XIRR!!!
Why again? Not sianz meh?
May be you happen to chance upon this blog post Retirement Income for Life??? (9) and read about Uncle8888's Formula and the Magic Number of $48K pa for couple.
For example,
You are in your 30 and have $300K as investing capital. You also plan to retire at 60 based on Uncle8888's Formula. However, the current Magic Number of $48K at 3% inflation rate will transform into $117K when you reach 60.
An increase of 243%!!!
Scary or not?
Then, do you know how much you will need to make from the stock market with your initial investing capital of $300K over your investing time horizon of 30 years?
Based on Uncle8888's Formula, you will need about $2.9M
Can you really make $2.6M from the stock market in 30 years?
To do that you will need an investing performance benchmark as road map to guide you along this long investing journey to reach your final retirement goal of $2.9M at 60.
What is this benchmarking tool?
XIRR!!!
On average you will need XIRR of 8% over 30 years.
Possible to achieve or not?
Why not?
Read more? Measuring investment performance
Read? Performance
Posts
Hi, I have been a silent reader of your blog for almost a year now. Really enjoyed it. Would really appreciate some advise from u regarding retirement planning since u are blogging abt it. I am mid 30s married with 1 kid. Wife is not working now. We have abt 350k in cash now which I have been pondering how to make best use of it for a few months now. Was actually thinking of buying a 3rd property with it but now seems quite far fetched with the cooling measures. Our HDB loan is abt 250k now, 3 yr old car is fully paid now, child is 2 yrs now. Have another 80k in gold and silver and 100k in stocks which have now finally broke even after investing for 5 yrs... Spend abt 7-8k a month which my salary just abt cover it.
ReplyDeleteGold? What is so great about Gold?
DeleteRead? Why must be Gold for hedging Inflation???
Learn from Warren Buffet, use cash flow from his insurance company to buy more growth companies.
For small retail investors, we use cash flow to built up our war-chest for the next bear and let compounding magic works its best by studying the stock market cycles.
Why???
Account size really matters!
Passive income? Really? Need or Want?
Read? Passive income?
Lastly, we must seriously factor in inflation rate of at least 3% as part of cash flow inclusive of passive income for XX yrs and also ensure that your family are well covered by comprehensive medical insurance.
Future passive income may not be inflation-proof or market-proof
Our 2nd property is fully paid up and it gives us a monthly returns of abt 3k which we use as savings. My salary will remain the same for the next 10 yrs or so. If you are in my situation, how will u use the 350k cash or even the 80k in stocks and 100 k in gold in this current situation. Should I pay up my HDB using the cash ? Hoping to get a residual income of 7k a month so we can be financially free in abt 5-7 yrs time. Thanks for yr advise.
ReplyDeleteGold was because I was once subscribed to the gold backed currency theory before. As of now, can't think of what to do with the cash even if I sell that's why they are still seating in the safe. Insurance wise, we are considered well covered. Now it's more like thinking how to use the money to generate other form of passive income instead of just relying on my job. Am actually hoping for another bear to come so I can buy some blue chips stock that can give me a 5-8 % returns.
ReplyDeleteRead? Know your investing style
Deletee.g. If you like to count money on quarterly basis even though you don't really need the passive income for living expenses, then income investing on S-REIT is good for you.
You mentioned: "100k in stocks which have now finally broke even after investing for 5 yrs"
5 yrs? Did you started investing in 2007/2008?
Actually i started investing since about 2004. Started with penny stocks and lost quite a fair bit before i turn to blue chips and reits which managed to cover my loses. Total realised profit is abt 10k and my paper lost now is abt there (wat i meant by break even). Of cos i did collect abt 30-40k of dividents over the years. Have been liquidating my stocks holding since mid last year cos i though of using it to buy an investment property before the recent cooling measure cost me to reconsider.
ReplyDeleteMost of the stocks that i have sold have gone up quite a fair bit this year and it makes no sense for me to buy them back. Thats why i have been holding these much cash and wondering what to do with them. One thought was to use the cash to pay off my balance HDB loan of 240k and live debt free with abt 100k as emergency funds. Actually, if say u are in my situation, how will u allocate yr finances?
ReplyDeleteHousing loan is good debt so we should leverage our excess cash for higher return through investment. This topic we can debate until friends became enemies. LOL! No right or wrong answer. We can never measure the financial worth of a person or family who is in the state of debt free.
DeleteRead? Will You Try To Pay Off Your Housing Loan ASAP If You Have One?
Some time in our life, when we are pushed to make very hard decision that will have significant impact and we have the resources to make that decision. But, we are only worry of bad decision and bad outcome.
So how?
How about choosing the middle ground like 50-50 or 40-60 basis?
Whatever outcome arising from such decision can't be really that bad and "lose" too much. Right? :-)
Thanks for taking yr time to read abt my situation. Thought abt all that u mention and wrote in the past posts. Guess I will hold on to the cash now and wait patiently for some corrections in the market and slowly buy up blue chips that can generate 5-10% passive returns in the future. Meanwhile try to keep my family expenses to below my pay.
ReplyDeleteLearn from fishermen, there are times when there are better chances of catching big fish and there are times to take nap under the shelter.
DeleteLow tide is the hardest to catch big fish. But, when a fisherman happened to catch a big fish in low tide, it is a very lucky fisherman meeting a very unlucky big fish which didn't make its way back to the deeper water.