All models are wrong, but some are useful.

George E. P. Box

Knowing a time of arrival is key to arranging any complicated journey. An estimated timeline for reaching financial independence is no different.

It is important psychologically because knowing provides a different perspective on choices and work life into the future. Understanding potential timing is also important at a practical level as there are a range of actions it makes sense to take prior to reaching financial independence, and potentially choosing to retire early.

This exploration began over three years ago, with an initial objective of building portfolio of $1 476 000 by July 2021. Since that time progress has occurred and goals have evolved, enabling bringing forward the achievement of this first goal.

Part of the function of this record is to have a history of this evolution, to serve as a reference point through the journey. Another, more outward-facing, purpose is to discuss the specific issues encountered in the middle and later stages of the journey – which can be different from those encountered in the earlier stages.

Since the significant equity market falls across the early part of this year it has been increasingly clear that my original timeline for reaching my financial independence goal may need adjustment.

This post discusses the significant impacts of market movements, how I am approaching reviewing the expected remaining length of the journey, and shows some early results of this approach.

Continue reading “Time and Tide – Estimating Distance to the Portfolio Goal”

And once the storm is over, you won’t remember how you made it through, how you managed to survive. You won’t even be sure, whether the storm is really over. But one thing is certain. When you come out of the storm, you won’t be the same person who walked in. That’s what this storm’s all about.

Haruki Murakami, Kafka on the Shore

The Global Financial Crisis was the second significant market event I was conscious of. My investing journey began at the same time as the 2000 ‘Dot com’ bubble. I have few distinct memories of that latter event, though I do recall a work supervisor who had a sizeable investment in an actively managed global technology focused fund, ruefully reflecting on market events.

The Global Financial Crisis was different – it emerged in the early phases of my investment journey, around seven years after I started building an investment portfolio by making regular contributions, and after I had already read a number of investment books and researched some financial market history.  Indeed, By mid-2006 I had already set an early FI goal of achieving investment returns equal to average expenditure, with an ambitious deadline of December 2008. This shows how far I was from anticipating the shape of events to come.

This post results from reader questions received about my direct experience with the Global Financial Crisis. It focuses on the period of the crisis and initial recovery, from 2007 through the 2010 and aims to cover:

• what investments were made leading up to and through the crisis period
• the overall asset allocation of the portfolio through the period
• the impact of the crisis of the portfolio – including overall portfolio value and distributions; and
• how the experience of the Global Financial Crisis has shaped the rest of the financial independence journey

In short, how – or indeed was – this storm weathered?

Answering that question needs to start at the beginning, however, with a description of the context in which the crisis developed.

Continue reading “Weathering the Storm – Investing through the Global Financial Crisis”