Do you live off your portfolio? How?

[samwise]

Standard advice is to balance your portfolio (usually 60% stocks and 40% fixed income ) and withdraw a certain percentage (usually 4%) every year.

 

But people on this board pick stocks. So how should one structure their finances? Or how do you, if you are comfortable sharing.

 

Some non-standard planning (which worked out ) seemed to be built on high alpha assumptions. Buffett had 174k saved and 12k annual expenses when he first retired at age 26. I assume he was 100% in stocks. Of course he had been compounding at 60%, which I assume no one here is banking on. (All from page 200 in the snowball ).

https://books.google.ca/books?id=cyCB5X-Xk50C&pg=PA945&dq=buffett+retirement+snowball+26&hl=en&sa=X&ved=0ahUKEwiWz9Twu4nmAhWmV98KHevuC2QQ6AEIJjAA#v=snippet&q=Retire%20rented&f=false

 

The other bit of non standard advice which is very popular on SeekingAlpha, is to live off dividends. Theoretically these should be more stable than prices, so you won’t be forced to sell in a downturn to fund expenses.

 

 

Edit: how does the value investor think of this problem? Do you use look-through earnings? But they are not available for expenses unless you get dividends or sell (hopefully) appreciated stock.

Do you think you can withdraw less than 4% since you are being more risky by picking individual stocks? Or do you think you can withdraw even more since you can buy companies with 8-10% earnings yield? Is that gap between the earnings yield and the withdrawal rate the margin of safety? What about growth of earnings or portfolio versus inflation?

How does the standard advice look from a valuation framework? Does it still work when bonds yield 2%?

 

 

Thoughts from value investors?

 

 

[DooDiligence]

Standard advice is to balance your portfolio (usually 60% stocks and 40% fixed income ) and withdraw a certain percentage (usually 4%) every year.

 

But people on this board pick stocks. So how should one structure their finances? Or how do you, if you are comfortable sharing.

 

Some non-standard planning (which worked out ) seemed to be built on high alpha assumptions. Buffett had 174k saved and 12k annual expenses when he first retired at age 26. I assume he was 100% in stocks. Of course he had been compounding at 60%, which I assume no one here is banking on. (All from page 200 in the snowball ).

https://books.google.ca/books?id=cyCB5X-Xk50C&pg=PA945&dq=buffett+retirement+snowball+26&hl=en&sa=X&ved=0ahUKEwiWz9Twu4nmAhWmV98KHevuC2QQ6AEIJjAA#v=snippet&q=Retire%20rented&f=false

 

The other bit of non standard advice which is very popular on SeekingAlpha, is to live off dividends. Theoretically these should be more stable than prices, so you won’t be forced to sell in a downturn to fund expenses.

 

 

Thoughts?

 

I've been dealing with this for nearly 3 years now.

 

I deduct a years worth of recurring expenses + misc from QuickBooks checking.

When the balance turns red, I add cash.

 

I like having cash & no debt.

I'm inefficient like that.

 

Trying to think in terms of when I'll need to sell what.

 

I'm a mix of equity / home & cash.

 

---

 

I plan on working again after graduation & intend to use a small chunk

for travel & home improvements.

 

---

 

edit: I may AirBnB my place to do some travel.

I think that if you own a great piece of real estate,

you can AirBnB & minimize draw downs significantly.

[writser]

I think the optimal solution depends on a lot of variables. Your life expectancy, your tax regime, your health care regime, your family situation (do you have kids, do you have a partner, does he/she have a job), your mortgage, etc. I would personally not feel comfortable with a withdrawal rate larger than ~3% to ~4%. I think more would be asking for trouble in some negative scenarios. Especially in the US where there might be some health care tail risks to consider as well (?), which you'd have to have a good think about.

 

Apart from that I'd say keep it very simple. Have a savings account with at least one year worth of living expenses. Top up the savings account every now and then and you're good to go. I'd advise not to go overboard with leverage and concentration in your portfolio. When you are young and have a career the majority of your 'personal capital' is probably in your future paychecks and having a high-risk, high-reward portfolio is fine or even desirable in the grand scheme of things. But when you are retired your portfolio is basically all you have so I'd be much more conservative, as there is no way to recover when you go broke.

 

I feel that any specific advice is basically useless because the answer would be totally different depending on, for example, if you are 1) a single 30-year old Finland resident who hit the jackpot with cryptocurrencies or 2) a 70 year-old couple living in the US with a disabled kid. It also depends on your wealth: if you have $20m you can afford to (and probably should) take some risk. If you have $3m you should be a bit more careful, because losing 75% would be terrible while the difference between gaining 100% or 150% over the next decade is probably not very meaningful for the way you live your life.

[scorpioncapital]

https://www.trustnet.com/news/7460768/how-you-could-have-drawn-10-a-year-without-shrinking-your-initial-investment

 

Alot depends on where you live, and the returns on your investments. Where you live can make a drawdown difference. In a big capital in Eastern Europe you can rent an apartment , brand new furnished for maybe $300-$400 usd a month. In USA/Canada in center this would cost maybe $1500 to $2000 all in. That's a pretty big difference. Add in Uber rides for say $2 euro vs $10 euro in NA and things add up quick, etc..

But this is probably only a small factor. After all, even if the incremental difference was $5k a year it probably isn't the major issue.

 

Return on investment is the key factor. That article says US market and small caps - at least right now...but it doesn't even consider intelligent equity selection.

 

The younger you start the better of course as time is a key ingredient. If you start later, I think you either a) need a part-time job - say like a digital nomad perhaps? or b) extreme focus and attention on opportunity, investment, and business selection/ownership/startup. B) could be risky and you can go the wrong way but if you want to live off investments you need a combination of A+B I think.

[Cigarbutt]

I think the optimal solution depends on a lot of variables. Your life expectancy, your tax regime, your health care regime, your family situation (do you have kids, do you have a partner, does he/she have a job), your mortgage, etc. I would personally not feel comfortable with a withdrawal rate larger than ~3% to ~4%. I think more would be asking for trouble in some negative scenarios. Especially in the US where there might be some health care tail risks to consider as well (?), which you'd have to have a good think about.

 

Apart from that I'd say keep it very simple. Have a savings account with at least one year worth of living expenses. Top up the savings account every now and then and you're good to go. I'd advise not to go overboard with leverage and concentration in your portfolio. When you are young and have a career the majority of your 'personal capital' is probably in your future paychecks and having a high-risk, high-reward portfolio is fine or even desirable in the grand scheme of things. But when you are retired your portfolio is basically all you have so I'd be much more conservative, as there is no way to recover when you go broke.

 

I feel that any specific advice is basically useless because the answer would be totally different depending on, for example, if you are 1) a single 30-year old Finland resident who hit the jackpot with cryptocurrencies or 2) a 70 year-old couple living in the US with a disabled kid. It also depends on your wealth: if you have $20m you can afford to (and probably should) take some risk. If you have $3m you should be a bit more careful, because losing 75% would be terrible while the difference between gaining 100% or 150% over the next decade is probably not very meaningful for the way you live your life.

1+ 

Not much further to add.

If living in the US, you may want to decompose the healthcare risk into basic healthcare costs and long-term care (nursing home). It is a morbid topic but people vastly underestimate the odds and duration of long-term costs and tend to vastly underestimate their 'share' of the cost. And the cost environment (safety net aspect, productivity issues in nursing homes) is unlikely to change for the better. Also, if you are part of the group 'planning' to live off your portfolio, you are likely to be part of the group who will be deemed to be self-sufficient. It may be worthwhile to see how much it would cost per year and use the 3-4% rule to have an idea for the put-aside funds necessary only for that purpose.

So make sure you can enjoy life today and tomorrow. :)

 

[gfp]

In my experience, the main concern for people living solely off of their investment portfolio is the effect it has on their decision making during a severe bear market.  You always want to be a 'strong hand' - with the mindset of, say, Charlie Munger.  In my experience, it is those that rely on that 'number' flashing in front of them on a daily basis for their current and future expenses who can't handle the drawdowns and second guess themselves - selling at the worst times.  I've seen it happen in families with as much as $40 million dollars (pre-correction) and individuals with $600k.  Living solely off of your investment account does not help in remaining detached from market price swings.

 

In my own case - I have found that some apartment buildings, rental real estate, etc, are a useful addition to stock market type assets because the first of the month comes around like clockwork and in come the rents, regardless of the current print on the S&P 500.  Its still 'living off your portfolio' or 'living off your investments' or whatever - but the diversity of that stable monthly cash hitting your bank account really helps during a 2008-2009 type scenario.  I suppose other passive sources of income or a diversified stream of dividends might have the same feeling.

[Jurgis]

If living in the US, you may want to decompose the healthcare risk into basic healthcare costs and long-term care (nursing home). It is a morbid topic but people vastly underestimate the odds and duration of long-term costs and tend to vastly underestimate their 'share' of the cost. And the cost environment (safety net aspect, productivity issues in nursing homes) is unlikely to change for the better.

 

Definitely this. I've mentioned this issue multiple times in the past and people (on CoBF) mostly pooh-pooh my concerns.  :-\

[Packer16]

If you are in the US, a big question is how far away from SS age are you.  If you have worked for most of your life, the amount you need is full living expenses to SS age and difference between SS (a CPI adjusted annuity) and your living expenses after.  As mentioned above, you can buy rental properties or in my case I purchased high yielding securities (loans, real estate and infrastructure) whose underlying asset value is appreciating.  These securities will provide enough yield for our living expenses.  With the expense cash flow covered by investment yield, I can invest more aggressively with the remainder.  I also have an emergency fund to cover one year's living expenses just in case.

 

Packer

[s8019]

Look-through valuation makes sense (and helps to detach from daily vagaries of the market, at least if you are not special situations investor). However, earnings yield alone would not help much if you accumulate a portfolio of cyclical stocks or melting ice cubes with risky balance sheets. Not losing money is probably more important than chasing the best return if you are in the game for the long run. Bonds make no sense, prices are crazy.

 

Have a Plan B. I believe Buffett took some money under management very early so he probably did not spend too much from his own pocket.

 

 

[SharperDingaan]

Treat your portfolio as something that exists, but which can not be relied upon.

Once/yr as/when you have gains or dividends, simply withdraw the cash & use it for school, a house down payment, or a mortgage repayment. Whatever comes out is a bonus, and it will make your life 'better' - every month - for an extended period.

 

SD

[gfp]

Have a Plan B. I believe Buffett took some money under management very early so he probably did not spend too much from his own pocket.

 

Buffett actually never took a withdrawal from Buffett Partnership, which became his Berkshire stake over time.  He kept his $175k or whatever his net worth was at the time outside of the partnership, contributed $100 as his initial partnership stake, and lived off his private investing account - which he has continued to do to this day (in addition to his modest Berkshire salary).

[s8019]

Money is fungible. I mean that he had more than one source of income: investment profit and management fee.

[stahleyp]

This is a great tool:

 

https://www.firecalc.com/

 

You can run various allocations and withdrawals.

[Packer16]

I also like www.i-orp.com which provides some nice visual reports.

 

Packer

[CorpRaider]

Have a Plan B. I believe Buffett took some money under management very early so he probably did not spend too much from his own pocket.

 

Buffett actually never took a withdrawal from Buffett Partnership, which became his Berkshire stake over time.  He kept his $175k or whatever his net worth was at the time outside of the partnership, contributed $100 as his initial partnership stake, and lived off his private investing account - which he has continued to do to this day (in addition to his modest Berkshire salary).

 

Yep.  He sought and achieved FI, so did Munger, so did Ben Franklin.

[samwise]

 

I'm a mix of equity / home & cash.

 

---

 

I plan on working again after graduation & intend to use a small chunk

for travel & home improvements.

 

---

 

edit: I may AirBnB my place to do some travel.

I think that if you own a great piece of real estate,

you can AirBnB & minimize draw downs significantly.

Thanks for sharing Doo!

So the allocation is equity/home cash, with Real estate earnings through Airbnb.

The fact that this is temporary means your situation is different from the question I asked. Do you think you could sustain this forever if you never went back to work?

[samwise]

Thanks for the very detailed response!

 

I think the optimal solution depends on a lot of variables. Your life expectancy, your tax regime, your health care regime, your family situation (do you have kids, do you have a partner, does he/she have a job), your mortgage, etc. I would personally not feel comfortable with a withdrawal rate larger than ~3% to ~4%. I think more would be asking for trouble in some negative scenarios. Especially in the US where there might be some health care tail risks to consider as well (?), which you'd have to have a good think about.

 

 

Agreed on the need to figure out expenses on the liability side, and other sources of income on the assets side of the equation. Usually people simplify the problem by separating the two sides and coming up with an annual expense number, then figuring out assets = 25x  expenses (i.e. a 4% withdrawal rate) . The full blown pension accounting would be to get a stream of liability cashflows and present value them, but lets keep it simple as a single annual expense number for now.

 

Healthcare in US seems like a big issue. I am in Canada where its a smaller issue, but yes we need to cover costs of medicines, dental, and vision.

 

So I am simplifying "life expectancy, your tax regime, your health care regime, your family situation " into one annual expense number, and we can assume the same expenses to perpetuity (inflation adjusted) to adjust for longevity risk.

 

 

Apart from that I'd say keep it very simple. Have a savings account with at least one year worth of living expenses. Top up the savings account every now and then and you're good to go. I'd advise not to go overboard with leverage and concentration in your portfolio. When you are young and have a career the majority of your 'personal capital' is probably in your future paychecks and having a high-risk, high-reward portfolio is fine or even desirable in the grand scheme of things. But when you are retired your portfolio is basically all you have so I'd be much more conservative, as there is no way to recover when you go broke.

The asset side is what I am most interested in.

So your preferred/proposed asset side is 3-4% cash (one year's expenses) and 96% equities?

Agree on the risk profile being lower. But how would you manage the equity portfolio risk?

What is concentrated in this context? Do you mean an index fund, or 100 positions, or 10?

If stock picking, how would you think about the earnings and the dividends and business quality of your portfolio? Would you have special situations and asset plays like AIM with basically no earnings for now?

As a thought experiment, think of the many people who live off a business, but imagine they are not the operator, just a passive investor. Aren't they in a similar position, but highly concentrated? I thought Munger recommended owning the McDonalds franchise, order dealership and a couple more businesses and you should do fine.

Another example is that a few days ago you could buy WFC earning 10%, paying out 4%, and probably growing earnings with GDP. That pretty much covers your 4% withdrawal rate and provides growth. Yes you would probably want x numbers of these kinds of assets to diversify. Would you consider that a viable option?

 

I feel that any specific advice is basically useless because the answer would be totally different depending on, for example, if you are 1) a single 30-year old Finland resident who hit the jackpot with cryptocurrencies or 2) a 70 year-old couple living in the US with a disabled kid. It also depends on your wealth: if you have $20m you can afford to (and probably should) take some risk. If you have $3m you should be a bit more careful, because losing 75% would be terrible while the difference between gaining 100% or 150% over the next decade is probably not very meaningful for the way you live your life.

 

Agreed on specifics. So I am more interested in a framework to think about this.

E.g. why does a simple 50/50 equity/bond portfolio at 4% withdrawal rate work in backtests? One *possible* answer is this: on average bonds paid 4%, and equities earned 8%. So the backtested portfolio earned 6% on average. You withdraw 4%, but reinvest 2% to cover inflation. So the math has worked out on average. *If* thats correct, then you can adjust for today and say bonds at 2% doesn't make sense.

 

But I have never seen this worked out, nor really worked it out myself. All I see is backtests, which may or may not apply to the future because no one knows the underlying valuation logic of the standard retirement advice. WEB had some similar framework to explain how to sell BRK periodically to manufacture dividends, back in 2012 (?) I think, but he used a multiple of 1.2x book value IIRC.

 

Agree on the effect of wealth. If you can live on 0.1% of your portfolio annually, then there is no risk. Thanks for the interesting way to frame risk in 10 year horizons and actual utility to oneself. Makes a lot of sense. Explains why safety gets sold to wealthy people as financial advice.

 

[samwise]

Thanks for the thoughts scorpion!

 

Alot depends on where you live, and the returns on your investments. Where you live can make a drawdown difference. In a big capital in Eastern Europe you can rent an apartment , brand new furnished for maybe $300-$400 usd a month. In USA/Canada in center this would cost maybe $1500 to $2000 all in. That's a pretty big difference. Add in Uber rides for say $2 euro vs $10 euro in NA and things add up quick, etc..

But this is probably only a small factor. After all, even if the incremental difference was $5k a year it probably isn't the major issue.

 

Yes expenses depend on where you live. Lets agree we come up with a dollar amount for expenses. Then what does a valuation framework based on fundamentals say about the portfolio?

 

Return on investment is the key factor.

Exactly. How do you define this term? Is it how your portfolio is growing per year? Then in 2008 you might see a number like -40%. Then what do you do?

Or is this some fundamental measure like earnings/cashflows/dividends/asset value/ROE...or pick your favorite EBITDA/FCF etc. over Price or EV?

 

The younger you start the better of course as time is a key ingredient. If you start later, I think you either a) need a part-time job - say like a digital nomad perhaps? or b) extreme focus and attention on opportunity, investment, and business selection/ownership/startup. B) could be risky and you can go the wrong way but if you want to live off investments you need a combination of A+B I think.

A is not living off your investments.

B is exactly what the question was.

 

I assume by starting younger you mean one can gather more assets. Lets assume by crypto/lottery/starting young you get the assets. Now what? How do you rationally think about this besides just relying on backtests, even very good ones like the trinity study. The problem with backtests is the hidden assumption that history will repeat. It probably will over the next 100 years, but your portfolio only gets one of those 30-40 year samples say 2020-2060. How would you analyze this in a more fundamentals based way?

 

https://www.trustnet.com/news/7460768/how-you-could-have-drawn-10-a-year-without-shrinking-your-initial-investment

 

That article says US market and small caps - at least right now...but it doesn't even consider intelligent equity selection.

 

An example of a very bad backtest, although in their defense they are just writing a fluff piece for an asset manager.

 

Why is it bad? The hidden assumption is that the conditions from dec 2009 to nov 2019 will repeat. The comments are very critical.

[samwise]

 

If living in the US, you may want to decompose the healthcare risk into basic healthcare costs and long-term care (nursing home). It is a morbid topic but people vastly underestimate the odds and duration of long-term costs and tend to vastly underestimate their 'share' of the cost. And the cost environment (safety net aspect, productivity issues in nursing homes) is unlikely to change for the better. Also, if you are part of the group 'planning' to live off your portfolio, you are likely to be part of the group who will be deemed to be self-sufficient. It may be worthwhile to see how much it would cost per year and use the 3-4% rule to have an idea for the put-aside funds necessary only for that purpose.

So make sure you can enjoy life today and tomorrow. :)

 

Thank you. Yes I have never thought about nursing homes and have no clue how this operates in Canada. Has anyone actually looked at this perhaps for their parents or grandparents?

 

What do you mean by this: "you are likely to be part of the group who will be deemed to be self-sufficient"

 

Are you suggesting something like this: I need $X per yer 40 years from now for nursing home fees and adult diapers. So I will need 25X in assets to pay for it in 40 years. So I need 25X discounted to now in addition to my current expenses. Did I understand you correctly?

[samwise]

In my experience, the main concern for people living solely off of their investment portfolio is the effect it has on their decision making during a severe bear market.  You always want to be a 'strong hand' - with the mindset of, say, Charlie Munger.  In my experience, it is those that rely on that 'number' flashing in front of them on a daily basis for their current and future expenses who can't handle the drawdowns and second guess themselves - selling at the worst times.  I've seen it happen in families with as much as $40 million dollars (pre-correction) and individuals with $600k.  Living solely off of your investment account does not help in remaining detached from market price swings.

 

In my own case - I have found that some apartment buildings, rental real estate, etc, are a useful addition to stock market type assets because the first of the month comes around like clockwork and in come the rents, regardless of the current print on the S&P 500.  Its still 'living off your portfolio' or 'living off your investments' or whatever - but the diversity of that stable monthly cash hitting your bank account really helps during a 2008-2009 type scenario.  I suppose other passive sources of income or a diversified stream of dividends might have the same feeling.

 

Thank you! You sound very familiar with these issues. I can empathize with the feeling of those people.

 

The psychological effects sound very similar to how Graham described people in the depression: people who did not get a quote on a private mortgage felt safe because they got their monthly payments, while people who got their coupons just as regularly from large liquid over-capitalized corporations (like Japan today), felt terrible because the market price had fallen so much. Were the later really worse off when their counterparty was so much more creditworthy than a single borrower? They were pshycologically worse-off because of the market quote which reminded them of losses and created fear. Graham keeps emphasizing how this is the feeling to overcome by not relying on Mr. Market. That could be one way to go, although hard to keep that resolve in a downturn.

 

It seems the other way is to just accept this as part of our psychology and get some cash flowing assets like real estate to cover expenses. VRE today yields 3.2%, so not much yield. Do you aim for much higher yields in apartments etc? I wonder if there is a longer term cost to these kinds of high yield bond-like investments.

 

Do you think of this as mostly a psychological hedge, or is it also a good portfolio structure anyway even if you could remain detached from the market swings. It might be better to prevent selling in drawdowns for example.

[samwise]

If living in the US, you may want to decompose the healthcare risk into basic healthcare costs and long-term care (nursing home). It is a morbid topic but people vastly underestimate the odds and duration of long-term costs and tend to vastly underestimate their 'share' of the cost. And the cost environment (safety net aspect, productivity issues in nursing homes) is unlikely to change for the better.

 

Definitely this. I've mentioned this issue multiple times in the past and people (on CoBF) mostly pooh-pooh my concerns.  :-\

 

Thanks for flagging this Jurgis! If you have mentioned this multiple times you must have thought deep and hard about this. How much are these expenses? Are they growing with GDP or faster like a lot of US healthcare costs? Any idea about the situation in Canada?

[samwise]

If you are in the US, a big question is how far away from SS age are you.  If you have worked for most of your life, the amount you need is full living expenses to SS age and difference between SS (a CPI adjusted annuity) and your living expenses after.  As mentioned above, you can buy rental properties or in my case I purchased high yielding securities (loans, real estate and infrastructure) whose underlying asset value is appreciating.  These securities will provide enough yield for our living expenses.  With the expense cash flow covered by investment yield, I can invest more aggressively with the remainder.  I also have an emergency fund to cover one year's living expenses just in case.

 

Packer

 

Thanks Packer! I'm in Canada. The CPP and OAS are not as generous as SS. But yes people can do a similar calculation.

 

My takeaway: you basically hedge out your living costs fully with part of your portfolio (loans, real estate and infrastructure) , then invest the rest aggressively.

 

It seem like you could easily just live off the safe investments part of your portfolio. If thats true, then thats the portfolio that I am interested in.

 

how do you think about constructing that portfolio? In the growth portfolio you can ignore or exploit volatility, but in the expense bearing part you can't because you need regular cashflow and selling in a down market would be bad. So you solve that problem by buying high yielding assets, and not just earnings or asset values.

Are the names hand-picked or index/ETFs? What yields are you looking for there.

 

To illustrate the issues one can face in handpicking vs ETF: One can get ~10% in MAC stock (real estate!), but the future could be bleak for Malls. An ETF like VRE only yields ~3.2%. On the other hands I can get a safer 10% earnings yield with WFC, but the dividend is only 4%. Or are you talking apartment buildings and rental properties here? I'm really interested in the framework for choosing that portfolio. To manage the risk and the cashflow do you give up reinvested earnings? Without reinvestment how is the underlying asset value appreciating (except with cap rates going down)?

 

Is this more for psychological safety or you actually think its better for th overall portfolio ?

 

sorry for the flurry of questions.

 

Edit: thanks for the link. As I clarified earlier in the thread, I am thinking more from the value framework, rather than the standard backtested results all these calculators use. Thats why the question is appropriate for COBF.

[samwise]

Treat your portfolio as something that exists, but which can not be relied upon.

Once/yr as/when you have gains or dividends, simply withdraw the cash & use it for school, a house down payment, or a mortgage repayment. Whatever comes out is a bonus, and it will make your life 'better' - every month - for an extended period.

 

SD

 

Thanks SD. I am currently in this happy state of not relying on my portfolio. So its all a (taxable) bonus. My question is about what happens when its not a bonus but base pay.

[samwise]

Have a Plan B. I believe Buffett took some money under management very early so he probably did not spend too much from his own pocket.

 

Buffett actually never took a withdrawal from Buffett Partnership, which became his Berkshire stake over time.  He kept his $175k or whatever his net worth was at the time outside of the partnership, contributed $100 as his initial partnership stake, and lived off his private investing account - which he has continued to do to this day (in addition to his modest Berkshire salary).

 

One can regard all of BRK as his post retirement hobby. :) Not bad.

[samwise]

Look-through valuation makes sense (and helps to detach from daily vagaries of the market, at least if you are not special situations investor). However, earnings yield alone would not help much if you accumulate a portfolio of cyclical stocks or melting ice cubes with risky balance sheets. Not losing money is probably more important than chasing the best return if you are in the game for the long run. Bonds make no sense, prices are crazy.

 

Have a Plan B. I believe Buffett took some money under management very early so he probably did not spend too much from his own pocket.

 

Plan B would be failure of the plan to live of the portfolio. Can be handled if one is 30-50, but not if one realizes they need to pay for a nursing home at 80.