Financial Independence - Retire Early Planning

Thought I would start a topic around Financial Independence / Retire Early, as surprised I couldn’t find one on here.

The current service fees on 212 actually lend themselves to this very well. In particular the fact there are no platform fees, and there are two FTSE All World Index ETFs on the platform, with a low 0.22% OCF.

I’m a little surprised there is not much fanfare around this, as a lot of FIRE sites are big on reducing costs!

Edit
Small mention on the below blog:

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I have managed to replicate this (almost) with an ongoing charge around 0.1% (ish) through a mix of ETFs.

Plan A for me is a monthly investment into my global pie (more or less mimicks VWRL) and stay the course through ups and downs. Im just not attracted to the more aggressive active funds/trusts. They often have a bubble and then underperform.

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For euro based investors we need the euro version of VWRL.
The accumulating one VWCE is available.

Also the world bond fund (VAGF(acc) and VAGE(dist)) are needed for a complete portfolio.
VAGF was made available for a short time, but disappeared again. For euro investors the bond funds need to be hedged in euros.

It is difficult to make calculations using another currency, you constantly have to monitor the exchange rate if for example you want to buy or sell at a certain price.

Also your price intuition suffers when leaving your home currency.

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The strategy I’m planning to use for FIRE is not spending your first pound. I will start this when I’m in full time work and after I buy my first house.

Basically, I will take my pay check, allocate all the money to the essentials, invest the rest into solid dividend ETFs and some individual stocks, and then I have the right to spend my second dollar- the passive income from the dividends. It’s going to be shitty at first, but soon it will start paying for nicer things, and soon it will be enough to start paying the some bills, and it will gradually make it to paying all of my expenses and then I’m officially financially free.

It think it works well for quite a few reasons which I will cover in a video in the future

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Thats quite an extreme route! You will be sacrificing dividends/growth, but at the rate you buy dividend ETFs probably more than covers it.

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That pretty much mirrors my plan, however I don’t really intend to draw from it for a long period of time. I figure in 10 years all being well there should be a nice bit of capital in there with some healthy compounded growth.

Here’s a couple of good reads for indexing ETFs etc that you may find interesting.

I’ve also selected around 14 companies I’m happy to hold for 5 years or so, nothing to flash and some are pretty boring but it’ll be interesting to see how they compare.

Then you’re right on the dividend front once I have something meaningful in there to work from.

Just debating what to do with my actively managed funds, I keep going back and forth on!

If you consider compounding, dividend reinvestment puts little money in at the beginning and lots of money at the end. I think investing the most money possible, and using those small amounts of dividends at the start should result in better long term returns. Then as the dividend payments get bigger, you’re probably not putting as much in as a dividend reinvestor but because you put so much money in early it should compound more, and it’s good to start enjoying life at some point, even if it isn’t as profitable as reinvesting your dividends. It’s all a choice too, there’s nothing forcing you to spend all your dividends, if you’re happy to reinvest some that’s even better!

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Yeah fair enough, so at the start you will reinvest dividends as well. Good idea.

Its generally why I look for ‘Total Return’ to grow wealth. Most people ignore the growth potential of dividend stocks because they forget about the value of the dividends, and focus purely on what they see as a lack of capital growth.

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A man of culture I see.

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I must also mention the importance of setting up an emergency fund for the method I said too, not great planning for your usual expenses and investing the rest, and having no money left over incase of an unexpected expense

My method is I get paid and instantly assign money to investments and savings. A few days later my bills are taken out by direct debit and every month I’m surprised when this happens. I try to live on 100 euro a week then. I’ve no car, no kids, no mortgage and cheap rent. I’m trying to invest as much as I comfortably can now with the goal to retire by 50 - which I’m confident I can do.

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Does that 100 include for your food etc as well?

100 a week for food, leisure, clothing (which I rarely buy) etc. Totally doable! Especially with everywhere closed these days.

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Cool. So is that our thoughts on 212 sofar:

All World Equity ETFs:
VWRP Vanguard FTSE All World Equity ETF GBP Acc
SWLD SPDR MSCI World UCITS ETF GBP Acc
VWRL Vanguard FTSE All World Equity ETF GBP Inc
HMWO HSBC MSCI World UCITS ETF GBP Inc
*VWRE Vanguard FTSE All World Equity ETF EUR Inc
SWDA iShares Core MSCI World UCITS ETF USD (Acc)
VWRA Vanguard FTSE All World Equity ETF USD Acc
VWRD Vanguard FTSE All World Equity ETF USD Inc

And some Bond ETFs noted:

VAGF Global Aggregate Bond EUR Acc
*VAGE Global Aggregate Bond EUR Inc

Not checked if they’re all available on 212 yet, but OCFs range from 0.12% to 0.22%

I like the concept of being able to live without working, but it’s not really a valid or appealing goal for myself. those with the ability to pursue it, are often employed in high wage jobs, with minimal expenses and can quickly get to a comfortable level of funds to make it possible. Otherwise you spend too long living with a focus to get out of work, rather than enjoy it.

I have minimal expenses, but a wage to match and honestly I think “retiring” sounds like a very boring & uncertain way to live. I would rather get the Financial Independence and constantly look to upskill in anything that catches my fancy.

It’s pretty safe to say in my opinion that many of those who did meet their FIRE goals before 2019, found themselves in a very uncomfortable position once 2020 rolled around. with dividend cuts across the market, although the savviest may have capitalized on the heavy price discount in march to inflate their total holdings.

I don’t think everyone is ready for FIRE until their portfolio has survived a prolonged bear market or market crash scenario. So perhaps allocate some funds to an asset that while it can’t pay you your monthly income, it can safeguard your portfolio as a whole when the worst years show up?

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Love this point

Agreed, the goal is never to go sit on a beach all day. It’s the freedom to pursue what you’re actually passionate about. I’m sure few people have a job which they’re really passionate about, and very few have complete control on what they choose to do on that job. For example a programmer may love programming, but they’re job makes them make things they have no interest in.

Myself, I’d love to have the time to do stuff like YouTube, and volunteer and spend time with the people I love. There’s so much “retiring” can give you. But of course you don’t want to be dependant on one stream of income, unless you’re earning a lot more than you’re living on and you have plenty left over you can reinvest elsewhere- and also have a huge emergency fund!

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Retiring doesn’t mean that you have to stop working, but the principles of FIRE are good, and could give you a solid foundation to focus on something that motivates you rather than a necessity to pay the bills.

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most of those aspects are to be fair, part of the Financial independence part, not so much the “retire early” part which makes for the catchy acronym. Examples I see have done exactly that, quit their jobs, not picked up anything new and just spend their time relaxing and doing hobbies etc.

for me, I doubt I would ever “retire” in the first place. so I would still work even if it’s not needed for bills and living expenses, because it’s a structured part of my lifestyle and keeps me grounded. will be less hours, but not necessarily one I “wanted” any more than my current one. The financing in my case wouldn’t be to escape work in any way, but instead to just keep learning things that interest me no matter the cost until I run out of things to learn or time.

when problems crop up in the market, they tend to ripple out, so even having multiple sources of income won’t secure your livelihood enough to be worry-free.

My main point is really at the very end of the post, regarding assets that don’t contribute to the FIRE goal, but can act as insurance against everything going wrong in the market. whether that’s gold, silver, tulip bulbs… :wink: Like how banks hold reserve funds, you should have something to prevent harm to your income stream due to bad years even if they may already be priced-in.

also important is aspects you can address while still in your day jobs earning a primary income, that are outside of investments, like building/renovating a zero-sum home. ways to make it so that a single lump some of money put in your home, can negate the need to pay any consistent streams of bills once you make moves for a FIRE lifestyle.

edit: at least by keeping jobs I don’t like, there is less worries I will bore/tire of my skills and hobbies in my freetime.

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