The three pillars of my FIRE strategy
July 19, 2018
FIRE is the objective of financial independence, i.e. not dependent on work to generate the necessary dosh to cover your expenses.
Some people are born into riches others win the lottery. The rest need to use their brains and brawn to get there.
I have explicitly chosen four pillars to get to FIRE. Some traditional FIRE seekers would consider this strategy very dangerous akin to playing with fire while holding much money in one’s pockets.
To each his own, everything is subjective, and risk is a personal matter.
Peer to peer lending
Peer to peer lending is a system which generates passive income by lending from one peer to another. These loans are split up into many tiny pieces and then sold to investors. Each loan part gets part of the interest.
- In general higher returns than a bank account
- The funds could be locked in for periods of time
- It the economy tanks, expect default rates to rise and most of the funds to be gone.
- This sector has not been through a significant financial crisis.
- The information provided on the loans is weak
- The financial information of the companies managing the loans is not entirely transparent
Bitcoin, Ethereum, and all these techno sounding projects. They are very risky because they have been around for relatively a short time there have been corrections in this market of 90% and the daily movement is frequently in the double digits.
- Potential higher returns than other asset classes
- Regulators still need to establish rules
- This area is pretty much a wild west
- Easy to lose all your money due to hack, scams and lack of technical knowledge
- Requires a lot of time to learn, understand and monitor
Buy a flat and rent it out. Simple. This can also be done through REITs
- Income from Real Estate should adjust with inflation
- Easy to leveraged through a mortgage
- Owning a real asset. The third-party risk is non-existing.
- Depends on economy
- Bad Tenants
- Difficult to dollar cost average into the asset class
- Can dollar cost average easily
- Easy to diversify
- Difficult to determine when the next crash is coming.
SS is the backup plan if all the above goes to hell, I will have to depend on the Government safety net, which I am paying for every month.
My ultimate aim is not to draw down on my capital nest egg but to live strictly off the proceeds and maybe have enough left to invest a little bit more.
Is this a safe strategy? Safety is subjective according to one’s objectives and tolerance to risks, including the ability to sleep when your portfolio is 50%, 60% or 70% down.
Each pillar will need careful adjusting according to your ability to generate income, your emotional detachment or attachment to your asset. The time and energy required to manage one’s portfolio.
What do you invest in to reach your FIRE objectives? How do you do it?
Do you invest in other asset classes?
Not investment advice. Not financial advice. Consult your financial advisor. Not a recommendation to buy, sell or hold. The staff of this site may own this digital asset/s mentioned on this page. Investing is risky and you may lose all your capital. See full disclaimer.
Also published on Medium.