#8: The ultimate FIRE calc, How to Make Money in Stocks, withdrawal rates, big lessons of last year

Andrew -

Have you heard about the FIRE (Financial Independence, Retire Early) movement?

It's a community of people (like Mr. Money Mustache) that's obsessed with controlling their expenses, growing their investments and reaching the stage where they can stop working as quickly as possible.

FIRE is about freedom. Freedom to do what you want, when you want, and with whom you want.

Sounds attractive?

Why I built the Ultimate FIRE Calculator

By my own calculations I've long achieved the FI part of FIRE (the RE part is more complicated, which I'll address in a future post), but I wanted to doublecheck the math and looked at a wide variety of retirement calculators out there.

I did not like what I found. There were lots of issues.

I wanted a clear and simple (but not too simple) calculator.

So I built one.

All you have to do is enter some key inputs and it'll immediately spit out when you can expect to reach financial independence (and any warnings if your assumptions are unreasonable):

...and you'll also find some colorful charts (one example below) to help you visualize the journey:

Try it out for yourself and see when you'll be able to retire.

How to Make Money in Stocks by William J. O’Neil (Investing Book Review)

The CAN SLIM investing system taught in How to Make Money in Stocks is based on William J. O’Neil’s study of the greatest stock market winners for over 100 years (see the Book Highlights section to learn what this acronym stands for).

CAN SLIM defies easy classification but it’s a blend of growth and quality investing using charts and technical analysis. The system aims to identify leading stocks before they make major price advances. The American Association of Individual Investors named it the top-performing investment strategy out of 50+ over the 12 year period from 1998 to 2009, with a return of 2,763.3% vs. 14.9% for the S&P 500.

Key Takeaways

  1. Do not buy a stock because of its dividend or PE ratio. Buy a stock with high earnings and sales growth, ROEs, profit margins, and which is the leader in its sector with new exciting products.
  2. Buy a stock when it is moving up and making new highs after emerging from a proper base or consolidation.
  3. Average up, not down. Buy leaders, not laggards.
  4. Stay on the sidelines during a bear market.
  5. Cut your losses quickly. The secret to winning big is to lose the least possible amount when you’re wrong.

Intrigued? Read the full review and top highlights.

Worthwhile reads

The Safe Withdrawal Rate Series – A Guide for First-Time Readers

"What I learned from my historical simulations is that you can still run out of money even if your 30-year or even 50+-year average return was way above your withdrawal rate." - Karsten

The Big Lessons of the Last Year

"Big risks are easy to overlook because they’re just a chain reaction of small events, each of which is easy to shrug off." - Morgan Housel