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No. of Recommendations: 12
Many Fools like to pick a certain date for annual portfolio analysis and rebalancing. I usually have available time in May, so I use my Fool balloon day as the annual benchmark. :) Last year's update was here:

http://boards.fool.com/Message.asp?mid=25501044

Well, this had to happen eventually, and now it did: I lost money over a year of investing. Microsoft Money reports my investment return for the past year (5/16/2007 to present) as $ -2,834, or -1.69%. The snowball can roll backwards too.

However, that's still a fine performance, as compared to the S&P 500 return of -6.11% over the same time period. Most of the outperformance is thanks to the 30% international allocation, which returned 3.33% for me (that's 9.44% over the US benchmark!) I'd like to say I saw the weak US dollar coming, though I'd also admit that maybe I just got lucky on that. Anyway, the point is that one can indeed achieve double-digit returns above the S&P index, even without chasing individual stocks.

And also however, that's a small blip as compared to my overall savings. My total net worth reached $200K this week, up from $148K last year despite the negative investment return. (The account breakdown like I posted last year isn't so meaningful anymore - I had a 401k rollover that skews all the numbers.) That's all cash and liquid investments - I still rent with no house or car in the net worth picture. Maybe my salary is high enough to go travel some more and move up a bit from the college student lifestyle. :)

FIRE's definitely within reach - at this rate I'll hit $1M by age 40.

- Erik
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Many Fools like to pick a certain date for annual portfolio analysis and rebalancing. I usually have available time in May, so I use my Fool balloon day as the annual benchmark. :) Last year's update was here:

Hmm, I export my net worth and cash flow reports from Quicken into Excel and do a FIRE analysis weekly, not yearly. It only takes about 10 minutes so it's not too big of a deal.

FWIW, our FIRE target date is down to about 3.5 years using our average total returns over the past dozen years and our 5 year average investment cash flow. We'll likely work up to 5 years beyond the FIRE date for extra security and perhaps locating a second retirement home (we're 43 & 47).

I don't rebalance that often, but I've started adding a portfolio analysis to my weekly reports and use it to direct future investments using a rough Coffeehouse portfolio.

-murray
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Thanks for posting, VikingErik, and congratulations on this year's progress.

Just curious - have you chosen to rent instead of buy because you've decided it will get you to FIRE faster? I rent and struggle with whether buying a home would slow my FIRE progress.

FIgirl
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No. of Recommendations: 6
Just curious - have you chosen to rent instead of buy because you've decided it will get you to FIRE faster? I rent and struggle with whether buying a home would slow my FIRE progress.

Hi FIgirl,

Please allow me to comment on that question. As far as the pure monetary decision of rent vs. own goes, there are some calculators on the web that allow you compute, what's better, e.g. this one: http://realestate.yahoo.com/calculators/rent_vs_own.html

Among other things it depends on the price-rent ratio as in how many year's rent does it cost to buy the place: http://stocksinvesting.wordpress.com/2008/03/21/house-prices...


IIRC in the SF-Bay area, where I live, the ratio has been close to 30, so there it's a no-brainer to rent. Of course you need to invest the "saved" money to profit from this, which I do. If the price-rent ratio is very low, it might be better to buy.

One problem of course is that when people buy a house they might buy something bigger than what they rent. E.g. I rent a one-bedroom-apartment, but would also buy something bigger.

Bernhard
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Just curious - have you chosen to rent instead of buy because you've decided it will get you to FIRE faster?

I believe it will, but it's not the chief driver of the decision. Renting is mostly a lifestyle choice, that I'm not interested in dealing with maintenance, and prefer not to be tied down to one location. (I work in IT and my company has been greedily jumping on exporting everything to India...)

I do believe renting is cheaper than owning for me, largely because it's difficult to buy as little housing as I need. I'm single and live by myself, so a cheap one-bedroom apartment is fine. 1-BR condo units do exist, but seem to be a sucker's deal, with monthly maintenance costs nearly as high as my rent anyway. I've run some scenarios, and I'd need to see completely unrealistic appreciation numbers (on the order of 14% annually) to outweigh the drag of property taxes and mortgage interest.

In short, I believe the housing market (at least in my current area, for single persons) is inefficiently priced, with renters getting the better deal, and I'm taking advantage of that.

- Erik
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I'm in the same demographic - single, no kids - and running buy vs rent calculators, it's practically impossible for me to come out financially better for having bought. And I have no love of home maintenance either.

But I am starting to tire of a one bedroom apt - I'd like a study for one. And for the 4-5 times a year I have friends and family staying over, I'd like them to have a guest bedroom and bathroom. I'm getting a little old for air mattresses, you know? Renting a one-bed is cheaper than buying; renting a two-bed becomes a wash vs buying.

So far it's the FIRE desire that's keeping me a renter, but I might well take the FIRE hit this year in order to get a little more space.

FIgirl
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<<But I am starting to tire of a one bedroom apt - I'd like a study for one. And for the 4-5 times a year I have friends and family staying over, I'd like them to have a guest bedroom and bathroom. I'm getting a little old for air mattresses, you know? Renting a one-bed is cheaper than buying; renting a two-bed becomes a wash vs buying.

So far it's the FIRE desire that's keeping me a renter, but I might well take the FIRE hit this year in order to get a little more space.

FIgirl
>>


One of the best things about being a renter is that you can find relatively cheap housing if you want to work at it. Housing designed for owner occupants tends to be bigger and with more amenities, and more expensive if you compare the costs directly with renting, and often you can't find comparably simple and cheap accomodations.

So buying becomes attractive when people want more luxury of one kind or another and are willing to pay for it. Nothing wrong with that of course, but we tend to like to deceive ourselves about our motives by talking about buying a home "as an investment" and "not wanting to throw money away on rent" and such.

Seattle Pioneer
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FIgirl,

You might consider renting a house instead of an apartment. I know that where I live around Atlanta, there are lots of houses for rent as people who have moved but not yet sold their houses are desperate for someone to move in and have revised their listings to be for sale or rent.

Rents on houses around here are pretty comparable to apartment rents, but the tradeoff is that it's a lot harder to find the rental houses vs the apartment complexes.

You could get a little more space -- pretty much any house is going to have at least 2 bedrooms, a kitchen, and probably a living room -- and probably not get blown out of the water on the amount of rent you're paying.

BKLounge22
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You could get a little more space -- pretty much any house is going to have at least 2 bedrooms, a kitchen, and probably a living room -- and probably not get blown out of the water on the amount of rent you're paying.

One of the trade offs, however, is that you typically have to maintain the yard if you rent a house. This extra work is something a lot of people want to avoid.

Acme
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One of the trade offs, however, is that you typically have to maintain the yard if you rent a house. This extra work is something a lot of people want to avoid.

Acme


I'm at that point. I've been mowing my lawns for 25 years. I'm ready to pay someone else to do it. Also, I've put in large chunks of $ into FIRE assets for 10 years now. My contributions are dwarfed by my investment returns. I can relent a bit on the contributions and instead pay a lawn service now. It's a quality of life issue now at my age. I have 1 1/2 acres that takes me 6 hours to do once a week. I'd like that 6 hours for something else like golf.

On a related note to FIGirl's question about sacrificing FIRE contributions to get a larger apartment/home, I would also consel her to consider the quality of life issue.

Find areas in your budget that you really don't miss. But if shelling out a few extra $100 for a larger apartment significantly adds value to your life now, do it. If it does not add that much value, then don't.

Only you can answer that question for yourself.

I've made many decisions like that for myself over the years. New car or used? Small home or larger? Bring lunch or buy?

- I decided on used cars because I realized "I'm not my car" and all it is is a vehicle to get me from "A" to "B".

- I decided to bring my lunch because it saves $10 per day, I eat less, eat healthier and utilize my lunch hour to excercise.

- I decided to buy a mid-sized home of 2400 sqr ft with 1 1/2 acre because it is an appreciating asset. But more importantly, that is where my family spends the majority of its time. Going back to the quality of life issue.

Other people may differ. In the end, if your pumping in 15% or more per year into FIRE assets (I do 30%), you are doing very well and most likely FIRE in your early 50's.

decath
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One of the best things about being a renter is that you can find relatively cheap housing if you want to work at it. Housing designed for owner occupants tends to be bigger and with more amenities, and more expensive if you compare the costs directly with renting, and often you can't find comparably simple and cheap accomodations.

So buying becomes attractive when people want more luxury of one kind or another and are willing to pay for it. Nothing wrong with that of course, but we tend to like to deceive ourselves about our motives by talking about buying a home "as an investment" and "not wanting to throw money away on rent" and such.

Seattle Pioneer


SP, you've got my number. I could rent for less if I was willing to downgrade. But I really like the small luxuries my apt affords me. And if I buy, it will be a reasonably nice home - not a luxury home by any means, but also not the cheapest home I could buy.

I will say, though, that I never, ever spout that silly junk about a home being an investment, etc. In fact, every time someone tells me that I should buy "for the tax deduction" or so I can "stop throwing money away on rent," hackles rise on the back of my neck and I find myself snappily correcting their retarded statements. This is generally not received well, I should mention. But, hey, they shouldn't offer their dumb financial advice if they don't want to find out how much I value it!

FIgirl
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<<I will say, though, that I never, ever spout that silly junk about a home being an investment, etc. In fact, every time someone tells me that I should buy "for the tax deduction" or so I can "stop throwing money away on rent," hackles rise on the back of my neck and I find myself snappily correcting their retarded statements. This is generally not received well, I should mention. But, hey, they shouldn't offer their dumb financial advice if they don't want to find out how much I value it!

FIgirl
>>


Heh, heh! Yes, the advice of frugal and cautius people is usually met with derisive dismissal by our financially adventurous friends, relatives and co-workers. My experience is that over a period of decades, the frugal and cautious person tends to roll up substantial accumulation of assets, while the adventurous person rolls up substantial accumulation of debts.

At the end of those decades, the adveturous person tends to be angry and envious of the "luck" of their more cautious and prudent friends.


Seattle Pioneer
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And for the 4-5 times a year I have friends and family staying over, I'd like them to have a guest bedroom and bathroom. I'm getting a little old for air mattresses, you know?

Another name for a guest bedroom and bathroom is MOTEL.

Just sayin'
Vickifool
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>> Another name for a guest bedroom and bathroom is MOTEL. <<

For only 4-5 times a year, it's certainly cheaper than buying a bigger house or adding a room.

#29
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And for the 4-5 times a year I have friends and family staying over, I'd like them to have a guest bedroom and bathroom. I'm getting a little old for air mattresses, you know?

Another name for a guest bedroom and bathroom is MOTEL.

Just sayin'
Vickifool
---------

Right you are, Vickifool. That's a huge part of why I haven't actually bought a house yet. But....I do think there's something to be said for being able to host loved ones in a comfortable environment (who would stay with me more often that 4-5 times a year if I actually had the space for them...and some of whom (esp my mom and cousins) who would consider being sent to a motel a huge insult and sign of lack of love...it's a cultural thing - as long as here's floor space and a blanket there's room for family!). I feel like it's a part of being a grownup. I was in school/training for so many years, living in dorms till I was 27 and then a studio/efficiency until I was 32. Moving up to a 1-bed was huge. But it does feel like a prolonged adolescence that I am still, at 34, not in a position to host a holiday dinner for family and friends (not enough plates! dinner table only seats 4!), or put people up comfortably when they come to town. I have always been on the receiving end of that kind of stuff, as an endless student - I'd like to try living on the giving end for a change!

Nonetheless, I'd be paying a huge premium over my current living costs in order to enjoy being on the giving end. Hence my being on the fence about buying a house.
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But it does feel like a prolonged adolescence that I am still, at 34, not in a position to host a holiday dinner for family and friends (not enough plates! dinner table only seats 4!)

Our dinner table would be hard pressed to handle three people.

Tomorrow we'll have seven.

There are ways...
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