#11815
Postby Hariseldon58 » December 4th, 2016, 5:45 pm
Very interesting thread, lots of good info from personal experiences. i thought I would add a few more ! 9 years in I have changed my approach which was more akin to those who are still planning but I found whilst the earlier methods worked, they can evolve.
I went FIRE in late 2007 with a largely Equity portfolio and no significant pensions to come. I was working on living off the natural yield , circa 4% of a largely Equity Income Portfolio with a large dollop of International Investment trusts and HYP individual equities.
Talk about sequence of returns risks ! I was mentally prepared for a 50% drop in the markets at some point in the future, I had seen heavy declines in 2000-2003 but I was pretty surprised to say the least that such a situation should occur almost immediately.
I chose to dump the HYP in the spring of 2008 and this proved to be beneficial. ( I did a little analysis earlier this year to see what would have happened if I had stuck with the portfolio as of 2008 to 2016 against what I had actually done)
Since then I have moved to a more passive approach but still largely equities.
I now ignore the natural yield ( it is just over 2%) I concentrate on overall returns and live off what ever cash is in the bank account, it is topped up by a mixture of investment income, some part time work , asset sales occasionally by top slicing prior to reinvestment. I find this a very sensible method, it suits me personally as I fairly relaxed about money and risk, others clearly prefer the structure of a reliable income flow.
I now find myself with nearly twice as much capital in real terms as when I retired, despite living comfortably and travelling. Total return does matter...I am very tolerant of large movements in the value of a portfolio and have significant confidence that it will come right ( this may be misguided but its a much more pleasant way to live than to be worried about it ! )
I am now 58 but see little virtue in the eternity portfolio, its likely that I will leave a significant sum to family but they should not rely on it and it may not be really beneficial to them as regards quality of life. The eternity portfolio is likely to be too cautious and lower the standard of living until you realise its too late to spend it all.
The approach of the poster with expertise in inflation and targeting a1.5% drawdown is I think too close to his specialist subject and unduly pessimistic, experience so far is that spending is broadly similar to previous years, some major expenditure on travelling is now much cheaper by using 'last minute deals' due to changes of practice by the companies I use and having the freedom to travel whenever, is great.
I like Inv35t's idea of the portfolio being considered in liability matching terms i.e. I need £X for 10 years then £Y for 25 years, one could stash that away in a low risk investment pot and use the balance to fund growth in a riskier manner. Not that I have done that but feel I could see a 50% fall in capital and still manage, so why worry ?
Working part time is good, the financial remuneration is not particularly relevant but it provides good social benefits and some structure to one's days.
Health is taken for granted and recent experience has left us unable to travel for a year and its absence is painful.
From an investment perspective the low cost, global passive approach at very low cost is simple and effective, there are still opportunities to profit occasionally with contrarian moves and this has proved helpful to the overall portfolio growth.