Early FI – A Challenging Game These Days

by FI Fighter on October 22, 2017

in Financial Independence, Thoughts

The dream of achieving early financial independence is one that I find very easy to sell. It’s like tempting someone with good food… Who’s going to say no to that? Unfortunately, we are now in the later stages of a bull market in general equities and real estate, so it is my own belief that there is not much juice left to squeeze with those conventional assets…

“Just buy index funds and you’ll get there in no time!”

Sounds good, in theory… Perhaps the majority of blogs out there are pitching that to you, but I just can’t do it… Sorry, I don’t believe in that at all and think buying up ANYTHING at all-time record highs is a risky (scary) proposition!

For the most part, you have to stay grounded on the journey to early FI, watch your footing, and proceed with caution… If something sounds too good to be true, it probably is…

Last week, I wrote a post about attending a real estate meet up in the Bay Area, and I was somewhat mortified by the number of eager beavers who showed up, still gungho about a ridiculously overpriced asset class that I walked away from in the middle of 2015 because of fears of outstretched/unsustainable valuations… and even more frightened I was by the number of salesmen out there who are pushing these shit investments (that grow shittier by the day with rising prices) to unsuspecting newbies…

Beauty is in the eye of the beholder, I guess… and what I’ve learned over the years is that investors always tend to flock to assets/investments that have worked in the immediate past because it not only feels “safer” but the belief is that prices will keep staying elevated… only soaring higher… forever and ever…

These days, stocks and real estate just aren’t allowed to go down (so it would seem)…

As long as Happy Days continue marching on, the reality is that the majority of retail investors just aren’t going to feel scared to invest… I mean seriously, who’s gonna stock up on bottled water and supplies when there’s sunshine, blue skies, and no calamity anywhere in sight?

Preparation?

For what, exactly?

A market crash?

Hah!

“You’re a tinfoil hat wearing Chicken Little doom and gloom loser FI Fighter!!”

As I’ve been told on numerous occasions…

So, it’s all too easy to fall into the pits and get duped by persuasive salesmen who talk a good talk when times are splendid and everybody’s making $$$…

I mean, even back in the day in 2013, I was duped into buying turnkey properties out in the Midwest (my greatest investment mistake ever)… and sentiment towards investing/real estate was far from being as bullish as it is now… I’m regretting that decision to this day, despite the fact that we are still in a raging bull market for real estate and prices haven’t even collapsed yet!

Sure, my out of state units cash flow ok (most of the time), but it pains me greatly to think about the opportunity costs that I missed out on by chasing after mediocre investments…

Obviously, all this reflection comes with the benefit of hindsight and experience… things that I did not have a lot of back in 2013…

My approach these days may seem unorthodox, but I’m just trying to again stay grounded, learn from history, and avoiding chasing after enticing carrots that are just a mirage and ones that I’ll ultimately never be able to snatch, snack on, and enjoy…

Always remember, nobody out there gives a shit about you… Everybody wants your money and they’ll feed you whatever bullshit necessary to take it away from you.

Does that sound too cynical and jaded?

It should…

Better to be safe than sorry… Falling for a scam/con artist will set you back so far, it’ll be heartbreaking (I’ve seen this and experienced it first hand)…

Straight up — Early FI is fucking hard these days… If I was starting out from scratch, I would really be stumped with how to formulate a plan and best proceed…

Hell, you can give me $1 million, $2 million, and I really wouldn’t be able to give you a good answer on how to invest it…

We’re all operating in a low rate environment (thanks to central bank polices/actions around the world), which have destroyed “savings”… Nope, you can’t just stash capital away in a “safe and secure” savings account and collect interest payments…

Dividend stocks? So many are priced for perfection and sitting in nosebleed territories….

Real estate? You already know how I feel about this asset class… I hate it… I’m thirsty and there’s no juice, all pulp…

So where on earth do you go to find yield?

It’s funny, these days I’m hearing more and more stories about investors flocking to crytocurrenices like NEO to earn yield… NEO spits off GAS, which you can sell in the free market for income…

Here’s the argument:

“What do you want me to do instead? Put all my life savings into crap like AT&T (T)? Forget it. I’m not signing up for that, the Risk/Reward sucks! I’d rather take my chances with cryptos…”

Strange times, no?

And I’m not disagreeing with that approach at all… I would rather own NEO than AT&T if I had to choose one or the other…

As for myself?

Yes, of course I want to boost the cash flow/yield… we all do… Who doesn’t? I like steak and lobster too with all the fixings… and pumpkin pie in about a month from now sounds darn good too! However, I’m not gonna go and stuff my face full of that stuff if it’s going to cost me $500/plate…

Again, I’m perplexed and confused…

So, I’m playing the speculation game and hoping to generate alpha (appreciation) through mining stocks… Gold, silver, lithium, cobalt, copper, etc…

I see either deep value or hyper-growth in the commodities sector… In either case, at least I’m able to buy cheap and snatch up tier 1 assets (unlike the garbage turnkey real estate that I bought out of state that will never go up in value!)…

If I really need a boost in yield, I’d rather just sell off some of those mining stocks than to chase after yield…

But c’mon, if you had told me I would be doing such a thing back in 2013, or during the prime years of my own early FI journey, I would have told you that you’ve got to be kidding me… We must be living in the Twilight Zone or something like that…

 

Early FI is a challenging game these days…

 

Don’t be deterred, but open your eyes and ask yourself:

“What will the future look like in 3, 5, 10 years from now?

 

That should help guide you along the way and spark ideas on how to chart your gameplan moving forward…

I can’t say I have any answers, I do not…

I’m confused just as much or more than the next person…

 

But in the back of my mind, I’m always listening to and hearing Stanley Druckenmiller:

“The obvious is obviously wrong…”

 

That and…

“You have to skate to where the puck is going, not where it’s been.”

 

If you swear allegiance to an asset class, you’ll just dismiss those words as bollocks. In my mind, early FI is all about creating a better future/lifestyle for yourself and your loved ones… Never forget that!

 

Too many people just care about being popular and sticking with the masses…

 

Here’s something somebody said to me recently that got me thinking a bit:

“These days, everyone has so much risk aversion… They are so damn scared of their downside that they take no risks and can’t process or fathom the thought of catching on to a good idea that offers insane upside potential. Even more ironic, they don’t even realize that the traditional investments they hold are asymmetric bets working against them: high risks, very little reward.”

 

It’s human nature to a large degree to be reactive and not proactive… Early FI is not easy… In hindsight, it actually was pretty easy for anyone (such as myself) who was aggressively buying up deep value traditional assets (e.g. index funds, real estate, dividend stocks) back in 2012, 2013… But the year is 2017 now, and we are edging ever closer to 2018… The end goal remains the same, but the path there… is not so clear… at least to me.

 

I am fully convinced that all the right moves that I made back then are not worth pursuing today… Times have changed… especially valuations and Risk/Reward.

 

Being open minded, flexible, and a hard worker will get you further along on your journey to early FI than just about anything else over the next few years…

 

In any case, it will be interesting to watch how things play out…

 

If anyone else is confused/perplexed/frustrated, I’m right there with you!

 

Fight On!

{ 21 comments… read them below or add one }

1 PhilNo Gravatar October 22, 2017 at 3:10 pm

Can you recommend resources that discusses trading strategies in the mining sector? Things similar to what you’ve talked in your videos such as “selling 1/3 or 1/2 on the double to make back initial investments and be free carried.” Thanks.

Reply

2 FI FighterNo Gravatar October 22, 2017 at 3:41 pm

Phil,

When I first started and even now, I listen to a lot of Rick Rule, Ross Beaty and guys like that to figure out the mindset/investor psychology part of the game…

I really like this Warren Irwin:

https://www.youtube.com/watch?v=HlMNuakrIhQ&t=995s

Here’s an article I wrote earlier this year that might be worth digging into:

http://fifighter.com/precious-metals/2017/02/mining-stocks-rules-of-the-game/

Cheers!

Reply

3 PhilNo Gravatar October 23, 2017 at 7:13 am

Thanks for your reply. Would you consider creating a patreon account, so I can support your content on a monthly basis? I appreciate the time and effort you’ve put into sharing your journey.

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4 FI FighterNo Gravatar October 23, 2017 at 10:37 pm

Phil,

I really appreciate the support! That’s something I’ll need to look into down the road.

Thanks for the suggestion!

Cheers!

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5 GonzaNo Gravatar October 22, 2017 at 3:42 pm

Hi Fi! yes, the mining stocks looks good for the next years. What about Uranium? maybe too early?

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6 FI FighterNo Gravatar October 22, 2017 at 6:28 pm

Gonza,

I like uranium but it’s a tough market to figure out… My own guess is it might take until 2020 or so until we get that rebound everyone is after…

Of course, I hope I’m wrong since I own shares of NXE and would stand to benefit if the bull run started sooner rather than later.

So, I only own NXE for uranium exposure and my own preference is to stick to the best project + best economics that is not in production yet. Producers scare me and my risk tolerance is not that high in this bad/low price environment.

Take care!

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7 Income SurferNo Gravatar October 22, 2017 at 3:49 pm

Open minded and remaining flexible is just about the only way to approach investing, in my opinion. As for AT&T, ha……I wouldn’t consider the telecoms…..and especially that debt bomb called AT&T…..even with someone elses money. I don’t see a whole lot of opportunities, within my circle of competence anyway, but I am certainly not tempted to go there.

Have a great week buddy
-Bryan

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8 FI FighterNo Gravatar October 22, 2017 at 6:30 pm

Bryan,

You got it! It’s easier said than done, but there are folks out there like yourself who have adapted and changed up their investing gameplan in these most interesting times.

Patience will be rewarded is my own belief.

Happy hunting!

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9 JanNo Gravatar October 22, 2017 at 7:53 pm

“You have to skate to where the puck is going, not where it’s been.”
That’s why I’m leaning towards cryptos these days.
It seems that money that might otherwise go to PMs is now going into cryptos. The popular belief seems to be that it’s late to get into cryptos (bubble) but I just have this feeling that it’s actually still early on for the major disruption that cryptos will probably cause. Altcoins are on ‘sale’ (perhaps) right now as BTC is going up in anticipation of the upcoming forks – I’d like to get some BTC after it comes down (if it does).
The banks are getting very nervous…

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10 FI FighterNo Gravatar October 22, 2017 at 8:22 pm

Jan,

Cryptos are exciting and a great place to be. I agree that a lot of promising alt coins look attractively priced with so much money flowing into BTC ahead of the fork… Everyone wants the spin out Bitcoin Gold tokens… After that occur, I would imagine lots of money flowing back into the alt coins.

Cryptos are in their infancy stage and I see much brighter days ahead, volatility and all.

Cheers!

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11 TawcanNo Gravatar October 22, 2017 at 8:30 pm

Great stuff Jay, true to yourself as always. It is tough to achieve FI but there are many ways to get there. ????

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12 FI FighterNo Gravatar October 22, 2017 at 8:37 pm

Bob,

Thanks for stopping by! For sure, many ways to get to early FI. For guys like us, index funds, real estate, dividend stocks worked really well…

For the next generation of early FI enthusiasts just starting out today? Who knows, maybe it’s cryptocurrencies, lithium, cobalt, etc…

It’s different for every generation… Markets are cyclical and cycles take years/decades to play out.

I think we were very, very fortunate to be able to take the “easy route” if you will…

Cheers!

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13 Financial SamuraiNo Gravatar October 23, 2017 at 7:17 am

I think you’re missing one really obvious and straightforward way to achieve financial independence. Work and entrepreneurship!

It’s not just investments that are making everybody a lot of money nowadays, it’s because of me that’s paying people a lot of money and bringing in a lot of business.

If it wasn’t for this bowl market, and easy fund raising environment, I don’t think I would make as much on my website as I do today. So many private financial technology companies have massive funding and need to spend it on marketing for Grove. And then so many of these companies pay a lot of money as well.

Invest, Work, side hustle, and all is good!

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14 FI FighterNo Gravatar October 23, 2017 at 10:40 pm

Sam,

You’re absolutely right about entrepreneurship and hats off to you for all your success! To be honest, I suck with that stuff and haven’t figured it out at all yet… Hopefully down the road, I’ll learn a thing or two about it and to improve this brand here…

This blog is catered to working professionals who don’t really have the time to run side hustle businesses and that sort of thing… So, to be clear, even if I were to dabble in that stuff, this blog needs to be focused on researching/focusing on investments that the retail investor has access to… For instance, I recently got into a private placement for a stock offering, but I realize not everyone is a qualified accredited investor, etc… So, I won’t dwell on those details…

I appreciate the audience and readers here and must keep in mind what can be applicable/relatable to their own investment experience and path to early FI.

Cheers!

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15 Financial SamuraiNo Gravatar October 24, 2017 at 1:30 am

Whoops. Sorry for all the typos upstairs. Or use voice dictation and a lot of those words don’t make sense.

I didn’t mean to write “because of me“. I think I meant to write because of the economy

Bull market

Growth

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16 BobNo Gravatar October 25, 2017 at 7:42 am

about the private placement, I would like you to dwell on those details.
Accredited doesn’t mean filthy rich. For Canadian Stocks it is enough to earn 200k C$/year, which is about 157k US$. Some Engineers in the Bay Area should be earning this… if I recall it right, you yourself had offer for 200k US$?

A detailed post about the PP process would be interesting. Getting the stocks, transferring it, selling it… etc

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17 Midwestern LandlordNo Gravatar October 23, 2017 at 7:42 am

“Easy Routes” are uncommon and a function of timing. Most of the time markets are relatively efficiently priced which is the way it is supposed to work. IE, if there is a good deal, investors are going to get in on them and drive the price up. So really, there is no reason to be frustrated that today there are few obvious investing opportunities; this is the way it works.

People like yourself and I are very lucky. We invested at the right time and became FI. No reason for us to be frustrated at all. Enjoy what you have already accomplished.

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18 FI FighterNo Gravatar October 23, 2017 at 10:42 pm

Midwestern Landlord,

Totally agree, we were extremely fortunate to be able to pick up quality real estate at wholesale prices… I am very thankful for that and even if prices keep rising and never fall again, you and I stand to benefit, so in truth there’s no frustration at all to be felt by us…

When I say frustrated, I’m speaking more along the lines as though I was on the journey to early FI today and trying to turbocharge progress and looking for shortcuts… I’m writing with the mindset that I’m out looking for the next killer deal (which I sort of still am)…

I hope that clarifies things a bit and sort of my stance/writing style.

Appreciate all the support!

All the best!

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19 GarethNo Gravatar October 23, 2017 at 7:09 pm

Hey, I really appreciate your blog. Just discovered it a few days ago and have been reading many of your posts.

I am just starting on my journey toward FI and have been looking into real estate investing – I was looking at acquiring cash flow properties in C class neighborhoods before I found your blog and now I am getting cold feet. The difference is that I am not relying on turnkey companies. I have trustworthy connections who know how to rehab and property manage in these neighborhoods.

Can you share more insight into why you are so against this? It appears that most tenants are fine. There’s the very small chance of getting a really terrible tenant, but for the most part, you should be able to screen against these. I mean, you can get bad tenants in A and B neighborhoods too (think college students and some early professionals).

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20 FI FighterNo Gravatar October 23, 2017 at 10:44 pm

Gareth,

Thanks for stopping by! I just wrote a post about Class C properties so feel free to check that out!

I hope the details are helpful… The short answer is the upside potential is much more massive with Class A/B, so my preference is to go that route… and it’s way less stressful and hands-off, which I like.

Take care!

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21 No Nonsense LandlordNo Gravatar October 27, 2017 at 6:20 am

My real estate has done very well. I actively manage it, which I think is the key to success. I can save over $50K a year by managing them and doing a bit of maintenace.

Reply

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