In researching for a video for 2021 I revisited the data for the No-Brainer strategy as presented in this video and noticed a mistake. In the video I mention that based on the data someone utilizing the strategy would've achieved financial independence in 25 of the 50 scenarios using a 50% savings rate. This group of FI accumulations metrics is incorrect as are the average Time to FI that are related to them. Below are the correct metrics: 15% Savings Rate Achieved FI: 0/50 (0%) AVG Time to FI: N/A 30% Savings Rate Achieved FI: 10/50 (20%) AVG Time to FI: 41 Yrs 50% Savings Rate Achieved FI: 34/50 (68%) AVG Time to FI: 19 Yrs 70% Savings Rate Achieved FI: 43/50 (86%) AVG Time to FI: 9 Yrs The cause of this error was I forgot to update the minimum 30-year safe withdrawal rate figure to reflect what we saw from the No-Brainer strategy before running the financial independence accumulation simulation. As a result, the savings goal required to reach FI was off and therefore so were the accumulation metrics. I have added notes for myself in the spreadsheet to ensure that this does not happen for videos in this series uploaded in 2021. Thankfully, after re-running the simulations it appears that all other figures (i.e. the return, crash, and even the withdrawal portion of the financial independence metrics) appear to be accurate as stated in the video.
For UK investors would 1 equity fund like vanguard ftse global all cap index fund that's about 55% us, and about 10% emerging markets etc. Combined with 25% in a short term UK government bond index fund or short term global bond index fund, hedged to Stirling work more or less the same
It's interesting seeing that this particular strategy isn't all that different from other strategies I've been learning about recently. On the surface it is a cut-and-paste of Benjamin Graham's most aggressive investing advice (75 % stocks, 25 % bonds) with some added diversification to the stock portion. Looking at the popular 3 fund portfolio, it's a slightly different recipe to "total market index, international market index, total bond index," though the ratios for those are a lot heavier on the market side than bonds. Instead of a fight over broad principles it is a fight over who has the best optimization.
This is interesting. I don't know if 50 years or so is enough of a timeframe to know how this will do long term but logically it does seem fairly safe. This definitely gives me something to think about for the next time I assess my asset allocation. Thanks for sharing this 👍
Rob, yes I really wish I had reliable data on the funds in this allocation going back further to get a better idea of how it would've handled things like the Great Depression but I don't. Still I felt it was a strategy worth discussing. Glad it gave you something to think about for next time :)
A problem I've run into is if you use a 401k program, you often don't have a good option for either a short term bond fund (they tend toward intermediate bonds and nothing else) or a small cap stock fund that you'd actually want to invest in (if they have one it tends to have a high expense ratio and small market cap and questionable strategy).
That certainly can make things more difficult. Most 401k plans don't have as wide of a selection of investments as other investment accounts which is unfortunate. But you may still be able to utilize what's in there as part of your overall strategy. For instance someone investing in stocks, bonds, and gold may find that there's no gold fund in their 401k. So they could invest in stock and bonds in their 401k and the gold portion of their portfolio somewhere else. It's unfortunate that such a workaround is sometimes necessary but it is an option that allows us to follow the strategy we want to follow without completely abandoning 401k and the other benefits that they can provide.
Great information! I would be extremely interested to see a similar comparison with a 90/10 or 80/20 stock/bond allocation. This video really made me think and subscribe for more!
Would you consider covering the Lifecycle Investing strategy outlined in the Ayres and Nalebuff book of the same name? I think the time-diversification argument is compelling, but I don't know if I would be willing to follow the strategy long-term knowing that my portfolio could go negative.
Its a good starter strategy, for instance an individual that didn't start investing until thier 30s would benefit more out of this strategy than the others.
I have done very well following Bob Brinker advice. His Is no longer on the radio but I subscribe to his MarketTimer newsletter, well worth the money. I save money by not having a financial planner too. Now if I would have just listened to what Dave Ramsey said 20 years ago, I might be retired now.
Build up your skills. You can have the best investment strategy in the world, but if you have no money to invest or even to pay your bills, it doesn't matter. The best investment you can make is in yourself. Build important, marketable skills that you can use to make money which then you can use to build wealth.
Jack, Alej makes a great point about the importance of building marketable skills that can be used to find a way to make a solid income doing something you enjoy. The other side of that coin is learning more about yourself. What do you actually need to make life enjoyable for you? What would be nice-to-haves that may not be required to live a life you enjoy but would be helpful all the same and how can you go about getting them? Is there anything that you notice other people are chasing (or telling you to chase) that simply doesn't bring you much value or enjoyment (either now or in the future as there are some things that may be a bit of a drag in the present but do bring potential value to you down the road by being a stepping stone to a larger goal)? The marketable skills will help with the income portion of the personal financial equation. The self exploration/discovery (and possibly experimentation if you find yourself in situations where you're unsure of the answer) will get you started on the budgeting/spending side of the equation. Lastly, always be trying to learn and improve even once things are going well. The world changes fast and while the fundamental keys to success don't tend to change much over time your priorities and goals likely will as life rolls on. If you've been continually learning you'll have a better chance of knowing how to pivot your strategy to set yourself up for success in whatever form that takes as your goals shift. Hope this helps!
In researching for a video for 2021 I revisited the data for the No-Brainer strategy as presented in this video and noticed a mistake. In the video I mention that based on the data someone utilizing the strategy would've achieved financial independence in 25 of the 50 scenarios using a 50% savings rate. This group of FI accumulations metrics is incorrect as are the average Time to FI that are related to them. Below are the correct metrics:
15% Savings Rate
Achieved FI: 0/50 (0%)
AVG Time to FI: N/A
30% Savings Rate
Achieved FI: 10/50 (20%)
AVG Time to FI: 41 Yrs
50% Savings Rate
Achieved FI: 34/50 (68%)
AVG Time to FI: 19 Yrs
70% Savings Rate
Achieved FI: 43/50 (86%)
AVG Time to FI: 9 Yrs
The cause of this error was I forgot to update the minimum 30-year safe withdrawal rate figure to reflect what we saw from the No-Brainer strategy before running the financial independence accumulation simulation. As a result, the savings goal required to reach FI was off and therefore so were the accumulation metrics. I have added notes for myself in the spreadsheet to ensure that this does not happen for videos in this series uploaded in 2021. Thankfully, after re-running the simulations it appears that all other figures (i.e. the return, crash, and even the withdrawal portion of the financial independence metrics) appear to be accurate as stated in the video.
For UK investors would 1 equity fund like vanguard ftse global all cap index fund that's about 55% us, and about 10% emerging markets etc. Combined with 25% in a short term UK government bond index fund or short term global bond index fund, hedged to Stirling work more or less the same
Great video, I feel like I haven't seen a video from you in ages.
Welcome back!
@@NextLevelLife Thanks!
It's interesting seeing that this particular strategy isn't all that different from other strategies I've been learning about recently. On the surface it is a cut-and-paste of Benjamin Graham's most aggressive investing advice (75 % stocks, 25 % bonds) with some added diversification to the stock portion. Looking at the popular 3 fund portfolio, it's a slightly different recipe to "total market index, international market index, total bond index," though the ratios for those are a lot heavier on the market side than bonds. Instead of a fight over broad principles it is a fight over who has the best optimization.
This is interesting. I don't know if 50 years or so is enough of a timeframe to know how this will do long term but logically it does seem fairly safe. This definitely gives me something to think about for the next time I assess my asset allocation. Thanks for sharing this 👍
Rob, yes I really wish I had reliable data on the funds in this allocation going back further to get a better idea of how it would've handled things like the Great Depression but I don't. Still I felt it was a strategy worth discussing. Glad it gave you something to think about for next time :)
A problem I've run into is if you use a 401k program, you often don't have a good option for either a short term bond fund (they tend toward intermediate bonds and nothing else) or a small cap stock fund that you'd actually want to invest in (if they have one it tends to have a high expense ratio and small market cap and questionable strategy).
That certainly can make things more difficult. Most 401k plans don't have as wide of a selection of investments as other investment accounts which is unfortunate. But you may still be able to utilize what's in there as part of your overall strategy. For instance someone investing in stocks, bonds, and gold may find that there's no gold fund in their 401k. So they could invest in stock and bonds in their 401k and the gold portion of their portfolio somewhere else. It's unfortunate that such a workaround is sometimes necessary but it is an option that allows us to follow the strategy we want to follow without completely abandoning 401k and the other benefits that they can provide.
My only issue is that you didnt clearly define a large cap apposed to small cap
Definitely interested in that book! We are working towards financial independence. Hoping to get there by 2026!
Great information! I would be extremely interested to see a similar comparison with a 90/10 or 80/20 stock/bond allocation.
This video really made me think and subscribe for more!
Betterment Boss, 2 cents, and this channel have really helped me with budgeting and investing tips.
Happy to help!
This book will be added to my reading list If it isn't there already
Dave Ramsey's portfolio looks very similar to this except mid-cap instead of bonds. How would that compare to this?
Getting out of cash and cash-based forms of investments is the real no-brainer strategy.
I listen to the entire video. And you never said what the mix should be is it all stopped all Bond some other mixture? What a video
Great series of videos and very detailed. Thanks.
Glad you like them!
Awesome content 👍🏻Just subscribed
Would you consider covering the Lifecycle Investing strategy outlined in the Ayres and Nalebuff book of the same name?
I think the time-diversification argument is compelling, but I don't know if I would be willing to follow the strategy long-term knowing that my portfolio could go negative.
Its a good starter strategy, for instance an individual that didn't start investing until thier 30s would benefit more out of this strategy than the others.
I started this year after the hit. I'm 26 1/2 so I'll have 33 tears until I'm 59 1/2.
I have done very well following Bob Brinker advice. His Is no longer on the radio but I subscribe to his MarketTimer newsletter, well worth the money. I save money by not having a financial planner too. Now if I would have just listened to what Dave Ramsey said 20 years ago, I might be retired now.
Enjoyed the charts to compare the other strategies!
Thanks, Ashley! I'm glad you found the charts helpful :)
Sounds like my Portfolio..lol
Bonds even worth it in the current super low interest rates>?
Nah.
My basic strategy for many years except for the international bucket. US markets are superior.
Under Biden administration you will see a swing towards international stock improvement, especially Asia.
@@tomsettles6873 you might be right about that. I may have to adjust.
First time I hear this one in more detail 💥
Glad to hear that, Uli! I hope you found it informative :)
As a teenager still in highschool any specific advice I should know
Build up your skills. You can have the best investment strategy in the world, but if you have no money to invest or even to pay your bills, it doesn't matter. The best investment you can make is in yourself. Build important, marketable skills that you can use to make money which then you can use to build wealth.
Jack, Alej makes a great point about the importance of building marketable skills that can be used to find a way to make a solid income doing something you enjoy. The other side of that coin is learning more about yourself. What do you actually need to make life enjoyable for you? What would be nice-to-haves that may not be required to live a life you enjoy but would be helpful all the same and how can you go about getting them? Is there anything that you notice other people are chasing (or telling you to chase) that simply doesn't bring you much value or enjoyment (either now or in the future as there are some things that may be a bit of a drag in the present but do bring potential value to you down the road by being a stepping stone to a larger goal)?
The marketable skills will help with the income portion of the personal financial equation. The self exploration/discovery (and possibly experimentation if you find yourself in situations where you're unsure of the answer) will get you started on the budgeting/spending side of the equation.
Lastly, always be trying to learn and improve even once things are going well. The world changes fast and while the fundamental keys to success don't tend to change much over time your priorities and goals likely will as life rolls on. If you've been continually learning you'll have a better chance of knowing how to pivot your strategy to set yourself up for success in whatever form that takes as your goals shift.
Hope this helps!