full time private investors who left their day job

[ERICOPOLY]

Eric,

 

Perhaps this is a stupid questions, but where are you getting 40% taxes from? Aren't most of your holdings long term?

 

Estate taxes.

 

Get this... the government thinks that 40% of each additional dollar I make is theirs.  Even if these are after-tax dollars!  It's a Kleptocracy.

[stahleyp]

Ah, yeahhh, I'm still too much of a small fry to think about estate taxes yet. haha. Hey man, it could always be worse! ;)

 

 

[bmichaud]

Eric,

 

I get that you don't need it, but aren't you going to miss the challenge? Couldn't you refine your style to be less prone to the inevitable blow up? You are brilliant with options and could limit the downside greatly by your various strategies.

 

Not sure why I'm arguing for stay in the game. I guess I've just become such a big fan that it's like watching Michael Jordan retire to minor league baseball after "only" three championships. I mean, not to feed what I imagine is an ego that's tough to control after such phenomenal success, but I look at your track record and brilliance and see a recipe for becoming a self made billionaire.

[SharperDingaan]

It just requires a different way of thinking ...

 

The UK used to tax its top earnings at 98% on every $ of incremental earnings. So .. everybody changed the coy car to a Porsche, & the coy flat to a nice little place in Knightsbridge. When the tax rules eventually changed; everybody bought the flats & the cars for their own account at fire sale prices as the fleet & flats were sold off. London's girls got quite a boost.

 

SD

 

 

 

 

[leftcoast]

I've been thinking about this topic a lot over the past few weeks, which is probably another sign that the market's due for a big correction :-) Calculating the magic number you need to achieve "escape velocity," as Eric once called it, mostly comes down to your expenses and what kind of margin of safety you feel comfortable with. (For those that want to dive deep into this analysis, I recommend a book called "Unveiling the Retirement Myth" by Jim Otar. He back-tests various strategies against 100 years of stock market history.)

 

But I find that as the possibility of reaching escape velocity starts to feel more real, it's in the non-financial aspects of life that I feel unprepared for it. I'm in my late thirties, decades away from "normal" retirement age. I have a demanding and often stressful managerial job that I don't hate most of the time and that a lot of kids would consider a dream job... but for a variety of reasons, the thought of climbing higher doesn't fire me up the way it used to. My career has been demanding enough that it hasn't left much time to pursue other interests... my time outside of work mostly goes to my busy young family, and to the investing hobby.

 

So the idea of just stepping off the treadmill is both exhilarating but also kind of terrifying... what exactly would I do if I didn't go to the office everyday? Who would I be without a career to help define my identity? I know, this sounds kind of pathetic! First-world problems for sure, and not ones you can really talk to that many people about. It's much easier to just focus on the numbers than it is to confront these kinds of questions.

 

My questions for those that have "retired" early:

• Did investing really become a full-time activity once you stopped working? And did you see your returns improve as a result? (I'm in the camp that suspects my returns would suffer if I devoted all of my time and attention to my portfolio.)
  
• Did you ever find it socially isolating to be "retired" when everyone else your age was working during the week? Most of the friends I've made in the past 10-15 years were met through work.
  
• What kinds of other projects or activities have you taken up to replace your day job?  Were they difficult to find? Did you find them before or after you quit your job? Do they give you the same sense of meaning and/or fulfillment that your career did?
  
• Has anyone used their "retirement" as an opportunity to find or start a new career?
  

[Hielko]

 

For the record; I never quit my day job, but I never started a day job either. I'm now a part time poker player and part time private investor.

 

I'm curious to know if you apply any poker strategies to investing and do you generate any income in poker?

If you don't generate income from poker you aren't a poker pro... and no, don't really use any poker strategies in investing. But you get some insight in high-level ideas such as risk management and psychological biases.

[kmukul]

I hit $10.3m in RothIRAs (including my wife's) at the end of 2013 -- that's what the closing statement was between my wife and I.  Then I have taxable money as well (which I still manage).  I'm only 40, so if these guys (Sanj and Mohnish) can do 10% a year... well... I'll be set.  Heck, how about just keeping pace with inflation.

 

Now here is what I wrote to somebody in private mail a few moments ago who was asking why I don't just keep managing it if I did so well:

 

Quoting myself:

 

I have a tendency to put it all on one idea with lots of leverage.  So it's risky if I put it on the wrong idea.  Once it was all in Fairfax calls.  At another time, all in BofA calls.

 

And what is the point of this really?  The government will take 40% of any further gains I make -- if not more.

 

4% yield on $9m is a thousand dollars per day, tax-free.  So will I need more than that?

 

So it's just sort of like... I don't need more, and I know I will eventually make a bad call.  And if I don't make a bad call, I don't need more money anyhow.

 

So it's useless to keep going.

 

Well I can get the point of not keeping going and may be you can enjoy your life. May be you can also donate :) to Melinda Foundation.

However for the other point of making a bad call, you can keep half of your money in cash (or protected by puts which you prefer). So that way you cant blow up. I think even If you work with half of cash you will make great returns overall. You might make 1 bad calls and it could hurt but if you make 1-2 good calls from here imagine where will it be. Chances are you will make more good calls then bad. I think over all that will be better then someone else managing your money plus you also need to do something with your "spare" time.

[cubsfan]

My questions for those that have "retired" early:

 

Did investing really become a full-time activity once you stopped working? And did you see your returns improve as a result? (I'm in the camp that suspects my returns would suffer if I devoted all of my time and attention to my portfolio.)

 

Did you ever find it socially isolating to be "retired" when everyone else your age was working during the week? Most of the friends I've made in the past 10-15 years were met through work.

 

What kinds of other projects or activities have you taken up to replace your day job?  Were they difficult to find? Did you find them before or after you quit your job? Do they give you the same sense of meaning and/or fulfillment that your career did?

 

Has anyone used their "retirement" as an opportunity to find or start a new career?

 

Leftcoast - all good questions, and I think the right questions - In my case:

 

Investing became a full time activity - because there is always something important to do. It's turned into a full time job, because

there are few things I would rather do. IF you don't love it, don't do it.

 

With real focus & discipline - your returns should improve. Mine did. But I always had to fight the "urge to trade" and do something every week.

I've seen others go down in flames because they are "trying to make something happen". Patience and finding quality investments can't be forced.

 

As far as being socially isolated - yes - there is some adjustment, but that's ok because I am always busy - and I don't waste time.

I'm much more productive, because I only work on things that will help me make money. No politics to worry about - just productivity.

Your time is your money - you don't waste it. You develop a different circle of contacts and confidents. One of the really great aspects is

that I do NOT have to work or associate with people I do not like or respect. That is a benefit I never thought about.

 

Other activities/projects - I spend all my time trying to figure out what investments might be worth or looking for new ideas.

It's plenty time consuming. It does leave time for education - which should never end. There are plenty of things to do to

improve skills - listening to interviews, conference calls, etc, etc. -- You can't do this unless you really enjoy it - it's too much detail work.

 

When I get burned out - I play racquetball or take the dogs to the park. But mainly I am always thinking about finding another great idea.

It can consume you. Done properly, it's a full time job. There is always something to do if you really want to make money. It's about focus.

 

My advice is only do this if you have a burning desire to do it.

[muscleman]

From Snowball, Omaha 1956-58

"I had about $174000 and I was going to retire. I rented a house at 5202 Underwood in Omaha for $175 a month. We'd live on $12000 a year. My capital would grow"

 

In 2013 dollars:

"I had about 1.5 million dollars ....I rented a house for $1500 a month. We'd live on $100 k a year. My capital would grow"

 

This was the point at which Buffet originally decided to retire at the age of 26. I think its a reasonable point of reference. It should noted though that Buffett's returns in period before this (1950-56) were 61% a year!! (see Snowball p.200). So he basically retired when the odds of him ever needing an income was extremely low.

 

snowball? Is that a book?

[ScottHall]

From Snowball, Omaha 1956-58

"I had about $174000 and I was going to retire. I rented a house at 5202 Underwood in Omaha for $175 a month. We'd live on $12000 a year. My capital would grow"

 

In 2013 dollars:

"I had about 1.5 million dollars ....I rented a house for $1500 a month. We'd live on $100 k a year. My capital would grow"

 

This was the point at which Buffet originally decided to retire at the age of 26. I think its a reasonable point of reference. It should noted though that Buffett's returns in period before this (1950-56) were 61% a year!! (see Snowball p.200). So he basically retired when the odds of him ever needing an income was extremely low.

 

snowball? Is that a book?

 

http://www.amazon.com/Snowball-Alice-Schroeder-ebook/dp/B009MYD9F8/ref=sr_1_1?ie=UTF8&qid=1394422465&sr=8-1&keywords=the+snowball

[ERICOPOLY]

• Did you ever find it socially isolating to be "retired" when everyone else your age was working during the week? Most of the friends I've made in the past 10-15 years were met through work.

 

That is a bit of a problem.  Moving to Montecito made it easier because a lot of people here have a lot of money.  However most of them either currently own a business that pulls in a lot of money, or they have already sold one for many millions and are set for life.  So it's a safety in numbers kind of thing.  The neighbors aren't jealous of me.

 

I have two kids (kindergarten and 2nd grade) so we meet a lot of parents.  I think if we didn't have kids it would be much harder to establish social relations.

 

[ERICOPOLY]

I mean, not to feed what I imagine is an ego that's tough to control after such phenomenal success, but I look at your track record and brilliance and see a recipe for becoming a self made billionaire.

 

Maybe I would have an ego about it if I could actually analyze the companies myself, but I can't.  I have very little confidence that I can continue these results.

 

 

 

[oddballstocks]

I mean, not to feed what I imagine is an ego that's tough to control after such phenomenal success, but I look at your track record and brilliance and see a recipe for becoming a self made billionaire.

 

Maybe I would have an ego about it if I could actually analyze the companies myself, but I can't.  I have very little confidence that I can continue these results.

 

Eric,

 

While others are in awe of your options trading strategies I am in awe that you rode an incredible wave, and had the ability to get out on top.  Many people who have a run like you do fuel the urge to get "just a little more".  It usually doesn't end well, you have done well for yourself and your family.  Congratulations!

[leftcoast]

• Did you ever find it socially isolating to be "retired" when everyone else your age was working during the week? Most of the friends I've made in the past 10-15 years were met through work.

 

That is a bit of a problem.  Moving to Montecito made it easier because a lot of people here have a lot of money.  However most of them either currently own a business that pulls in a lot of money, or they have already sold one for many millions and are set for life.  So it's a safety in numbers kind of thing.  The neighbors aren't jealous of me.

 

I have two kids (kindergarten and 2nd grade) so we meet a lot of parents.  I think if we didn't have kids it would be much harder to establish social relations.

 

Your kids are the exact same ages as mine.

 

When our oldest was born, my wife quit work to stay home around the time we moved into a new neighborhood. It was very isolating for her. Many nights I'd come home from work and would be the first adult she'd spoken to all day. She's naturally more extroverted and outgoing than me, and as much as she found fulfillment with the kids, she also found the social isolation incredibly difficult. Once preschool started and she got plugged into the "mommy network" with regular social activities, she became 10x happier. As soon as our youngest graduated from preschool, she went back to work part-time even though it was not necessary financially... I think she was really seeking another social group to be part of.

 

I look at her experience and realize I need to think hard about how I would handle being at home alone all day, everyday. I suspect I would need something (hobbies, volunteering, school, fun job) to get me out of the house.

[PJM]

There is only reason to become full-time investor - is to satisfy your entrepreneurial spirit and if you have passion to be an entrepreneur. Any other reason would only bring grief, unhappiness, stress and envy. I can bet that everyone who has been successful as an investor has done so because they enjoyed the process of finding undervalued businesses and betting on the same.

 

Becoming full-time investor or being employed has its plus and minus, so I don't see how you can compare either. You will be successful and happy in either if you have passion for it and you are able to work with people who are smarter than you. Naturally other things such as family, financial obligations, risk aversion, life style etc play a part in every decision we make, but I think everything else falls in place if you have made peace with your inner self and taken the path that provides you with maximum happiness.

 

I left my job giving up a 7 digit pay package, promising career ahead, great life style etc to be an investor because I'm passionate about investing and wanted to take it full time. I don't think I'll be able to make up the opportunity cost of the job I had and my family had to adjust to new lifestyle but it is worth it. Only time will tell if it was a right decision but irrespective of the outcome I'll have enjoyed the journey and made worth of it.

 

[ERICOPOLY]

Alright here is what you can do with your time after you quit your job:

 

http://santabarbara.craigslist.org/grd/4355321242.html

 

[leftcoast]

You develop a different circle of contacts and confidents. One of the really great aspects is that I do NOT have to work or associate with people I do not like or respect. That is a benefit I never thought about.

 

This definitely resonates. Some kinds of work stress are positive and even fun, but stress from office politics and working with assholes is not one of them.

 

I'm curious... as a full-time investor working from home, what kinds of contacts and confidants do you develop? Are they fellow investors that you share ideas with? 

[Otsog]

Leftcoast,

 

I'm not there yet (or as close as you it sounds like), but this is a great forum to read up about early retirement (not so much investing, but they do have a section for that): http://www.mrmoneymustache.com/forum/

 

 

[leftcoast]

Alright here is what you can do with your time after you quit your job:

 

http://santabarbara.craigslist.org/grd/4355321242.html

 

Mmmm... free bacon.

[leftcoast]

Leftcoast,

 

I'm not there yet (or as close as you it sounds like), but this is a great forum to read up about early retirement (not so much investing, but they do have a section for that): http://www.mrmoneymustache.com/forum/

 

Cool, thanks. To be clear, early retirement is not an imminent event for me... I expect I'll be working for a few more years at least before I hit my number. (And anyways there's something that feels slightly indecent about retiring before the age of 40.  ;) )

 

It's just that I can now see that number is eventually achievable, which makes the whole idea is start to feel real and not just like a pipe-dream. And as it starts to seem real, I feel like I need to start thinking about some of the other aspects besides the number itself. It's a bit of a bewildering line of thought to follow because it leads quickly to both practical and existential questions.

[yadayada]

Eric, you say your quitting, but wont you get bored? I personally like a challenge myself, and working on something. And just hanging around the house at 40, and maybe shooting at some pigs every once in a while would leave me a bit unsatisfied with life.

 

I mean you dont get to where you are by not having that attitude right?

[cubsfan]

You develop a different circle of contacts and confidents. One of the really great aspects is that I do NOT have to work or associate with people I do not like or respect. That is a benefit I never thought about.

 

This definitely resonates. Some kinds of work stress are positive and even fun, but stress from office politics and working with assholes is not one of them.

 

I'm curious... as a full-time investor working from home, what kinds of contacts and confidants do you develop? Are they fellow investors that you share ideas with?

Part of my work schedule involves attending lots of conferences, so I have met many fellow investors. Just about everyone is helpful.

There are a couple that I have a steady, ongoing dialog with - some of that involves exchanging investment ideas, a lot of it is just

investment strategy and views. And like this CBF forum, although very new to me, I can see there are many worthwhile people

to develop a relationship via the internet. You don't have to be a recluse unless you want to.

[obtuse_investor]

This may be a case of preaching to the converted, but here is some philosophical perspective.

 

In Praise of Idleness by Bertrand Russell

https://libcom.org/files/Bertrand%20Russell%20-%20In%20Praise%20of%20Idleness.pdf

[benhacker]

This thread is pretty timely.

 

On Friday I just put in my notice to work that I would be leaving the company.  My personal targets were always to leave once I got to ~$5M in AUM (reached last year, around $6.5M now, but some of that is mine).

 

I basically figure(d) if I could make $40-50k off of the RIA business, then I could live modestly and my portfolio would be untouched and it could grow for the future without fear of withdrawal rates, etc.  Of course in general I expect the business to grow in time at a good clip but that is all upside.

 

Some Thoughts:

1) I do worry if additional work doesn't help returns - I think it will, but I am putting some things in place to firewall "activity" and make sure my incremental time is spent reading.

2) My goals are not to do this because it's entrepreneurial at all... I like the challenge, I enjoy the fact that it is mine, no one else is responsible for my record.  I also most enjoy the freedom of time / location that it affords me. 

3) I believe I have a decent # of potential clients who have hesitated to sign up with someone who is "part time" over the years, so I think a few new clients may be in the making (in addition to folks at my work who weren't aware of what I do, and now will be).

 

Just a few thoughts for me.  We'll see in a year of actually doing this exclusively what additional lessons or insights I will have.

 

Ben

[hyten1]

i too decided to concentrate on investing full time starting in 2011. it actually came about unplanned. In 2010 i co-founded a tech company worked on it for 1 year and decide this is not what i wanted to do. the time commitment and my enthusiasm for the business just wasn't there. so the company and i parted ways (amicability, i am still a minority shareholder and get involve  from time to time).

 

so when i left i decided to give this investing a try. I actually started investing part time in 2003.

 

for me the hardest part is getting use to being alone a lot. i do have to proactively seek out others and try to establish a network of like minded folks which isn't always easy most people don't invest full-time before they are 40. the amount of free time have given me  the chance to learn other things as well as improve on my deficiency in many areas.

 

 

hy