Posts tagged with "returns"
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Reached A Milestone
We have finally reached an important milestone! But not in a good way :(. While we are sort of minimalists, we still spend quite a bit. As a result, we recently reached a milestone of Rs. 50 lakhs spent on various expenses since we became financially independent in January 2018. Generally people should be proud of their achievements, but this is not one of them :). Still, it is not all too bad. According to my projections of expenses I should have reached the Rs. 50L lakhs milestone by end of 2022, yet we did not reach it until July 2024. So not too bad.
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Year In Review - 2023 Returns
The last update in the year in review series is on my returns in 2023. In the short run, the returns might seem high or low, but in the long run it should match my expectation of 10%. That was the assumption I used when I decided to retire early. As long as I can keep my expenses inflation to around 6% and my returns to around 10%, I should be able to manage to live a decent retired life. Since it has only been about six years since my financial independence, there isn’t a lot of data to go with. But as you saw from my update on expenses, we have managed to keep our inflation to below 6%. Now the question is, were we able to keep our returns to above 10%? Lets find out.
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Year In Review - 2022 Returns
Continuing on in the year in review series, I now take a look at my returns in 2022. Although this is not really important since investments are for long term and there is no point looking at returns every year, I like to review it nonetheless. Last year, the stock market contrary to its general nature, did nothing interesting really. It was mostly flat with the market touching the peak around January and went down to the lows in June and back up by December. In the end, most of the indices that I track have ended slightly higher than where they started the year. My corpus performed inline with the indices, nothing too high or low. Enough talking lets start by comparing my portfolio returns with some of those indices.
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Time To Revisit My Expectations?
Most of my finance related numbers for retirement were based on an inflation of 6% and investment returns of 10%. Going by the recent data, neither inflation nor returns are inline with my expectations. We are in a high inflation and low returns period of a market cycle. The worst part is that the returns from both equity and debt are low at the same time. While it is not as bad in India, elsewhere in the world, that is causing a lot of pain. Since the rest of the world will affect India at some point, I thought it was time to revisit my numbers and see if they still make sense in the future as I continue my long retirement journey.
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Is It The End Of 4% Rule Then?
I have written so many articles on 4% rule, that it feels like I can make a living by just writing about it. Yet we keep coming back to it because times have changed, or may be the 4% rule does not work in Indian context or because it may not work during recession and what not. The latest in this saga is this article I read a few days ago. Without going into too many details, the article suggests that a new research found that the 4% spending rule may be too high and we should probably go for a 1.9% rule instead. That sucks. I made my whole early retirement planning based on the 4% rule and it seems like I may be doomed.
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Changes After Retirement
It is interesting how things change after you have achieved some goals. Take for example my goal of early retirement. When I was still in the journey of accumulating wealth to eventually retire, I was hell bent on learning everything about investments and stocks. At the time I started with the basics like having adequate insurance and emergency funds etc. Then I taught myself about asset classes, asset allocation and rebalancing. Next I moved on to learning about macro economics, market cycles and behavioral economics taking several classes on Coursera, EdX and Udacity. Eventually took a class in accounting and finance as well. The hope was that I will eventually be able to analyze businesses and invest in stocks directly.
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The Market Scare
There is a lot of talk about how markets are crumbling all over the world. I have no idea what they are talking about. We barely corrected 10% from the peak if you take Sensex into account. That is a normal drop one would expect from the markets in any given year. I don’t understand what the excitement is all about. A 10% drop is peanuts in my opinion. But more importantly why would one look at the drop from the recent peak? Isn’t investing in equity all about the long term view? What happened then? These very same people don’t seem to be too concerned when the markets were moving up by 20-30% in a short duration. All this confuses me quite a bit.
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Year In Review - 2021 Returns
Continuing on in the year in review series, I now take a look at my returns in 2021. Although this is not really important since investments are for long term and there is no point looking at returns every year, I like to review it nonetheless. Last year the stock market had a real crazy bull run. Those kind of dream runs rarely happen, so congratulations on living through one of them :). It does not matter which index you look at, all of them were in the green. So lets start by comparing my portfolio returns with some of those indices.
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Tactical Asset Allocation vs Fixed Allocation
If you have been reading my blog for some time you probably already know that my asset allocation changes based on market conditions. I have my own set of rules using which I decide whether to be equity heavy or debt heavy. Of course there is no secret sauce involved you can do the same with data available on the internet. My question however is whether it is worth doing tactical allocation or is it just better to follow a fixed asset allocation plan. That is what I set out to find and here are my findings.
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Real World Application of 4% Rule
I have not even completed 4 years into retirement, yet I wanted to check how the 4% rule is working for me. Please keep in mind that this is such a short time in retirement that we can’t make any conclusions about whether 4% rule really works in this day and age at all in India. We will only know its usefulness in a much longer duration like a decade or so. This exercise is to understand how a 4% rule will work with and without the 20% buffer I usually talk about. Lets get started.
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