Financial independence from A to B

I have been on the road for financial independence (FI) from 2008, with some tangible steps taken since 2011.

 How long will it take me to reach it? 

 

 I would like to make some assumptions first:

Assumption one.  Our house is not an equity.  Counting home equity is only good if you don't plan on living there in retirement.

We are making a lot of irrational decisions by renovating the house to our liking. Significant amount will go in in the next two years’ time (approximately $100,000). 

Assumption two. I am planning to invest $2,000 a month.  This is after taxes. I assume that this amount will increase in line with the inflation.

Assumption three.  I am able to achieve 3% return after the inflation on my investment.

Assumption four.    In fifteen years’ time the kids will be out of the house and the mortgage paid.  This should lead to annual expenses of $50,000. 

 

 Key milestones to achieve Financial Independence:

 At four percent withdrawal rate I should be able to get $50K a year.  There some potential opportunities but pitfalls too. Let’s see what the journey will bring ahead.

 My father retired when he was seventy years old. He actually kept coming to work  for free for almost a month, after retirement. This was  to make sure that his successor transitioned into the role well. I maybe have a job  in my late sixties to do too by keeping my skills up to date.  However, I see a lot of people in their early fifties are given a boot at every major crisis. 

Financial independence Portfolio expense ratio

The US government provided a lot of cheap money to the market.  This led Price to Earnings ratio for S&P500 returned back to 21.5, which is to 2% yield.  More over this is based on prior year earning for a lot of companies! In times like this portfolio expenses are one of the things to look at.

Properly measured, the average actively managed dollar must underperform the average passively managed dollar, net of costs. Empirical analyses that appear to refute this principle are guilty of improper measurement. All six of my investments are passively managed.

However, the financiers are always find a way to skim a little bit more. I decided to calculate, how much am I paying a year for my passive financial independence portfolio?

My funds charges:

	Charges, %	Annual charge, USD
Emerging Markets Stock Index Fund	0.23	256
Eurozone Stock Index Fund	0.12	126
U.S.500 Stock Index Fund	0.10	132
Global Small-Cap Index Fund	0.29	303
Growth Fund	0.259	129
Kids S&P500 funds	0.06	23
Total		969

May 2020 update ($512,818 +$23,553 or +%4.8)

↑ Eurozone Stock Index Fund is up by $4,777 or +4.8%
↑ US 500 Stock Index Fund is up by $5,936 or +4.7%
↑ Global Small Cap Index is up by $6,896 or +7.1%
↑ Fidelity Growth Fund is up by $2,004 OR 4.3%
↑ Financial independence savings for last month $2,000
↑ EUR is up to USD by 1% or $1,965 for my portfolio
↓ GBP is up to USD by 1.7% or $808 for my portfolio
Grand total additions: $24,385 USD

↓ Emerging Markets Stock Index Fund is down by $832 or -0.7%
Grand total losses: $832 USD

April 2020 update ($489,265 +$47,946 or +%10.9)

↑ Emerging Markets Stock Index Fund is up by $9.509 or +9.3%
↑ Eurozone Stock Index Fund is up by $5,937 or +6.4%
↑ US 500 Stock Index Fund is up by $14,328 or +12.8%
↑ Global Small Cap Index is up by $11,545 or +13.4%
↑ Fidelity Growth Fund is up by $5,014 USD
↑ Financial independence savings for last month $2,000
Grand total additions: $48,334 USD

↓ GBP is down USD by 0.8% or $347 for my portfolio
Grand total losses: $347 USD

How the rich stay wealthy all their lives

     Recently I published a story demonstrating why the rich will stay rich and the poor are always disadvantaged using the current rules.

I also took some steps, to invest some money I had into the kids’ portfolio. This portfolio can not be taken away from them, even if I or they need the money badly.

     The new tax year started recently and the market was still quite volatile.  I took this opportunity and invested additional money into the kids accounts. I used all allowances for this year (~ $11,000 per child).  All the money went into S&P500 fund.

    The blue line the three investments I made.  For reference:  All time high was 250 on January 02, 2020.  Low during the COVID19 shutdown was 190.  Average of the three transactions I bought shares for 211.1   Today the portfolio is up by 4% or $1,400.

    The market volatility is far from over. We will still experience some wild Russian roller coaster rides.  However, I don’t see that it will sink below 190 again.

     In difficult times such as now, my provider got a little bit greedy. I put the last order over the weekend, when actual price was 205. They closed the order on Monday at highest price of the day at 211.  Because of it, I cannot really do opportunity trading with it.  If market will be back to 240 in two years’ time it is still 7% a year return.

Assuming that I will continue contribute until they are 18 years old:

- For the older child, in the worst-case scenario its college money or $100,000 college graduation money.   

- For the younger one its $150,000 college graduation money.   

All sums are in today’s money.

Did you do any trades during the roller coaster or just sat tight?