Your heresy shall stay your feet – why you shouldn’t just invest in equities

Posted on November 17, 2019 by Aussie HIFIRE

The most popular approach to reaching FIRE here in Australia seems to be investing solely in equities, either Australian only or with some international shares as well.

It’s a strategy expounded by some of the more prominent bloggers and any questions on Reddit or the like about how to invest to reach FIRE usually get a bunch of responses talking about various equities only portfolios.

Given the great returns that shares have had historically and especially over the last 10 years or so, it’s easy to see why this is a popular strategy. Which is why I wanted to write about how it’s probably not actually going to be the best idea for most people.

Quick disclaimer: As is always the case you should not plan your finances around what some random person on the internet says. Everything which is written here is of a general nature at most and is certainly not specific professional advice for you and you should not be relying on it when making decisions. Whilst every endeavour is made to provide accurate information at the time of writing you should be talking to a licensed professional about any specific areas of your finances, taxes etc. Also, it’s going to be really embarrassing if it all goes pear shaped and you have to explain that it did so because you read about something from a random blogger. Moving on!

I live in Australia, why do I need to invest in equities in other countries?

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I find the ones who are advocating heavily for non-equity investments are those planning a capital drawdown lifestyle, hence the pain of your portfolio plummeting in value.

Me, when Mr Market comes knocking at the door I'd rather tell him to push off, and then roll over and go back to sleep (on top of my big pile of dividends).

 

Statistically 100% equities is optimal. But you must have controls for the risk of drawing down at a market trough - eg holding enough cash at the right time (IE when you've FIREd) to last through the trough. Squirrels store food for the Winter, we have to be as smart as the squirrel.