Can i do this?

Is it possible to invest $1.3million aud and make a steady passive income of 50k/year increasing with inflation for 35 years? I dont want to work anymore and if i sell my apartment thats how much money Ill have. I want to travel long term and need at least 50. According to the 4% rule its plenty but what I need to know is where do I invest so that i get 4%. I want to be able to make an easy withdrawal monthly.

 

Yes it is possible in theory. If you invest in something that returns 4% or more and grows with inflation.

 

Plenty of potential options. You will be exposed to serious sequence risk. IE a market crash in the first few years could bring an end to the dream.
If you were willing to potentially return to work or build up 200k cash (term deposits and short term) you could weather most scenarios.

 

You mean have 200k elsewhere as a buffer just in case?

 

i agree with Hodor , and not just a share market crash , ( a property downturn which often assects rents and credit availabilty ) a money market collapse ,

and i think a buffer ( or the option of accumulating more income when returns look stressed ) would be very wise

please note NO INVESTMENT is 100% safe , the government guarantees ( so far ) the first 4250,000 in a bank account/term deposit ( read the fine print it is a little more complicated than that )

so 'as safe as a bank ' even the government doesn't completely believe that

remember risk v. reward is a trade-off ( but not an even playing field , plenty of dangers there INCLUDING a 'safe uinvestment ' sometimes being eroded by inflation and fees )

please take care , ( it is a diffucult time to place money sensibly )

 

But I dont understand. How does one ever retire? I always thought that one day I would have enough money to not have to work anymore. To relax and enjoy life. Perhaps I was naive. Now that i have more than most people will ever have I feel more insecure, confused, daunted than ever before. I have been trying to find out information for months now and all I hear from people is that there is no real option. It all just seems fraught with risk. Im completely at a loss.

 

the sad reality is .. that many have there retirement savings destroyed in market crashes ,

in the GFC , many put cash into plantation schemes ( and not only lost the investment cash but also owed more on loans taken out to invest that cash , so were bankrupted )



i missed all these lessons mainly because i was completely occuppied with family issues and had ( at the time ) no interest in investing , and no excess cash that needed parking .

but i do know some friends that suffered major setbacks .at that time ( investments lost in Elders and Babcock & Brown come to mind )

some will try to tell you investment is easy and a steady accumulation of wealth , but there can be nasty bumps on the way , so timing can be very important

yes so far i have had successes ( and losses ) BUT the only share that performed to my predictions was MQG ( and that has pleasantly exceeded my hopes ) , the rest have succeeded ( or failed ) simply on buyer sentiment or poor management ( or despite poor management )

99% of listed companies disappear worthless

99% of listed companies disappear worthless - Cuffelinks


in 2010 i inherited a portfolio started bt a relative in the 1970s , and apart from the certificates of no longer listed companies , i received holdings in APE , CSR , QAN and WOW ( in the 'dustbin were many iconic names Ansett Airlines , MacDonnell & East , Nylex , Mount Isa Mines , Rinker , Poseidon Nickel )

i have since off-loaded QAN , but of the 4 shares inhertied the clear performer ( since late 2010 ) has been APE ( then a small cap ) NOT the three top 200 stocks in the quartet .

fear and insecurity are not bad things in investing ( it SHOULD keep your natural greed in check , ) i find a tiny bit greedy is a nice balance ..

and while our share market is testing record highs it is not built on sensible foundations ( in many cases ) so being worried currently might be a winning edge for you ( you might understand the real economy better than many professionals )

in 2011 i planned a 'hold and forget ' strategy , but in many cases that has proved unsuitable ( and i do review situations regularly , including reduceng holdings going excessively well , for unsound reasons )

HOWEVER as an investor coming to the market ( both shares and property , and this time maybe even fixed interest securities ) are near turbulent times

the Royal Commission into banks and finance companies has shown misconduct has been rife amongst our most trusted companies ( and management response to that misconducr , in many cases has been appalling ) for over TEN years

and near term ( probably in the next 18 months ) there is a risk of a major downturn as the property market is starting to go through now , and a major factor in that will be loans ( and debt ) people can't afford to pay off quickly

HOWEVER i suspect it is a brilliant time to begin learning for the next 20 years ahead .

good luck ... stay calm and learn while you watch

i suspect we are in the FOMO phase ( Fear Of Missing Out ) although some coomentators are calling this TINA ( There Is No Alternative )

 

This is all well and good but I still have no idea what to do with my money

 

It's not all bad.

Passive income of 4% is available. And there are investment options that won't go to zero in a scenario other than you want a gun and canned food for investments.

200k gives your 4 years living expenses. Plus whatever income you get from your portfolio which should increase this buffer over time.
In a GFC type scenario I would be planning for a 50% cut in the near term (so 25k a year) which should recover in time.

This would be enough for my piece of mind and a willingness to maybe work a day or two if times got tough.

I'll give some more thoughts when I get on a computer rather than phone.

 

So the 4% rule is a load of BS because theres no way to know if youll make 4% from one year to the next. I have read that etfs are a good way to go with less risk. Is this correct. I also looked at vanguards managed fund which pays monthly income

 

*** This is all well and good but I still have no idea what to do with my money ***

you share this problem with several experienced fund managers ( Warren Buffett has been sitting on $US 120 billion cash for at least 2 years now ) and also me .

i would rather have 'no idea' ( and be willing to learn and develop strategies ) than be forced to invest cash currently as some fund managers are .( in Super funds )

i am against the 4% rule ( and the concept of regular drawdowns ) and prefer to cut spending before even thinking about portfolio sell-downs ( unless you find a better deal elsewhere )

if you can find a share tipping competition ( the ASX runs one a couple of times a year ) i find them useful for testing strategies , while they are not good at picking winning strategies ( at least for me ) they are excellent at showing which strategies fail badly ( and why )

BEWARE of tipping games elsewhere that use 'pretend cash ' ( and have their own trading platforms attached )

 

4% is a good rule of thumb and historically been enough for the majority of time frames, there have been periods where it would fail, usually due to a crash near the start of retirement.

You want low cost diversified funds, many ETFs can provide this.

 

since i only had a 10 year time-frame ( when i started investing ) AND expected a crash by now

i decided a drawdown strategy wasn't suitable for me ( my guesstimated retirement portfolio would not have a lot of fat in it )

while i hold several ETFs they are not my major play ( i prefer to use them as 'in surance against my personal stock-picking adventures )

10 years ( IMO ) is too short to rely on normal market growth to increase my portfolio to a safe size ( to retire on )

 

Im thinking about this one - Investment Products

Would this be a good place to start?

 

as a solo play ???

while this looks comprehensive , how do you intend to improve your investment skills ??

if you don't develop these skills you will find difficult to discern quality investment advice when you hear it .

another possible problem is this is an 'active product ' so you face 'key personnel risk ' a good performing manager moving on to better salaries

 

I dont think i can learn investing skills. Im just not cut out that way. If im not interested in something I simply cannot focus on it for long. I want to just put the money somewhere quite conservative with low risk and not have to do anything. Is this possible?

 

Yes. And it's the best option IMO and per a lot of academic research.

 

So like where?

 

The fund you mentioned is one option.

VDHG (an ETF) is another similar product from Vanguard to think about.

Neither would fall into the conservative category however, you won't find the returns you want in that category. You will face equity risk/volatility with the returns you require.

You might find it worthwhile speaking to a financial planner that is fee for advice, not a % fee

Your biggest challenge is going to be psychological. When the market tanks, as it will at some point in the next 25 years, how are you going to handle seeing your investments get smashed?

Having 4 years buffer would give me piece of mind.

Are You Making These Money Losing Investment Moves?

You probably don't need to chase returns doing anything fancy and doing so will likely result in worse performance.

 

*** I dont think i can learn investing skills. Im just not cut out that way ***

invest like me probably not , invest in a way you find comfortable .. i believe you can

you have reached out in a sensible forum , that is an awesome start

you have over $1 million to invest ( sensibly ) you have either already done something right or someone who likes you has .

conservative , hints you should prefer to not losing big , rather trying to win big ( and not lose it all afterwards ) and that is a solid strategy considering you are looking 35 years ahead

look at the links to the websites attached , and bookmark those that catch your interest

i originally planned to buy some stuff and just wait it out , but time has many twists and turns ( or it has for me ) and it became to me i had to become my active .. and my health went downhill so i also had to rush into the bargain ( cash in the bank doesn't currently earn much )

you have some spare cash , a desire to be wise with it .. they might seem to be baby steps but they are important steps just the same

107 Best Warren Buffett Quotes On Life, Wealth, & Investing - Sure Dividend

Buffet is not the only smart head in the game , but he does tell it simply that most people can understand ... if you try the complex plans ( like tax-minimization ) you need to employ a top class accountant