3 ms·

How long did you assume you'd be living and how did you assume to store this value? Because if left on it's own, just 30 years from now these $2M will likely ha

by comboy 8y ago

How long did you assume you'd be living and how did you assume to store this value? Because if left on it's own, just 30 years from now these $2M will likely have much lower purchasing power (even if stored on savings account and even no black swan financial event happens during that time).

milesvp 8y ago
4% draw down on a stock index fund will likely pay 80k anually adjusted for inflation indefinitely. At least, this is based on historic stock data However, I was taught in undergrad econ, that this 4% return above inflation is considered the risk premium, over what a CD would get you. So there is a real risk of losing everything. Which means hedging is a good idea, some of the money to buy a reasonable house, some %age of rest in bond fund, and quarterly rebalancing can go a long way to preserve a lot of wealth in a black swan event.
- javier2 8y ago
  Yeah, it's more like 2M will let you live confortable indefinitely in 90% of future scenarios. So there is still an y% chance you might have to go back to work again.
  - jkaplowitz 8y ago
    Even if I get to that level of net worth - which, as I noted, I'm not at yet - I'd probably still have some earned income. I could just care much less about how much and could be a lot choosier about what work I want.
  - walshemj 8y ago
    But if you had $2 mill to invest you wouldn't have it all in one concentrated index fund - you would have at least 50% in wealth preservation funds and diversified investments commercial property, overseas funds/trusts etc. I have less that 10% of that in my investment portfolio and don't actually have a FTSE 100 tracker I have around 20 investment trusts and individual shares.
- jkaplowitz 8y ago
  I don't even have of 80k USD in after-tax inflation-adjusted expenses living here. It's a cheap city.
jkaplowitz 8y ago
Yeah, needs to be invested, I agree. But can be done without too much risk. This does not involve drawing down principal, in other words it lasts truly indefinitely.

by comboy 8y ago

milesvp 8y ago

4% draw down on a stock index fund will likely pay 80k anually adjusted for inflation indefinitely. At least, this is based on historic stock data However, I was taught in undergrad econ, that this 4% return above inflation is considered the risk premium, over what a CD would get you. So there is a real risk of losing everything. Which means hedging is a good idea, some of the money to buy a reasonable house, some %age of rest in bond fund, and quarterly rebalancing can go a long way to preserve a lot of wealth in a black swan event.

javier2 8y ago
Yeah, it's more like 2M will let you live confortable indefinitely in 90% of future scenarios. So there is still an y% chance you might have to go back to work again.
- jkaplowitz 8y ago
  Even if I get to that level of net worth - which, as I noted, I'm not at yet - I'd probably still have some earned income. I could just care much less about how much and could be a lot choosier about what work I want.
- walshemj 8y ago
  But if you had $2 mill to invest you wouldn't have it all in one concentrated index fund - you would have at least 50% in wealth preservation funds and diversified investments commercial property, overseas funds/trusts etc. I have less that 10% of that in my investment portfolio and don't actually have a FTSE 100 tracker I have around 20 investment trusts and individual shares.
jkaplowitz 8y ago
I don't even have of 80k USD in after-tax inflation-adjusted expenses living here. It's a cheap city.

jkaplowitz 8y ago

Yeah, needs to be invested, I agree. But can be done without too much risk. This does not involve drawing down principal, in other words it lasts truly indefinitely.