Seeing the BIG Picture


From the inception of this blog up until now, my primary focus has been on reaching early financial independence. When I first started out on the journey, I thought it would be an ambitious goal to get to the top of the early FI mountain by age 37.5, so I set that as my goal for extra motivation. As the years went by (and rapid progress was being made), I adjusted the target and pulled in the date. In fact, around this time last year, I had strong hopes of being able to check out of the cubicle at age 30.

Well, as I sit here and write this, I’m now 31…

And I’m not retired.

What happened? Did the early FI by age 30 plan ultimately fail? What did I do wrong?

So Close, Yet So Far

I’m not sure where to begin, but let’s just freelance this article and see where my thoughts take me…

When it comes to early FI, I’ve always desired for the endgame to be both realistic and sustainable. From the onset until most recently, my primary objective was always fixated on earning enough passive and semi-passive income each month to not only meet, but exceed my living expenses for perpetuity.

Today, on a good month, my income streams will bring in between $2,000/month to $3,000/month.

Those numbers aren’t bad, but again, I want to be as realistic as possible; I don’t believe that blind hope and delusion are a sound strategy!!!

With such a limited amount of income, most likely, I would have to settle for living in a much cheaper country away from the states. Having to do so (even temporarily) is actually just fine and dandy for me, as I’ve had an insatiable amount of wanderlust ever since I graduated from college in 2007. My round-the-world expedition through Tokyo, Bangkok, and Rome last year didn’t help matters any!!!

So, perhaps $2,000/month to $3,000/month in passive income could work in a really cheap country… But would it be enduring?

Long-term, I doubt it.

And I would never have enough cushion to ever really feel comfortable and truly “free” which is what early FI is ultimately all about, anyway. In short, it became quite clear to me that I needed to establish a larger margin of safety net… There’s still a lot of work that needs to be done before I can confidently declare early FI victory…

But what really bothered me the most and put a stop to my plans to “retire at age 30” was the irrefutable fact that if I were to check out at age 30, I would be doing so at just about the top of a raging bull market cycle…

To me, that would be a recipe for disaster… Because what goes up usually comes crashing back down!

Bulls and Bears

I don’t have a crystal ball, but ever since the beginning of my investing career, I’ve always tried to be cognizant of where we are in a given market cycle. I realize that not all investors care about such things, but I’ve never been one to just invest “blindly” and trust that things will somehow magically work out in the end. Sure, if you plan on working 30+ years, things will probably work out ok with the “slow and steady” approach… but I have no intentions of grinding it out in Corporate America for anywhere near that long! With a short-term career horizon, a single catastrophic market collapse would most likely devastate my portfolio and dreams of early FI.

Over time, I’ve been able to conclude with some degree of certainty that I will never be one of those traditional Buy and Hold investors who simply purchases index funds around the clock, regardless of rain or shine, and just keeps on staying the course until that magical day of financial freedom arrives.

Let me be clear on this very important distinction, though — Buy and Hold is a TREMENDOUS strategy AFTER you’ve reached early FI. In fact, once I have enough Net Worth to sustain and support early FI indefinitely, my EXACT strategy will be to invest in stable cash-flowing assets and NEVER sell them!

But to get to early FI (while you are still really young), I believe an investor needs to take a slightly different approach than to that of purely Buy and Hold.

To be quite frank, I don’t see a shortcut to early FI without an investor utilizing one of the following methods:

  • Inheritance or windfall.
  • Starting your own business.
  • Joining a company pre-IPO.
  • Earning an exorbitant annual salary (e.g. Wall Street banker).
  • Leverage.
  • Timely speculation.

Buy and Hold investments, whether it be through cash flow real estate or dividend growth stocks can work, but you need a ton of capital invested if you plan on short-cutting your way to early FI with these approaches. Since most normal folks out there don’t make $500,000/year, us “little guys” can only hope to accelerate our own progress through the use of leverage.

So far in my investing career, my success is mostly attributed to taking advantage of other people’s money (OPM).

Leveraged real estate.

But with leverage (in particular), an investor needs to be conscientious of prices because it cuts so sharply in both directions.

This introduces the important concept of Market Cycles, which actually jives rather well with my own investing philosophy.

I’m neither an ultra-bear nor a perma-bull.

I’m both, actually… I’m adaptable.

You might have heard the following quote before:

Bulls make money, Bears make money, Pigs get slaughtered.

Sounds good, I guess… But it never resonated with me.

My own take is this:

Bulls who act like Pigs can make boatloads of money and Bears who act like Pigs can also make a boatload of money.

The investor who can only see one side of the coin does themselves a huge disservice. There are appropriate times to be bullish, just as there are appropriate times to be bearish.

These days, I’ve been leaning much more towards the ultra-bear side of the equation.

It’s funny how that works though… From about 2012-2014, I was a quintessential perma-bull, buying up as many assets as I possibly could! I was buying stocks and real estate hand over fist like the stuff was going out of style. During this period of time, many readers, friends, and family were most supportive of my efforts.

Way to go! You’re doing great. Keep up the progress!

In short, I built up my Net Worth to over $1MM in the bull run between 2009-2015.

Life was great! Asset prices kept rising and the passive income was compounding. Anyone investing looked like and probably felt like a freekin’ genius.

But never once along the way did I ever let myself be deceived by the notion that the good times would keep rolling onward forever and ever…

History Repeats

In spite of all the success, in the back of my mind, I was still always trying to calculate just where we were in the market cycle… Yes, of course, that’s a lot easier said than done, but hey, as individual investors, we just try and do the best that we possibly can…

Towards the end of 2014 and early 2015, my internal scale started tipping over to the bear-side of things. After I closed Rental Property SH #3 at the end of January, and watched the local housing market continue to soar, I knew that we were fast approaching treacherous territory.

By the summer of 2015, that same townhouse my partners and I had just won in January was worth at least $50,000 more than what we paid for… I was flabbergasted… in disbelief and utter shock… Did everyone (and the market) just lose their collective minds? This was insanity!

But the bidding wars just kept getting more fierce and competitive. Friends of mine who had completely shunned real estate back in 2009 (when houses were selling for $300,000 less!), were now totally engaged and hell-bent on winning something… ANYTHING!!!

While many of my peers were pressing full steam ahead, I took a step back and called, “time out”!

Instead, I did what I believe many investors forget to do in boom times — I looked back into history. I re-lived and experienced 2008 all over again. I recalled the last financial crisis and replayed many vivid scenes in my head (memories that I will never forget). I saw the terrified look in the face of my former decimated co-workers who showed up to work each morning, afraid for their lives. I recalled exactly how I felt in those most desperate of times…

This exercise, I believe, is not only beneficial, but completely necessary to help us circumvent the temptations of greed. Perhaps even more damaging than fear, greed can lead us astray and into the clutches of complete financial ruin. In times of greed, people lose their heads completely!

And I will get to that shortly…

But first, they say that history doesn’t repeat itself, it merely rhymes. I disagree with that assertion because I feel that human psychology will NEVER change. The majority of people (and investors) out there are myopic and their viewpoints on the present day are completely dictated by their current emotions and feelings.

How soon we forget the lessons from yesterday.

And that will never change.

It’s human nature.

Here’s a perfect example — Today, the median single family home listed in Santa Clara, goes for ~$1,000,000 and it attracts lines out the door during open house showings… But back in 2009, 2010, 2011, when these very same houses were selling for $400,000, or $500,000, no one wanted to touch them with a 10 ft. pole! In fact, everyone I talked to about real estate investing at that time was giving me a million reasons why I shouldn’t invest… Why take the risk? Prices will only fall further…

But today? Everyone and their grandmother is telling me to Buy, Buy, Buy!!!

In short:

When valuations are at all-time lows and cash flow is just begging to be picked up off the ground, there are no bids and ZERO interest from investors.

When valuations are setting record highs, everyone wants to win and will gladly overbid for a cash flow NEGATIVE property.

Again, it’s just simply human nature.

And if you know that people will never change, then it’s best to use this intel to your own advantage. Sure, the beat might be a little different this time around, but I assure you it’s the same song and dance as before (deja vu).

Investing Psychology 101

Fear is paralyzing.

The Fear of Missing Out (FOMO), aka Greed, is blinding.

So, now that times are AWESOME again and investors are ONLY accustomed to seeing the markets moving in one direction, they confuse their profits for brains… It feels good to be on the winning side of a trade, of course, but for myself, I will say straight-up that the more money I make, the more terrified I get!

Especially when my winning streak has stretched for 7+ years without witnessing any negative returns! Quite frankly, I don’t care how great your most recent track record is, you should ALWAYS be petrified of losing your investment principal.

By mid-2015, I had full conviction that we were again entering very dangerous times… So I did the only prudent thing that I felt that I could do when I was uncertain — I elected to focus on defense!

Defense Gets No Love

When I switched over to playing D, to somewhat of my own surprise, that transition was met with some scorn and contempt. Previous followers and supporters of this blog now felt like I had abandoned the cause and essentially betrayed the early FI way of life…

Understandably, there is a dissonance when we are grooving along comfortably and then all of a sudden veer off course and try something new and entirely different…

Sudden stops and turns are so… jerky.

So, I get that.

By no means was I offended, but it did elicit some curiosity within me… If anything, it made me question whether or not the talking heads on TV were sending subliminal messages that were somehow getting lodged deeply into our own psyche. For starters, the mainstream media is controlled by the wealthy elitists who will never inform the public of any impending disaster. As far as they’re concerned, easy money printing is healthy for the economy, gold is a pet rock, and you should ALWAYS BUY BUY BUY THE DIP!!!

You hear that garbage enough times, subconsciously or not, maybe you start to believe that underlying message?

I didn’t realize how taboo holding cash and getting out of the market at all-time highs was until I became a blogger!

We are being programmed and re-programmed, constantly, whether we realize it or not. You know, it’s funny… When it comes to something like sports (and it doesn’t matter which one), athletes are taught and conditioned to believe that you MUST learn how to play both offense and defense if you ever want to be considered a complete player. After all, defense is 50% of the equation!

In baseball, for instance, you’ll be hard-pressed to find a designated hitter (DH) reach the Hall of Fame because regardless of how great a slugger that player is, they will receive (justifiably so) a lot of flak from critics for being nothing more than a one-dimensional player. As magnificent of an offensive player that Michael Jordan was, he probably spent just as much time (if not more) focusing on the defensive side of the equation (9x NBA All-Defensive First Team). It was the combination of both offense AND defense that made him a complete (and legendary) player.

As investors, shouldn’t we know better than to just seek out ONLY offense all the time?!?

Focusing on D

These days, the markets are as volatile and uncertain as ever. Without a doubt, I’m beefing up my defense more now than at any other time over these last 7 years.

Yes, I still hold cash-flowing real estate (8 rental properties). But my revised asset allocation lets me sleep well at night and I feel that I have de-risked myself considerably.

I don’t like uncertainty! So, I’ve checked out of the stock market (cashed out of 401k, Roth IRA, and general equities) and am hoarding: cash, gold, silver, and gold/silver mining stocks right now.

I am sitting on over $100,000 in cash right now. Many investors think I’m nuts… Probably because we are all brainwashed to believe that holding cash is a losing proposition because it doesn’t earn interest… Perhaps it might be surprising to note then that cash has outperformed the stock market so far in 2015!

When it comes to gold and silver, I can’t think of a better place to store wealth than in physical bullion stashed safely away in a secure vault.

Sure, the gold and silver mining stocks are volatile and “risky”, but I would counter that they are one of the less risky investment/speculation options that exists out there at this time. When a sector has been decimated to the tune of falling off between 80% to 90%+ from its recent highs (and the sector isn’t fundamentally broken), I would argue that the risks have likewise evaporated by 80% to 90%+.

Again, it’s funny to note human behavior. Back in 2011, shares of Yamana Gold (AUY) were trading for $11.00/share and everyone was buying and recommending the stock. There were no risks then? This past summer, shares of AUY dipped to as low as $1.42/share and hardly anyone noticed… Not many folks were buying at $1.42/share because it was deemed too risky… but somehow AUY was a bargain at $11.00/share!?!

Just like with Bay Area real estate in 2012, friends, family, and others are now telling me what a crazy idea it is to invest in mining stocks at this time… But right now, to them at least, the idea of pouring more money into the S&P 500 and real estate (after such a massive bull run) is still considered a wonderful, winning strategy!

Go figure…

The Big Picture

As I’ve mentioned before, I am not a Dividend Growth Investor (DGI). I am not a Real Estate Investor (REI). I am not a Money Under the Mattress kinda guy. And I am not a Goldbug.

I am an Agnostic investor; an Early Financial Independence Freedom Fighter investor.

This means that I get to play on many different teams and wear many different hats. I am unrestricted and I can adapt to different conditions. Depending on the weather, I take on a different form and outfit…

By no means does this strategy imply that I think that I’m better than anyone else out there. Actually, it’s quite the opposite approach — I know that I’m not the smartest guy in the room, so I try and make life as easy as possible for myself. Instead of chasing after investments that require skill and don’t allow for a large margin of error, I opt for simple investments where the outcome is so certain that even I won’t screw them up.

Basically, I try to find deeply discounted and hated investments. I follow trends and market cycles, picking out investments/speculations that have a high ceiling and almost no remaining floor left in them. I search for investments that anyone with the benefit of hindsight would later call “brain-dead obvious” selections. The opportunity must be such that I can essentially throw blind darts at a dartboard and still end up hitting the target everytime.

That’s the criteria I need to succeed as an unskilled investor/speculator!

When I first started my journey to early FI in 2012, I began by focusing on dividend growth stocks. Later on, I switched over to rental properties. During that period of time, those choices were the perfect examples of buying into deeply discounted and hated investment opportunities.

But we aren’t living in 2012 anymore…

Most recently, I’ve hopped aboard the U.S. Dollar, Gold, and Silver train.

Again, this approach isn’t meant to denigrate any one particular method or approach to investing. As a matter of fact, I LOVE every single one of those aforementioned investments…

I just believe that there is a right time and a right place for each one.

I’m taking the Stanley Druckenmiller approach to diversification:

“If you look at a normal portfolio, most people will make 70% to 80% money that year on 2-3 ideas… even though they’ll have 30-40 things in their portfolio. My concept was to put into those 2-3 ideas that I had the most conviction in. I was also lucky to travel across asset classes, so I traded: commodities, currencies, bonds, and equities. And it gave me the discipline, if I didn’t have a good idea in equities, I was happy to have no equities. Or the same thing with bonds. So when you have a quiver with a bunch of arrows in it, you can usually find something to put a lot of money into.

The only other thing I’d say is too many investors look at the present. The present is already in the price. You have to think out of the box and sort of visualize 18-24 months from now and what the world is going to be and what securities might trade at.”

“The obvious is obviously wrong.”

Right now, I have no good ideas when it comes to real estate or stocks. But with gold and silver mining stocks, I have a million ideas… So, I’m concentrating on that sector for now, trying to strike while the iron is still hot.

When it comes down to it, though… really, who doesn’t LOVE passive income? Of course, I would prefer to own dividend growth stocks of the highest quality and most stable blue chip companies in my portfolio as opposed to some useless “pet rocks”… Further, no doubt would I cherish the opportunity to add even more abundant cash-flowing rental properties in Class A neighborhoods. I assure you, I haven’t completely lost all my marbles over these past few months! However, at this present moment in time, the value proposition in those other asset classes are just simply not there for me… Perhaps others can still find some gems in stocks and real estate, but I sure can’t.

And that’s the only reason why I’ve taken a hiatus from dividend growth stocks and rental properties. No hard feelings, it’s just temporary… For certain, I don’t think anything less of those investment classes… I’m just holding out for a better opportunity to get back into them later.

Again, right now, I just see a ton of value in holding U.S. Dollars, Gold and Silver Bullion, and Gold and Silver Mining Stocks.

But at some point in the future, I’m sure that window of opportunity will also close up shop and I’ll again have to search for a lower risk/higher reward outlet to turn to. Hopefully, at that time, real estate and dividend stocks will again fall out of favor with the masses and I’ll have a chance to throw blind darts again.

What can I say? As an investor/speculator, I really LOVE what is hated by everyone else…

In case you’re wondering, though, yes, I do have every intention of stopping this game of musical chairs after I’ve built up a sufficient Net Worth to sustain early FI for the remainder of my life. Whereas many early FI enthusiasts measure their progress through Passive Income, I chart mine exclusively through Net Worth.

Because if I can execute my plan accordingly, I’ll be able to convert Net Worth into Cash Flow later.

At that time, finally, I will have marched full circle, completed the early FI journey, and it is at that time that I will once again convert myself back into a true Buy and Hold investor.

Set it and forget it. I’ll be out on the beach catching some waves.

That, my friends, is the BIG PICTURE!

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4 years ago

I really really love your blog, you think very clearly. When thinking about investing I try to focus the same way as you do, trying to catch undervalued assets I think it is the best way to reach FI.

Alexander @ CashFlowDiaries

You are definitely peaking my interest in your current gold/silver thoughts. So the plan is basically buy dirt cheap now and sell high in a few years when they are back up?

How are you picking the individual gold/silver stocks out of all the ones that are out there? Just based on historical data and which ones are the best deals right now?

4 years ago

Even if we don’t choose the same strategy, I still enjoy reading the point of view on your blog. For me, the things on my plate in life are set up that I had to default to the easiest, most passive method (Buy & Hold Index) to make time for other things I have to do. At the same time, there’s other factors that push in that direction too. Such as: being 24, making compensation equivalent to about $110k/yr, and living in a very low COL area. It’s just so easy for me to save 80% of my after-tax income… Read more »

4 years ago

To me you look smart and dumb at the same time:

1) No one is brainwashed about stay always invested: simply if there’s inflation and you keep lot of cash, you are burning lot of money everyday.

2) Doesn’t you think is too early for gold cycle? Gold appreciate during recession, real economy recession. As today real economy still need to growth, meanwhile market was pushed up by low interest rate.

4 years ago

Very interesting view on the subject. I still need to study a bit more to check on how this situation can be applied in UK. But i hope you do not mind if i will recommend this post on my blog.

p.s. i just started to learn about all this at the beginning of this year, so i can see myself as a beginner FI-RE adept.

thanks for the inspiration.

4 years ago

Sorry to rain on your parade but I am one of those guys that has been questioning your recent change of attitude. I think the fact that you are only creating 2000-3000/mo on a net worth of over a million is the real problem here. All you have to do is net 10% on your capital and you have 100k/yr. Thats more than enough of a stable foundation for years to come. Getting 10% in a stable market in the midwest or elsewhere is not hard. The bay area is not a stable area. If you keep your net worth… Read more »

Joshua Myers
Joshua Myers
4 years ago
Reply to  FI Fighter

You’re right the Bay Area is better for your long term investing, but it’s not going to get you to FI as quickly as other investments. If you’re aiming for a FI “in style” by age 40, then you Bay investments are your best bet. If you’re dying to get out of the rat race in a year, you might want to reallocate a tad. As far as readers responding negatively to your “defensive” moves, I have to disagree. From my perspective buying precious metals is a pure speculation play, and anything but defensive. I have no problem including the… Read more »

4 years ago

Sorry if I was overly cynical but I am not a fan of the coastal areas with high COL. I was raised in Boston my parents have a modest house that is worth over a million. They could easily sell it and buy a bigger house for 200k nearly anywhere else. They have extremely high expenses and will have a tough time retiring because of this. Getting a lower COL is a very important step in becoming financially independent. I guess that’s the tradeoff you make if you want to live in the most expensive area of the country. Not… Read more »

Income Surfer
4 years ago

And that my friend is why we are contrarian investors. Glad you’re conscience of “Extraordinary Popular Delusions”, as well 🙂

Midwestern Landlord
Midwestern Landlord
4 years ago

Fi Fighter,

Nice article. You certainly could retire in a lot of areas in the united states (not just overseas) with $2,000 to $3,000 per month coming in plus all of your liquid assets plus knowing that your rental properties will pay down / appreciate over time. Said that, there is no right or wrong answer and nothing wrong with working on accumulating more wealth. What is your monthly cash flow goal before officially declaring early financial independence?

Dividend Hustler
4 years ago

Hey FIF. Thanks for sharing the article. Do what you think is best bud. You know your gameplan better than anyone. Slow and steady does it. You’re only 31. 31 is so young. The big picture here, You’re already doing well and already made it bud. Now it’s definitely Captial Preservation and no need to take crazy risk anymore. Slowly and SURELY, you’re create even more wealth now. There are so many people out there that havn’t even touched the Millionaire status and they’re close to 60. So many crazy shit can happen. Divorce. Sickness. Accidents. Cancer. Whatever the case,… Read more »

4 years ago

Charlie munger talks about the importance of cash optionality as well. I was wondering, what percentage of your net worth do you attribute to market-wide appreciation in real estate? I have noticed that Financial Samurai largely made his investment gains through stock speculation in the internet bubble and market wide real estate appreciation in San Fran. In other words, good luck. Of course, being in that position required saving a large portion of yearly income and a high income wall street job, but there is no denying the importance of luck for himself. He would have gotten there anyway, though.… Read more »

4 years ago

I’m one of the guys who gave you a ribbing when you transitioned to D. Mostly because you called it D and dividend growth trading or whatever. It read like cognitive dissonance. There’s pretty much no way you can call buying gold or holding cash until a crash anything other than price speculation. I think this post in which you refer to yourself as an investor/speculator is a lot more… honest. Your stated philosophy and actions can be reconciled. You have clearly always been comfortable looking for down markets and taking positions that include a significant amount of risk in… Read more »

4 years ago

It is always very pleasant to read your posts. Do you submit them to seeking alpha? Maybe you could earn a few bucks there, and more people would read about your ideas.

$2.000/$3.000 in cash flow is gorgeous, in my view.

Do you make quarterly reports about your equity/cash-flow for your self? You should, to see the evolution.

A question from a portuguese, very far from US and SF reality: when FED increase interest rates, how will that affect your cash-flow/equity. Any idea?

4 years ago

If you receive $3k/month; how are you not able to live comfortably in the South Bay as a single person? Curious about your monthly expenses.

Common Reporting Standard

Such great words from an investor.
Every entrepreneur and investor
should read this post of yours :).
This is just great :).

4 years ago

How about foreign stocks ? I’m from Vietnam and I think our stock market is still very cheap , the majority of companies has P\E below 10 ( there are dozens has P/E below 5 even ) . Ofcourse invest in foreign stock market is risky , but so is anykind of investment , and with proper research like you did with the gold and silver stocks , i think you will find a lot of undervalue stocks and assets here . Just one more option for you to think about , i have to say i’m one of your… Read more »


[…] In fact, in the summer of 2015 (around the time I first turned bearish on general equities and real estate), I started listening to various sources, trying to find some kind of philosophy (viewpoint) that resonated with me. […]