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You could get up to 10% on 1M investment annually (that is what my friend has). Sure he does not have private yacht but one can live quite comfy on 100K without

by FpUser 5y ago

You could get up to 10% on 1M investment annually (that is what my friend has). Sure he does not have private yacht but one can live quite comfy on 100K without lifting a finger and that is what he does.

Grustaf 5y ago
If your friend can reliably generate 10% (not just in the current insane bull market) he should open a hedge fund.
- FpUser 5y ago
  He had it for about 4 years I think. Also he does not manage the money. Somebody else does it for him.
  - PragmaticPulp 5y ago
    If your friend gave someone a million dollars and they promised to deliver $100K per year indefinitely, your friend is the victim of financial fraud.
    - FpUser 5y ago
      Who said they've promised anything? He said that he was able go get about 10% in a last 3-4 years and that is all.
  - deleted 5y ago
    [deleted]
  - bcrosby95 5y ago
    Markets have been amazing the last 4 years. You can't use that short of a timeline to predict the next 40.
- DeathArrow 5y ago
  I think that if you tracked S&P 500 since inception years you made about 10-11% year on average. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...
ghaff 5y ago
Returns for the past decade have been quite good even if you're just investing in a diversified equity portfolio. Drop 10% to 4%, which is the rate that most planners use, and you're down to $40K/year. Which isn't that below median US income but many people working in tech in the US would probably consider it fairly bare bones even for a single person.
PragmaticPulp 5y ago
> You could get up to 10% on 1M investment annually (that is what my friend has) We have a hundred years of investment data in the United States that says this isn’t true. A 10% withdrawal rate will lead to portfolio failure 50% of the time after about 14 years. You can calculate using historical data here: https://engaging-data.com/will-money-last-retire-early/ https://engaging-data.com/will-money-last-retire-early/ There are mountains of research showing the safe withdrawal rate for retirement is around 3.5-4%. A million dollars gets you $40K per year at most, not $100K per year. Anyone expecting to live off of $100K/year with only $1m invested is in trouble in about a decade, even if they could get a mythical reliable 10% return. Note that due to inflation and downturns, you cannot withdraw an amount equal to the interest you earn. You have to withdraw significantly less than the interest you accumulate.
- nightski 5y ago
  On average. But if you are lucky enough to invest your first few years with extraordinary returns (say the past two years with 40%+ in index funds) that can greatly skew the outcome due to compounding.
- FpUser 5y ago
  >"We have a hundred years of investment data in the United States that says this isn’t true." An average over extended period of time. Maybe my fried is lucky and it's only been 3-4 years of such return for him
  - icedchai 5y ago
    The last 4 years have been outliers, and lucky for everyone (except those folks who sold at the bottom and moved to bonds in 2020.)
icedchai 5y ago
Let me guess: your friend has only been investing for the past 10 to 12 years. The past 10 years were very good times. Yes, there were a couple rough patches (March 2020, anyone?), and years where things went nowhere (2014-2016?) but if you stayed the course, you were more than fine. If you literally did nothing except put your money in an S&P fund, reinvested all dividends, and waited, you'd be up 15% annually. It won't be like this forever...

by FpUser 5y ago

Grustaf 5y ago

If your friend can reliably generate 10% (not just in the current insane bull market) he should open a hedge fund.

FpUser 5y ago
He had it for about 4 years I think. Also he does not manage the money. Somebody else does it for him.
- PragmaticPulp 5y ago
  If your friend gave someone a million dollars and they promised to deliver $100K per year indefinitely, your friend is the victim of financial fraud.
  - FpUser 5y ago
    Who said they've promised anything? He said that he was able go get about 10% in a last 3-4 years and that is all.
- deleted 5y ago
  [deleted]
- bcrosby95 5y ago
  Markets have been amazing the last 4 years. You can't use that short of a timeline to predict the next 40.
DeathArrow 5y ago
I think that if you tracked S&P 500 since inception years you made about 10-11% year on average. https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://www.investopedia.com/ask/answers/042415/what-average...

ghaff 5y ago

Returns for the past decade have been quite good even if you're just investing in a diversified equity portfolio. Drop 10% to 4%, which is the rate that most planners use, and you're down to $40K/year. Which isn't that below median US income but many people working in tech in the US would probably consider it fairly bare bones even for a single person.

PragmaticPulp 5y ago

> You could get up to 10% on 1M investment annually (that is what my friend has) We have a hundred years of investment data in the United States that says this isn’t true. A 10% withdrawal rate will lead to portfolio failure 50% of the time after about 14 years. You can calculate using historical data here: https://engaging-data.com/will-money-last-retire-early/ https://engaging-data.com/will-money-last-retire-early/ There are mountains of research showing the safe withdrawal rate for retirement is around 3.5-4%. A million dollars gets you $40K per year at most, not $100K per year. Anyone expecting to live off of $100K/year with only $1m invested is in trouble in about a decade, even if they could get a mythical reliable 10% return. Note that due to inflation and downturns, you cannot withdraw an amount equal to the interest you earn. You have to withdraw significantly less than the interest you accumulate.

nightski 5y ago
On average. But if you are lucky enough to invest your first few years with extraordinary returns (say the past two years with 40%+ in index funds) that can greatly skew the outcome due to compounding.
FpUser 5y ago
>"We have a hundred years of investment data in the United States that says this isn’t true." An average over extended period of time. Maybe my fried is lucky and it's only been 3-4 years of such return for him
- icedchai 5y ago
  The last 4 years have been outliers, and lucky for everyone (except those folks who sold at the bottom and moved to bonds in 2020.)

icedchai 5y ago

Let me guess: your friend has only been investing for the past 10 to 12 years. The past 10 years were very good times. Yes, there were a couple rough patches (March 2020, anyone?), and years where things went nowhere (2014-2016?) but if you stayed the course, you were more than fine. If you literally did nothing except put your money in an S&P fund, reinvested all dividends, and waited, you'd be up 15% annually. It won't be like this forever...