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I don't think you should try to become a 'professional full time investor' and put everything in index funds until you reach the ratio of funds that would signi

by mahyarm 12y ago

I don't think you should try to become a 'professional full time investor' and put everything in index funds until you reach the ratio of funds that would significantly beat your current salary, compared to the average returns of an index market portfolio. Lets assume the average return is %5, so if you make $200k/yr annually in your engineering craft, then you would need $4 million minimum to match the market for your salary, and probably at least $6 million before you would consider switching your career to 'managing your own money'.

falsedan 12y ago
Your numbers are off: - average long-term return on the stock market is 8-12% - full-time wealth management means no more tech job, means no need to live in the bay area, means $100k p.a. nets you a comfortable lifestyle You're looking at $1-1.5MM before retiring to the quiet life.
- DennisP 12y ago
  That's the average long-term return over the past century or so, but not necessarily the return over any particular 30 or 40 year period. Sometimes it's quite a bit lower, and it's probably a good idea to take that into consideration. Periods that start with PE ratios as high as they are now tend to do especially poorly.
- k3strel 12y ago
  Also remember that what matters are real returns after inflation and taxes. The S&P 500 has returned 11% a year since 1983, but 6% after taxes and inflation. http://www.thornburginvestments.com/pdfs/TH1401.pdf http://www.thornburginvestments.com/pdfs/TH1401.pdf
- marktangotango 12y ago
  I agree with these guys, the real return is lower, and the years that are negative to 4% will be diminish your nest egg unless you eat raman in those years. A millionaire eatinv raman? Maybe.
  - falsedan 12y ago
    The quiet life does not include Maseratis and penthouses. That nest egg should support you for 40-50 years, and then you'll be dead so leaving a remainder would be suboptimal.
m-i-l 12y ago
I think one of the points of the article is that investing in index funds isn't a full time job, so even if you are newly rich you don't have to either make managing your money a full time job or pay other people high fees to do it for you, i.e. you can keep your day job if you want (or "get on with building Google" in this case).

by mahyarm 12y ago

falsedan 12y ago

Your numbers are off: - average long-term return on the stock market is 8-12% - full-time wealth management means no more tech job, means no need to live in the bay area, means $100k p.a. nets you a comfortable lifestyle You're looking at $1-1.5MM before retiring to the quiet life.

DennisP 12y ago
That's the average long-term return over the past century or so, but not necessarily the return over any particular 30 or 40 year period. Sometimes it's quite a bit lower, and it's probably a good idea to take that into consideration. Periods that start with PE ratios as high as they are now tend to do especially poorly.
k3strel 12y ago
Also remember that what matters are real returns after inflation and taxes. The S&P 500 has returned 11% a year since 1983, but 6% after taxes and inflation. http://www.thornburginvestments.com/pdfs/TH1401.pdf http://www.thornburginvestments.com/pdfs/TH1401.pdf
marktangotango 12y ago
I agree with these guys, the real return is lower, and the years that are negative to 4% will be diminish your nest egg unless you eat raman in those years. A millionaire eatinv raman? Maybe.
- falsedan 12y ago
  The quiet life does not include Maseratis and penthouses. That nest egg should support you for 40-50 years, and then you'll be dead so leaving a remainder would be suboptimal.

m-i-l 12y ago

I think one of the points of the article is that investing in index funds isn't a full time job, so even if you are newly rich you don't have to either make managing your money a full time job or pay other people high fees to do it for you, i.e. you can keep your day job if you want (or "get on with building Google" in this case).