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drbubb

Where are you on the Path to Financial Independence?

The Path to Financial Independence  

133 members have voted

  1. 1. What stage have you reached?

    • I haven't started yet: what is all the fuss?
      0
    • I am spending more than I make, and need to change that
      6
    • I'm free from most consumer addictions: spend on only what I need
      20
    • THe only debt I have is mortgage debt
      25
    • I have no debt at all (except financing my investments)
      30
    • I am debt free, and have a job I like
      44
    • I am debt free, and no longer need to work
      9
  2. 2. How long before you expect to reach Financial Independence?

    • Never. I expect to die in debt, still working
      7
    • I will be financially independent when I retire
      39
    • I should be F.I. in about 10 years
      31
    • I should be F.I. in 5-10 years
      26
    • I plan to be F.I. in 2-5 years
      15
    • I can see F.I. within two years
      3
    • I have already reached Financial Independence
      13


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I would appreciate your thoughts on whether you think 20% pa is a realistic target, or pie-in-the-sky. I like to think that having age on my side will allow me to take a little more risk, hence hopefully make better average returns, than the typical fairly cautious investor.

 

No less a person than Albert Einstein supposedly described compound growth as the eighth wonder of the world and you can see why. With enough time and if you can stay clear of debt, it is surprising how even playing the long haul game when it comes to investing, the returns can be excellent once you hit 10-20% a year return.

 

From the Motley Fool.

 

"Those who understand compound interest are destined to collect it. Those who don't are doomed to pay it."

 

4. Over time, regular saving of quite small amounts can build up an astonishing sum of money.

 

If you save £100 a month for 40 years and your investments compound at 12% a year how much will you have? The answer is an astonishing £980,000!

 

There are calculators for you to play around with on here.

 

http://www.fool.co.uk/school/compound.htm?ref=foolschool

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Guest WorriedShareholder

It is simple really:

Sell your property NOW, wait for the crash, and then...

 

The crash you will need is only a 30% drop in stock indices, which if you believe this website, you may see before the end of the year. If you cashout now, and sit on your cash until late October, you may see a wonderful share-buying opportunity. Catch it right, ride it back up , et Voila!, you have serious money.

 

Shepherd that profit well, and invest in property in 2008 or 2010, or whenever it drops, and you can own property debtfree- all courtesy of playing the cycles.

 

Is this pure theory, or can it be reality?

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Worried, this scenario would suit me great.

 

Throw in a currency crisis and a gold through the roof for added wealth.

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Worried, in slight translation says:

 

"Sell your property NOW, wait for the crash"

 

(Not the HPC, a stock crash):

 

The crash you will need is only a 30% drop in stock indices, which if you believe this website,

 

(Yes. History suggests a fall of 20-30%. There are enough fundamental imbalances to get us there by year-end.)

 

If you cashout now,

 

(Cash-out of Property now, that is)

 

and sit on your cash until late October, you may see a wonderful share-buying opportunity.

Catch it right, ride it back up , et Voila!, you have serious money.

 

(Easier to say this than to do this. But not impossible)

 

Shepherd that profit well, and invest in property in 2008 or 2010, or whenever it drops,

 

(Okay. But will property fall, if stocks are rising? What's that a stagflation period where stocks

rise as interest rates rise? Or just tighter credit and downwards momentum in property?)

 

and you can own property debtfree- all courtesy of playing the cycles.

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time to revive this thread perhaps

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It would appear that the average Joe is now further from FI now than at any point in the last 47 years.

Savings hit a low

Wonder what was happening in 1960? Or is this just caused by a chinese type mass rush into stock speculating rather than more conventional savings :lol:

Personally I hate debt, which must be a good starting point. Probably take me a good few years to be FI. Bought a house in 2003 :mellow: which at the time I thought was too expensive. Will hopefully have that paid off in the next two years (touch wood).

I think another good way of eventually achieving FI is to be a contrarian. Can't see how many people who live a 'normal' life ,and have all the gadgets, cars and the 'lifestyle' that goes with it all, can ever be free of money.

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Great comments, everyone. I enjoyed reading them

 

"I am debt free, and have a job I like"

 

Check

 

Hmm...

I think I left a category out: those who are debtfree and do not yet own their homes.

Obviously, there is a big difference between Debtfree-with-home, and Debtfree-without-home.

Now, as a STR person, I am DFWH, rather than DFWOH, but I can afford to buy a home, and still be debtfree, so perhaps that is the same category are DFWH.

 

If you are willing, it would be interesting to learn if people here are WH or WOH- perhaps I will start a new pool about that in a few weeks, when this section is better developed.

 

I get the feeling from reading HPC, that there are many who are DFWOH who are just waiting for the right moment to buy, and then they will pounce, and become homeowners with debt. They will exchange the stress (for some) that comes being off the ladder, for the stress of having a mortgage to pay. Personally, I think that the debtfree life is better, even if WOH.

 

DFWOH but as an incidental STR this is as much due to circumstaces as planning

 

Like DB and PG I am enjoying the liberation of a debt-free life. I have no stress at being 'off the ladder' as I have litle doubt that the demographic time bomb will take care of UK house prices fairly soon if the credit bust doesn't kick in first (not to mention peak oil!)

 

http://www.greenenergyinvestors.com/index....c=1132&st=0

 

 

I like the idea of moving beyond the wannabe-FTB prejudices that seem rife on HPC.

 

Starting to think 'outside the box'

 

keep up the good work GEI!

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As of the 23rd, fingers crossed, I will be DF(WOH) via STR, but with a realistic goal of having 40%+ of the equity needed for my next purchase, assuming the GF and I do ever actually want to buy together in this god-forsaken country. (We are by no means desperate to buy back as soon as prices weaken a little, much though I do appreciate the warm fuzzy benefits of home-ownership).

 

I am currently torn between the late-20's getting married and having kids soon / house / stability / career / pension / blah blah blah thing that most of my friends are now doing, and the... well... alternative option, whatever that is! (Emigrate / sack off work and travel for a year / retrain / start a business etc etc - all of which I potentially like the sound of, but having been brought up by conservative risk-averse be-grateful-for-what-you-have type parents, it's hard for me to seriously consider these alternatives, when I'm pretty well set up for that average comfortable life, should I want it.)

 

I wish my 20s could last another 10 years - not ready for the next stage yet!! Being ahead of the game financially does give me some options though - makes me infinitely more relaxed than I otherwise would be!

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Personally, 2007 for me is about setting foundations for my steady progress towards financial independence. Still in my twenties so have time on my side hopefully.

 

I produced a few more publications and patents to my name. This always helps when preparing new research grants or looking for a new research contracts. A couple of students I mentor have passed their masters and are now pursuing PhDs (investment in the next generation of engineers :lol: )

 

The start-up I helped co-found based on some of my research is gearing up for its next stage of development. We have gone through a couple of seed rounds and now round one investment is on track to enable us to cope with the increased workload. We are going through the due diligence stage with potential venture capitalist investors. Several projects are in progress with tier one semiconductor companies that with a lot of hard work and some luck will come to fruit within the next twelve to eighteen months.

 

Additionally, I have negotiated with another company some royalties based on every chip they sell using some of my Intellectual Property, so this could have the potential to become a nice passive revenue stream for me.

 

debt free, renting a flat a few minutes walk from work. Investments are mainly in the form of cash at the moment. This is more than enough to fund my current lifestyle for the next 4 years if I wasn’t in paid employment and had no other income. Therefore, over the next year I aim to gain the confidence/knowledge to slightly diversify my assets to help increase returns greater than high interest rate/ISA accounts.

 

On a side note, I have been offered a lecturer position in a new Chinese university with free accommodation, which I am very tempted to accept if it wasn’t for the start-up I am involved with. In the meanwhile, I am beginning to learn mandarin with the little spare time I currently have available. The trouble I am finding at the moment is too many possible paths to purse but only one Gen-X :)

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Interesting situation, Gen-X

 

which Chinese uni?

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DFWOH, in a transitional period following a number of life changing events. I have always lived within my means, but did not make any real effort to save when I was younger. I will be able to afford to buy a modest property soon, with little or no mortgage. None is the obvious preference, and I may wait another year or so for developments in the housing market to unfold.

 

FI is unlikely, but I've begun investing in growth stocks. I'm up about 13% this year and expect more, market conditions allowing. At a suitable point will take risk on junior mining stocks. I just need to learn the ropes sufficiently, and GEI seems the perfect place to start. There is a cooler and more sober atmosphere than on the other boards I have seen, plus the experience and knowledge is priceless. I wish I had more to offer in this respect.

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II would appreciate your thoughts on whether you think 20% pa is a realistic target, or pie-in-the-sky.

 

I doubt it unless you do it full time or have someone (and a rare good one at that) to do it for you. I love economics and the markets but also have a day job.

 

The most important thing I have found (and I am spending a lot of time on this subject) in settling on an investment approach is to base it not on what is possible (option trades, etc) but on what is feasible given my current situation. Consistent application appears to be the key to success and one needs to adopt an approach that supports this. I usually lose money when I can't give the particular investment the respect it deserves.

 

What does that mean in practice? Have a consistently applied system (e.g. a weekly systematic and structured investment review following a set agenda and investment rules) and investing in sectors via ETFs (fundamental for focus and basic technical for buy and sell points), with the occasional covered warrants for hedging and speculation. Plus very short term spread betting when I have the time and the market is ready for it. I have invested considerable time in understanding ETFs and picking the "best in class" should the fundamentals and technicals support a move.

 

Please also don't forget to factor in inflation. That compounds too, only negatively. These forecasts are very sensitive to the underlying assumptions. A 1% deviation can have a big long-term impact. It is far better to do some sensitivity analysis (vary the assumptions and see what happens) to give you some realistic ranges as targets.

 

I read a goodish book once ("Surviving the Bubble" methinks) that said the main goal of investing for the amateur is the protection of capital (after inflation). To which I would add avoiding the spendaholicalsim that has characterized the last decade. Simply to have money at retirement will be quite an achievement for most.

 

Me, yes I want to be FI and might well be by now, but any assessment gets too complicated (lifestyle questions). More likely an event (redundancy) will push me to it and I'll then turn around and wonder why I did not make the change sooner.

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Have a consistently applied system (e.g. a weekly systematic and structured investment review following a set agenda and investment rules) and investing in sectors via ETFs (fundamental for focus and basic technical for buy and sell points), with the occasional covered warrants for hedging and speculation. Plus very short term spread betting when I have the time and the market is ready for it. I have invested considerable time in understanding ETFs and picking the "best in class" should the fundamentals and technicals support a move.

 

Hi, Fence. And welcome

 

It would be interesting to hear a bit more about your system.

Are you willing to start a thread about it.

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Hi, Fence. And welcome

 

It would be interesting to hear a bit more about your system.

Are you willing to start a thread about it.

 

Thanks for the offer. I'm still trying to get to grips with the mechanics of this board so not sure what's involved and whether I can contribute too much yet in such a "full on" way. Maybe an ETF thread is another way to go as that's at the heart of what I am trying to do.

 

Maybe "system" is a bit too grandioise. The key point is to tailor ones approach to what one can realistically invest the time in to support and to apply it consistently using a regular checklist. I've spent too long dabbling here and there in a very unstructured manner (e.g. log on at work now and then, place a few trades, etc) and it has hurt.

 

That means I need to cut my cloth to fit. I can't spend the time tracking individual stocks, options, etc. But nor am I happy just to put my money into an index tracker or mutual fund. I just received my Fidelity pension statement and they said "yeh, peformance was not so good last quarter due to the falling dollar" to which my response was "well that was bl**dy obvious so how did you so called professionals let it happen!". ETFs offer the best compromise as they provide sector exposure to pick up fundamental themes (e.g. energy, asia, etc) but without the exposure to individual companies which significant due diligence would require to mitigate risk.

 

The next issue though is what ETFs? There are lots out there in many international markets. My approach:

 

o Identify the ones listed in the US, Europe and Canada.

o Group them by class (e.g. energy, materials, commodities, etc)

o Sub-group them into specific groups (e.g. global energy oil services versus global energy alternatives) based on their holdings and not market listing

o Select the best in each subgroup according to fees, volume, relative performance, etc.

o Look for correlations between the selected ones to reduce the size of the ones to watch (e.g. Oil services is pretty much a representative energy leader)

 

Sorry but no, I'm not going to share the list as it took a lot of effort and I've possibly already said too much!

 

The next step is to monitor these selected ETFs on a regular (weekly) basis for changes in fundamental and for technical buy (e.g. at bottom of rising channel) and sell points (opposite or stop loss reached). I have not perfected this yet as I am trying to find the best tool for quickly presenting this information (i.e. access and consolidate key data from multiple sources) and comparing it to my current holdings. Data is key as there is a lot of noise/information/opinions out there which would make you act like a tree blowing in the wind if you tried to follow it all. Ok, the information can help shape fundamental thinking but data (technicals) should be used to validate, time and execute. My Yahoo portfolio manager just does not cut it. Also, I've tried being a buy and hold (i.e. forget) investor and that sucks.

 

It's almost like I need to go through the process of preparing a report to myself of what I see the fundamentals as (I am an FSN, CWR, GSR, DR, etc fan), what my holdings and their performances really are, and what my strategy is (including what to buy, risk management, which accounts (e.g. SIPP versus ISA versus trading) to use, etc). I already feel I have a better grip on things by knowing what's going on, what people think, what it all really means (in terms of data), how sectors are performing, and what my full options are (e.g. I can short financials and property with an ETF, some ETFs are (were!) getting ahead of themselves, etc).

 

I also need to remember to review my original ETF shortlist on a less frequent basis for new joiners and to revalidate the analysis (e.g. maybe alt energy does start to behave differently from energy generally so should be tracked separately).

 

As I trade in USD I have a currency exposure which I cover with covered warrants. I may also use these to play longer term trends where ETFs don't offer the leverage or precise securities. I found warrants to be better suited than spreadbetting because of the limited exposure and because they offer long-term plays without roll-over. I can take a position (dollar will be down by year end) and let it ride without constant review and worry of getting stopped out on a bounce. Warrants just seem to fit in with my rhythm. I have insufficient knowledge of options to assess if they would be better.

 

Spreadbetting is there to satisfy my old compulsive side! It's for a quick in and out when I have the time to sit there and watch it. I am not comfortable opening a position and then walking away from it open as I can't guarantee when I'll next be able to look at it. That's irresponsible and costly. Also, the sector spreads are massive compared to ETFs and again would be a better play via ETFs given their longer-term nature. But spreadbetting is great when the markets are choppy and the blood is up!

 

Hope this all makes sense and has some worth (obviously not to you!). It's all about cutting ones cloth to fit one's time so feeling in control rather than trusting to luck, and assessing all the available investment vehicle options and knowing what to use which one for and when.

 

Ok, well off topic so please move it if best!

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that's a good posting.

It would make a good beginning for an "ETF Strategies thread",

and I would be happy to set one up for you.

 

I think that a charts page might be useful too, if you were willing to let us know which ETF's

you want on it, i couyld set one up.

 

Lety me know, if you are willing to have a thread set up around that

 

= =

 

You said:

I just received my Fidelity pension statement and they said "yeh, peformance was not so good last quarter due to the falling dollar" to which my response was "well that was bl**dy obvious so how did you so called professionals let it happen!".

 

LOL. I agree with you on that, but many of these guys define their jobs very narrowly, to make it easier.

If they go for absolute returns, they charge huge fees, and call themselves hedge funds

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that's a good posting.

It would make a good beginning for an "ETF Strategies thread",

and I would be happy to set one up for you.

 

I think that a charts page might be useful too, if you were willing to let us know which ETF's

you want on it, i couyld set one up.

 

Lety me know, if you are willing to have a thread set up around that

 

= =

 

You said:

I just received my Fidelity pension statement and they said "yeh, peformance was not so good last quarter due to the falling dollar" to which my response was "well that was bl**dy obvious so how did you so called professionals let it happen!".

 

LOL. I agree with you on that, but many of these guys define their jobs very narrowly, to make it easier.

If they go for absolute returns, they charge huge fees, and call themselves hedge funds

 

Thanks. I may regret saying this (do I have the time?) but sure go ahead. Maybe something like "ETFs - Investing Options For The Time Challenged Investor". It would be good to share people's views on what's hot and what's not in the ETF world. I'm happy to throw in some basic analysis to kick things off like a review of Energy ETFs. Maybe the charts should come later.

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OK you guys have got me what does STR mean?

 

I am guessing its not: A short tandem repeat (STR) in DNA is a class of polymorphisms that occurs when a pattern of two or more nucleotides are repeated and the repeated sequences are directly adjacent to each other (courtesy of wikipedia)

 

Personally I have savings that balance out my mortgage, and some equity investments - mostly ISA funds with a UK weighting. Plus a small ish portfolio of invididual stocks.

 

While that might sound good my pension arrangement is not too good.

 

Am presently just managing to break even on a month by month pending habit basis although my single unexciting salary is having to support wife and child.

 

Dave

 

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OK you guys have got me what does STR mean?

 

It's a term widely used in UK property circles for a property bear who decided to bet on a falling

market, and so: "Sold-To-Rent"

 

If you do so, and the market subsequnetly falls, you can buyback cheaper.

 

Those who did this too early, and failed to invest the extracted equity well, saw the Uk house

market shoot up, making it tough to come back into the market at the same price.

After being ridiculed for years, STR's are now having a great time as the marklet slides.

 

Those who STR-ed to invest in gold, are laughing twice as hard at Property Bulls.

(And some who then invested gold share profits in the Hong Kong or Singapore property

markets are laughing three times as hard at the now-starnded UK property bulls.)

 

\

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O dear. I find this all scary. I have a student loan, some car loan. I break even every month. I earn quite well now after being a student but I am getting on a bit. I am a bit late coming to the party. I am determined to do something about it. I came to this from HPC and realised this is the more important aspect the investment/looking after any money made. O and I rent ;)

 

In essence I think I can pull back being in my late 30s but I hope I dont get stuffed in an upcoming uk recession.

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O dear. I find this all scary. I have a student loan, some car loan. I break even every month. I earn quite well now after being a student but I am getting on a bit. I am a bit late coming to the party. I am determined to do something about it. I came to this from HPC and realised this is the more important aspect the investment/looking after any money made. O and I rent ;)

 

In essence I think I can pull back being in my late 30s but I hope I dont get stuffed in an upcoming uk recession.

 

I was in a similar situation earlier this year. Just sold the house and the car, living a parents and trying to get rid of the van. Once thats gone then we are putting a house up in Slovakia. Other halfs family have got a small piece of land but we have only 1/3 of the money needed to build. No way I'm getting a mortgage on land thats been in their family for ever. I hope I can learn something here that helps me grow my saving and avoid disasters.

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A lot of it depends on personality type; optimist vs pesimist - red/green/blue - INTJ ENTP et al.

 

I reckon the historical advice sill prevails; buy a house don't rent, save your money, invest in stocks, be good to yourself and your loved ones.

 

 

>>obviously timing the love is critical ;)

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My answers not there in either case!

 

Debt free for 7 years.

 

Assets greater than annual expenditure. But large expenses (school fees, family house, pension) are all in the future. Nowhere near financial independence. Not working right now due to childcare commitments.

 

Expect to lose it all in the coming financial trauma.

 

Expect to have to work until senility and then go bust (but not in debt - not suis juris)

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My answers not there in either case!

 

Debt free for 7 years.

 

Assets greater than annual expenditure. But large expenses (school fees, family house, pension) are all in the future. Nowhere near financial independence. Not working right now due to childcare commitments.

 

Expect to lose it all in the coming financial trauma.

 

Expect to have to work until senility and then go bust (but not in debt - not suis juris)

Do you really expect those things to happen to you? If you expect bad things to happen then you will probably not be in a position to defend yourself if it came to pass.

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Do you really expect those things to happen to you? If you expect bad things to happen then you will probably not be in a position to defend yourself if it came to pass.

 

Thank you for replying. I'm afraid I'm not a trader. Hoping to learn something from this site.

 

Sites like this raise fears! eg the mortgage debt of Germany in 1918 ish would not buy a postage stamp in 1923, US forced sale of gold in 1930s, Argentina forced conversion of dollar accounts, Argentina restricted cash withdrawls, UK rent acts, German landlords having to sell because rents would not cover repairs. In a democracy, it pays to be with the majority. The majority are debtors.

 

I used to have a really high savings ratio and had hoped to save school fees, a house and a pension. I've got the school fees. But I have decided to take some time out with my children so I'm not making any progress on the other two and I'm eating into the school fees a little. The most extravagant thing I have ever done but I love it.

 

School fees are currently in:

a flat (debt free. should be safe but will not pay the fees on its own. Rent act risk?).

Sterling (spread between banks and NS&I but can be inflated away while withdrawls are restricted)

PEP and ISAs (removed in August 2007 from FTSE to gilt type things but still gone down)

GBS (truly backed? forced purchase by UK govt? gold is like a currency so FX risk)

Perth Mint Certs (I'm not a voter there so confiscation risk, again FX speculation really)

 

I'm reliable, bright and professionally qualified but very bad at interviews, nearly 40 and my experience is dated already. Former employers have promised to let me back in 2 years but then I would go back to never seeing my young children during the week. I'm sure I will find a local job allowing me to see my children - but not a high flying one which will allow me to retire comfortably. All my retired relatives go on cruises but the world is changing and I dont see that for my generation. Comfortable retirement for the many is the preserve of the current generation. Both my grandfathers worked into their 70s. My great grandmother appeared well provided for but then the rent acts left her partially dependent on her sons.

 

I havent reached that all elusive "middle class lifestyle". Spending time with my children is a huge luxury. I've never been happier. But its a gamble re future income which makes preserving existing assets even more important during these interesting times. If I had the trading skill and the guts of some on this board then I'd be financially independent now. For me, just staying out of FTSE since Christmas was brave - and probably wrong too. Now, at the eye of the storm, is the once in a lifetime opportunity to save assets before the coming depression/inflation/war/revolution/socialist state (pick one). I just can not work out the right place to put them.

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