Retired at 30

Digi_Tilmitt

I'm 19 and currently in college. I live at home. I work part time with two jobs, one pays about 700 a month, the other 200. I spend the 200 on stuff that I want/need and invest the entire 700 in shares. I do this by wire transferring from my bank account (in 2500 euro lumps) to an american online stock broker account where it is converted to dollars and I can buy american shares with. Currently I have only done one wire transfer, as I only started this in August, but the shares I bought have already increased alot...and I even got a $18 dividend credited to my account! Wow!

My plan is through relatively frugal living and wise investments, to hit one million by the time I am 30. I will then retire and live off the returns from my one million (by buying stocks with high dividend yields probably), in Japan!

That makes my life sound really boring...but trust me it isn't! I like stuff too and have my own deeply important dreams and things I want to and will do and see! But anyway, I was just wondering is anyone else trying anything even vaguely similar to this? Does anyone else think they can escape a life of toil in the fires of industry by channeling the majority of their income into investments? Even if you're not trying anything half as "extreme" I'd love to hear about it. I'd like some feedback too as to what you think of the whole thing, I imagine most people would think it's mad and whatever, but still it's interesting to see what others think.

DublinEvents

'Tis a risky thing you are doing there. I mean, sure you are getting dividends right now but what happens if you invest thousands later and suddenly the stock prices go down? What will you do then? You can't hope for the sun to always shine on you, you know.

Gurgle

Digi_Tilmitt wrote:

My plan is through relatively frugal living and wise investments, to hit one million by the time I am 30. I will then retire and live off the returns from my one million (by buying stocks with high dividend yields probably), in Japan!

Best of luck with the whole plan.

Remember to spread your investments; a million spread wisely should see you set up for life. Put a good chunk of it in a guaranteed return account, another chunk in something like gold or copper. Today's high dividend shares could be tomorrow's Enron so don't put all your eggs in one basket or even one economy.

Might be wise to take a step back from Japan - Brazil, China and Russia are likely to be economies with major growth in the next 10 to 30 years.

Tazz T

A million would get you a house and a few pints with the change now. In ten years time, in Japan, it'll get you very little. What you're doing is very wise but I wouldn't expect to retire by 30. If it was that easy we'd all be doing it. I've been a regular investor for over 15 years and have yet to make my first 100,000. They don't have that 'shares can go up as well as down' in the small print for no reason. As anyone who was investing during the crash of 2000-2002 will testify. I personally lost 50% of all my investments and only recovered this year.

Try setting more modest goals first. My first goal was to use investments to get a deposit for my first house. That took a few years alone. Unless you plan staying at home for the next 10 years, that's something you'll have to consider.

My goal now is to get the money for a holiday home. I'm currently about halfway there. Hopefully in the next two years.

Then I'll consider investing for an early retirement.

hmmm

Digi_Tilmitt wrote:

That makes my life sound really boring...but trust me it isn't! I like stuff too and have my own deeply important dreams and things I want to and will do and see! But anyway, I was just wondering is anyone else trying anything even vaguely similar to this? Does anyone else think they can escape a life of toil in the fires of industry by channeling the majority of their income into investments? Even if you're not trying anything half as "extreme" I'd love to hear about it. I'd like some feedback too as to what you think of the whole thing, I imagine most people would think it's mad and whatever, but still it's interesting to see what others think.

I'm doing somewhat similar, but over 20/25 years and enjoying my life on the way Have a read through the fool.com website for their retire early advice. 30 sounds very ambitious, but I think retirement on your level of saving at 40 is possible. Things happen too and priorities change, so I wouldn't be putting my life on hold to save (you might meet a nice girl, buy a house and have puppies) - but you can be both a good saver and enjoy life.

At this stage you should read read read, while you've little to lose if you make a mistake. I've found over the years that it is more important to avoid stupid losses investing than it is to find "the next big thing". In fact, the next big thing is often the wrong place to invest. I'd recommend you buy Malkiel's "Random walk down Wall Street" for some good advice. You're getting excited when you see your investments increase in value which is a normal reaction - but you should really be getting annoyed Most important thing I ever learned - the way small investors invest is completely the wrong way around. If you wanted to buy a house as an investment and the price of it kept going up, would you be happy to pay the higher price? Or would you prefer it fell and you could buy it cheaper? Same with shares - you should be happy to see share prices fall because you can buy more shares cheaper. Right now you've only experienced your investments going up in value, at times (maybe lasting years) they will go down in value. If you have read what the "greats" of investing have written you will be happy to accept this without getting depressed and knocked off track.

The rough rule of thumb quoted for withdrawing from your investments is no more than 4% a year. So with 1 million, that would give you 40k a year before CGT & Income tax etc. Is that enough for you to live on for 50 years?

The most important thing appears to be building a portfolio with an appropriate risk level. At your age, you could afford to put money into high risk investments that hold out the likelihood of high returns, because it the investments tank in value you have the ability to generate income to start again. As you get older and your working lifetime shortens, you will want to progressively reduce the risk of your portfolio.

So e.g. right now your portfolio could be a high risk portfolio looking something like this:
40% Stock market fund
30% Small caps value
20% Emerging markets
10% Technology/Biotech/Nanotech/Good knows what

along with a 6 month cash reserve. In that portfolio, your investment value could go down by 30% in a year - would you be able to deal with that mentally?

As you approach your saving goal, you'll want to rebalance, reduce risk and lock in your gains, so your portfolio might eventually look like
50% Cash/Bonds
40% General market fund
10% Small caps

One of the problems is that the stock market has underperformed for 10 year periods at a time, and if the next 10 years is one of those periods you won't make your investment goals. So it's a worthy goal to hope that with average stock market performance you can meet the goals, but I'd still ensure that your career choices are solid and can continue to provide you income into the future.

Digi_Tilmitt

I don't actually plan on investing in Japan, just living there. Didn't really make that clear.

Tis a risky thing you are doing there. I mean, sure you are getting dividends right now but what happens if you invest thousands later and suddenly the stock prices go down? What will you do then? You can't hope for the sun to always shine on you, you know.

Everything I invest I can afford to lose. Most people come out of college in debt or with nothing in their account. I'd be a fool if I believed everything I touch will turn to gold, but I do believe I have the right mindset to pick on the whole very sound investments.

If it was that easy we'd all be doing it.

Abstaining from spending 70% of your income isn't easy, but it's what I'm doing. Most people could invest alot more than I am with a concerted effort, but they chose to spend it instead. And by doing so they condemn themselves to have to work decades longer. Aswell I think the problem with most people is that they make such half assed efforts and then freak out the second something drops. You have to throw everything you have at it and keep a level head through the bad times. Anyone can make it if they save hard, have a really strong interest in investing and keep their head screwed on when things go against them.

A million would get you a house and a few pints with the change now. In ten years time, in Japan, it'll get you very little. What you're doing is very wise but I wouldn't expect to retire by 30. If it was that easy we'd all be doing it. I've been a regular investor for over 15 years and have yet to make my first 100,000. They don't have that 'shares can go up as well as down' in the small print for no reason. As anyone who was investing during the crash of 2000-2002 will testify. I personally lost 50% of all my investments and only recovered this year.

I hadn't really thought about having to get a house, that's a good point. ....I'll just have to save even harder!

Digi_Tilmitt

At this stage you should read read read, while you've little to lose if you make a mistake. I've found over the years that it is more important to avoid stupid losses investing than it is to find "the next big thing". In fact, the next big thing is often the wrong place to invest. I'd recommend you buy Malkiel's "Random walk down Wall Street" for some good advice. You're getting excited when you see your investments increase in value which is a normal reaction - but you should really be getting annoyed Most important thing I ever learned - the way small investors invest is completely the wrong way around. If you wanted to buy a house as an investment and the price of it kept going up, would you be happy to pay the higher price? Or would you prefer it fell and you could buy it cheaper? Same with shares - you should be happy to see share prices fall because you can buy more shares cheaper. Right now you've only experienced your investments going up in value, at times (maybe lasting years) they will go down in value. If you have read what the "greats" of investing have written you will be happy to accept this without getting depressed and knocked off track.

Yes I have read "A random walk down wall street", I thought it was brilliant. Though I completely disagree with the efficient market hypothesis. I consider myself most definitely a fundamental analyst, and think the market is often woefully inefficient in under and over pricing various shares.

The rough rule of thumb quoted for withdrawing from your investments is no more than 4% a year. So with 1 million, that would give you 40k a year before CGT & Income tax etc. Is that enough for you to live on for 50 years?

I have a plan to avoid paying tax (GASP ILLEGAL!!!)...but yeah I guess 40,000 would quickly be eroded by inflation through the years. But I really believe that it's absolute childs play to get a 10% return each year, so even if I spend 40,000, the remaining 60,000 would get added to my capital.

So e.g. right now your portfolio could be a high risk portfolio looking something like this:
40% Stock market fund
30% Small caps value
20% Emerging markets
10% Technology/Biotech/Nanotech/Good knows what

along with a 6 month cash reserve. In that portfolio, your investment value could go down by 30% in a year - would you be able to deal with that mentally?

I tend to invest in "value" stocks that I believe the market has way underpriced. As such I do not try to weigh my portfolio in any particular way. As long as everything in it is undervalued by my measure, I don't care what they are. If I found five semiconductor companies all of which I thought were undervalued I'd have no problem with my entire portfolio being made up of just them. As for large declines in my portfolio...no one can really say how they will react to it. I would really hope and am trying to mentally train myself to be able to cope and stay the course in the case of a large market decline. Obviously at the moment since I haven't experienced any bad times I can't say for sure, but I believe I would be up for it.

I'm doing somewhat similar, but over 20/25 years and enjoying my life on the way Have a read through the fool.com website for their retire early advice. 30 sounds very ambitious, but I think retirement on your level of saving at 40 is possible. Things happen too and priorities change, so I wouldn't be putting my life on hold to save (you might meet a nice girl, buy a house and have puppies) - but you can be both a good saver and enjoy life.

I agree, and I can definitely see myself going "off track" with unpredictable things affecting my life. As you said having a family with a girl would be the most obvious but there are plenty more. 30 is being optimistic really, but I'll strive towards that goal and see how it goes.

Sarsfield

Digi_Tilmitt wrote:

I have a plan to avoid paying tax (GASP ILLEGAL!!!)...

But seriously, have you looked at all your current tax liabilities? Back tax plus penalties will very quickly erode anybodys wealth. And a spell in the pokey will diminish your future earning potential. Dodging tax isn't easy or socially acceptable anymore.

Digi_Tilmitt

Sarsfield wrote:

But seriously, have you looked at all your current tax liabilities? Back tax plus penalties will very quickly erode anybodys wealth. And a spell in the pokey will diminish your future earning potential. Dodging tax isn't easy or socially acceptable anymore.

I actually haven't dodged a penny yet, as I have unrealized gains. But the plan is basically I signed a thing with my American brokerage saying that I was paying tax on any capital gains in my home country, and so don't have to pay it to the American government. I will only ever be transferring money out from my Irish bank account into the American online broker. If I make massive massive gains that I owe tax on, the taxman will never know unless I started suddenly sending these massive transfers back into my Irish account which might then raise suspicion at the bank. So when I build up to whatever amount is big enough to sustain me without me needing to work in my american brokerage account, I will pack up and move to Japan (cause I really love Japan). I'll then transfer any money I need to live into a Japanese bank account and live off that. That's it.

Is there's any gaping holes in that plan...please tell me!

hmmm

Digi_Tilmitt wrote:

Is there's any gaping holes in that plan...please tell me!

Yes, the Revenue might introduce an information sharing scheme with the US authorities and you are officially screwed (not too unlikely, they've done it with other jurisdictions). Also, the Revenue may query your outgoings (and any incomings) from your bank account if you're subject to an audit.

CGT is "only" 20% at the moment, it's best for your mental health to stay legal and not have to spend your days worrying about getting caught.

What happens if in 10/20 years time you decide you want to stay in Ireland? You will then have to transfer untaxed income into the country and declare it (with huge penalties), or sit around poor in Ireland while your wealth is out of your reach. Not worth it I think.

PDelux

one of the VPs in the company that I work for retired in his mid 40's which i thought was young. He only had the company stock but because he was a VP he had alot and owned it through the tech boom of the 90's.

Have you noticed as well that the slide in the dollar has eroded some of your gains? It has happened to me but i am not worried because i think its a temporary blip and wont carry on in the medium term.

Do you trade options too on your American brokerage?

When you talk about buying undervalued stocks do you mean like buying energy stocks now that oil is low(er)? for example Valero (VLO)

stepbar

I tend to invest in "value" stocks that I believe the market has way underpriced.

What criteria are you basing the decision to invest on?

Digi_Tilmitt

PDelux wrote:

one of the VPs in the company that I work for retired in his mid 40's which i thought was young. He only had the company stock but because he was a VP he had alot and owned it through the tech boom of the 90's.

Have you noticed as well that the slide in the dollar has eroded some of your gains? It has happened to me but i am not worried because i think its a temporary blip and wont carry on in the medium term.

Do you trade options too on your American brokerage?

The dollars decline has eroded my gains, but considering I will be transferring in more cash soon and fairly regularly from now on, I have alot more to gain from a weak dollar than a strong one.

I don't trade options, the only ones I could see myself involved with would be selling calls, but I find that the good premiums are all on stocks that are overvalued in my opinion, or "growth" as the people who buy into them like to call them. But I will always be on the look out for a reasonably priced stock with excellent premiums to pick up.

When you talk about buying undervalued stocks do you mean like buying energy stocks now that oil is low(er)? for example Valero (VLO)

What criteria are you basing the decision to invest on?

There are many factors and there are a few different "types" of good value stock that I look for. Generally the following criteria: I look for low P/E's, stock that has been overpunished for bad news, good dividend yields, high short interest. Also a stock that has been repeatedly hammered down by the market for no good reason. I wrote a pretty embarrassingly bad article for my website about my views on investing...it might give you more of an insight into my style. Here's the article.

stepbar

Thought so.... basing ur "investments" solely on the figures.... My advice......

Stick to the day job....:rolleyes:

Sangre

So you basically want to scrimp, save and basically reduce the quality of your life while you're in your prime?

No thanks.

Digi_Tilmitt

stepbar wrote:

Thought so.... basing ur "investments" solely on the figures.... My advice......

Stick to the day job....:rolleyes:

What would you suggest I do instead?

Digi_Tilmitt

Sangre wrote:

So you basically want to scrimp, save and basically reduce the quality of your life while you're in your prime?

No thanks.

I do not need to spend massive amounts of money to enjoy my life or be happy. At my current rate of spending I can enjoy all the things I want within reason. It would be different if I was miserable...but I guess some people need material goods to fill holes inside themselves more than others...

But I do really hate working. So I think reducing my consumption from a reckless diminishing returns level to a moderate yet satisfying level is a great deal for escaping slavery to work while I still have a small bit of kick left in me.

stepbar

Well first off ur looking at P/E yeah? P/E is not always an indication of a "value" investment. Have you looked at the industry P/E? What is the average? If the P/E is below the average well then it may be a good investment.

Do you have an understanding of the concept of a company strategy? Who are the competitors? Where are they positioned relative to the company? What is the management team like? What experience do they have? What percentage of shares do management own? What assets do they have? How are they valued? Is there any hidden value that could be unlocked?? etc etc etc etc etc etc I could go on. DO NOT BASE YOUR INVESTMENTS SOLELY ON THE FIGURES because you are taking a VERY NARROW view.

Digi_Tilmitt

stepbar wrote:

Well first off ur looking at P/E yeah? P/E is not always an indication of a "value" investment. Have you looked at the industry P/E? What is the average? If the P/E is below the average well then it may be a good investment.

Do you have an understanding of the concept of a company strategy? Who are the competitors? Where are they positioned relative to the company? What is the management team like? What experience do they have? What percentage of shares do management own? etc etc etc etc etc etc I could go on. DO NOT BASE YOUR INVESTMENTS SOLELY ON THE FIGURES because you are taking a VERY NARROW view.

I know that P/E is a relative indicator, I do look for low P/E's relative to what the company is involved in.

Most of the rest of the stuff you mentioned is far too subjective. Anyone can convince themselves that such and such a company has an amazing management and so even at this insane price it's still a good buy. I cut out most, but not all of that stuff from my analysis, as it's really too easy so see things that aren't there when you consider such stuff.

I would strongely disagree that there is any benefit to your way of doing things. In fact I would say it only clouds your mind with useless ridiculously subjective information that will lead you to justify unsound fundamentals and buy shares in companies that you shouldn't.

I don't care if the CEO is a lauded as a "genious" or the management has a billion years of experience between them. If it's not making money I'm not interested.

stepbar

OMG :rolleyes: You really are talking sh1te; you havent got a clue, not a clue. And that article well my god.... The absolutely nothing new about what your talking about there........ Ha ha "buy low, sell high" up ya boy ya......

Seriously how can you say a share is a good investment or not if your not able to look at the whole picture? How can you invest in a share if you dont understand the underlying market that the company operates in? What is the point in investing in a semi conductor company if you dont understand the micro / macro conditions that it operates in and the conditions that affect profitability? Amateur investors look at the figures, the professionals look at the future potential and then justify the investment with the figures. If your are going to be serious about "investing" as least get a book out on strategy and have a good long read of it.

Digi_Tilmitt

stepbar wrote:

OMG :rolleyes: You really are talking sh1te; you havent got a clue, not a clue. And that article well my god.... The absolutely nothing new about what your talking about there........ Ha ha "buy low, sell high" up ya boy ya......

Seriously how can you say a share is a good investment or not if your not able to look at the whole picture? How can you invest in a share if you dont understand the underlying market that the company operates in? What is the point in investing in a semi conductor company if you dont understand the micro / macro conditions that it operates in and the conditions that affect profitability? Amateur investors look at the figures, the professionals look at the future potential and then justify the investment with the figures. If your are going to be serious about "investing" as least get a book out on strategy and have a good long read of it.

While subjective knowledge certainly helps, to give it significant weighting is really a bad idea. As I have said above, it's far too open to interpritation. It's really easy to convince yourself to buy into something that isn't making money because of vague factors that your brain considers a plus, but at the end of the day those factors are still attached to a company that's not making good profits.

I do look and listen about general market trends and factors, but it is most definitely not the main thing I use to make judgements on what to buy. Yes I allow it to affect me, but its influence is very small compared to financial fundamentals.

To me you sound like a technical analyst, trying to see something where there's nothing. The numbers are there in front of you. Use them.

hmmm

meh I'm with Digi on this. You should consider a company in its entirety of course, but my initial screens are all financial ratio and not industry based. Philip Lynch (one of the few to beat the index) had his strategy of buying companies in boring industries, preferably distasteful industries (e.g. undertaking), as he said himself mafia involvement was a plus and with an appropriate set of financial figures. He put a lot of faith in PEG as a metric. Buffet & his mentor Graham are classic "value" investors, Dreman is a noted contrarian who believes that investors overpay for growth.

If you decide that there are inefficiancies in the market EMH (personally I believe they really only exist in special situations and micro caps), then it takes a good 10 years for you to figure out whether your strategy is right or wrong.

daveg

I'm not going to talk about shares but I have 2 thoughts for you OP. Before I do I just want to say best of luck with your plan, it's a very fresh idea.

Firstly your 19. I'm 32. I have a wife and a child. I remember when I was 19. A lot of things will change (actually nearly everything) over the next 10 years for you. Priorities will change for number one. As someone else pointed out you may, and probably will, meet someone and will settle down. Then you have to think about buying a house etc. What I will say is you saving now will help if priorities change and you take a different direction. I'm not trying to say that you will be married with kids in 10 years time. What I am trying to say is that both you and your priorities will be total different in 10 years time.

Secondly why are you aiming to live in one of the highest cost of living countries in the world? Why not Thailand? You may find the lump sum you need to retire will be much less for somewhere like Thailand.

Just to add working for a living, when it's something you enjoy, is not so bad. Personally I'd find it very hard not having routine and a purpose everyday if I were not working. I know this as I was once out of work for 3 months. I went mad. Concentrate as much on your studies n college as you do on trying to make that million.

Best of luck with it OP.

Kingkong

Found this thread very entertaining. Really does show that investing is more an art that a science I think. With so many theories and views is investing pot luck at the end of the day. Yes you can control risk but not without sacifcing returns. How come the majority of mutual funds managed by highly paid so called professionals fail to beat the market index. Are all investors at the mercy of the market at the end of the day.

PDelux

Have you conisdered spread betting? If you know what you are doing it is definitely a way to make money fast. (you can lose money fast if you dont know what you're doing:) )I know alot of people here, from past posts, are against it but it might be worth a look.
Some good reasons for it are:
-you need less cash which means you can spread the money over a larger number of stocks.
-no tax on the gains
-more risk but more profits
-say one of your stocks in your portfolio is taking a beating from bad news or whatever, you can hedge against this by selling the stock on your spread betting account

The spread betting websites usually have a simulator, before you think about setting it up you can try the simulator to see how it works.

damnyanks

To make any substantial gains you are better off looking into future / option contracts as opposed to straight forward cash equities. It's far more volatile so you could lose a bomb but if you know what you're doing it can go very well.

Obviously you are at the mercy of the market.

PDelux

Digi, there is a special "Where to Invest 2007" issue of BusinessWeek magazine this week you should get. Has some really good articles.
This is a great magazine.

http://www.businessweek.com/magazine/toc/06_52/B4015magazine.htm

smemon

pretty romantic plans there...

i'm 19, basically doing the same thing only investing in internet ventures.

the only difference is that i own and control the 'businesses' which i invest in.

i'm not content to be a millionaire or retire at 30, you can't live off a million nowadays. 10 years down the line, you DEFINITELY won't be able to live of a million euro.

in 10 years time, you'll be lucky to get any kind of a house for €1m

stepbar

smemon wrote:

pretty romantic plans there...

i'm 19, basically doing the same thing only investing in internet ventures.

the only difference is that i own and control the 'businesses' which i invest in.

i'm not content to be a millionaire or retire at 30, you can't live off a million nowadays. 10 years down the line, you DEFINITELY won't be able to live of a million euro.

in 10 years time, you'll be lucky to get any kind of a house for €1m

Stop calling yourself an entrepreneur will ya and take your head out of your arse :rolleyes:

http://www.answers.com/entrepreneur&r=67 and thats only one definition of which there many.

Where is the risk in divvying up a few websites and pulling ad revenue from them? ZERO (In fact dont be going telling roy keane what your at... he'd sue the sh1te out of ya)

Your young (and nieve...) ill give you that.. but DEFINATLY NOT an entrepreneur

smemon

stepbar wrote:

Your young (and nieve...) ill give you that.. but DEFINATLY NOT an entrepreneur

granted, i'm playing it safe with some sites, the one's you know about. But i've invested quite a bit in projects which are just getting off the ground. I've spotted niches, examined the competition and backed my ideas with cold hard cash.

Obviously i won't tell you what they are until i've firmly established them. I've stupidly bought into one or two things which haven't paid off and learned from it

I've also offered to takeover websites currently running at losses a measure of my confidence. (or a measure of my stupidity as you would say )

Put it this way, if i continue to develop sites at the rate i've done over the last 6 months or so, i'll be able to live comfortably off the net within the next 3 years and have sites worth quite a bit i can flog at anytime to get me out of trouble should trouble arise.

Reyman

Try this website - http://www.retireearlyhomepage.com.

Some interesting points !