, my understanding is I can cancel out the LEAPs loss by selling shares:

- sell all the LEAPs so I end up with -$40,315
- sell 1072 shares of AMD in one of the brokerage accounts which would be +40,315 gains leaving me with $136,519.20 cash (or I could sell more shares and keep some of the LEAPs, have to mull that over)

Or am I making a glaring mistake? I'll need to sell more of course.

For a better picture, below is our net worth over time. There is a red line for where Mint double counted an account one month but this is the trend over time. Note that the peaks in the AMD stock price correspond with the peaks in our net worth (the x-axis isn't the same timespan though). The AMD all time high was $161.91 on November 29th, 2021. Even though AMD didn't get back to that high, we went past our prior net worth due to continuing to invest (both in AMD and non-AMD).

Image

AMD stock price past 5 years:

Image

So this isn't really a lottery ticket story. More of a high income and invest with exposure to dramatic swings of a growth stock and some poorly timed LEAPs that somewhat recovered. In conclusion, I'm not a rockstar investor!

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