What are the top 10 Commandments of Options Trading Strategies

Options Trading/Strategies

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This blog is about the top 10 Commandments of Options Trading Strategies.

Options trading is a complex and often risky business. However, by following some simple rules, options traders can increase their chances of success while minimizing their losses.

Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options’ variables. Call options, simply known as calls, give the buyer a right to buy a particular stock at that option’s strike price. Conversely, put options, simply known as puts, give the buyer the right to sell a particular stock at the option’s strike price. This is often done to gain exposure to a specific type of opportunity or risk while eliminating other risks as part of a trading strategy. A very straightforward strategy might simply be the buying or selling of a single option; however, option strategies often refer to a combination of simultaneous buying and or selling of options.

Options strategies allow traders to profit from movements in the underlying assets based on market sentiment (i.e., bullish, bearish or neutral). In the case of neutral strategies, they can be further classified into those that are bullish on volatility, measured by the lowercase Greek letter sigma (σ), and those that are bearish on volatility. Traders can also profit off time decay, measured by the uppercase Greek letter theta (Θ), when the stock market has low volatility. The option positions used can be long and/or short positions in calls and puts.

Below are the 10 Commandments of Options Trading:

  1. Do your homework. Before entering into any options trade, make sure you understand the underlying security, as well as the risks and rewards associated with the trade.
  2. Have a plan. Options trading is not a get-rich-quick scheme. Carefully craft a plan that takes into account your investment goals, risk tolerance, and time horizon.
  3. Use stop-loss orders. A stop-loss order is an order to sell an asset when it reaches a certain price point—the point at which the loss on the trade would become too great to bear. By using stop-loss orders, options traders can limit their losses on any given trade.
  4. Let winners run. Once an options trade is profitable, resist the urge to take profits too early. Instead, let the trade run its course and reap the full rewards of a successful trade.
  5. Cut losers short. On the other hand, when an options trade is going against you, don’t be afraid to exit the position and take your losses. Trying to “fight” the market will only lead to further losses.
  6. Manage your risk exposure. One of the most important aspects of successful options trading is managing risk exposure. Make sure you don’t have too much of your portfolio invested in any one security or sector. Diversification is key to mitigating risk in options trading (or any kind of investing).
  7. Use limit orders. A limit order is an order to buy or sell an asset at a specific price—the price at which you are willing to enter into the trade. By using limit orders, options traders can better control their risk exposure and avoid getting caught up in volatile markets.

8 . Be patient . Patience is a virtue in all aspects of life, but it’s especially important in options trading . Don’t enter into trades just because you’re feeling antsy—wait for opportunities that meet your investment criteria . And once you’ve entered into a trade , resist the urge to “trade emotionally” and instead let your original analysis play out . Over-trading is one of the biggest mistakes options traders can make .

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9 . Stay disciplined. Like patience, discipline is also key to success in options trading . Once you’ve developed a sound investment strategy , stick to it ! Don’t let emotions influence your trades — if anything , emotion should be kept out of trading altogether . The best way to do this is by developing a clear set of rules that you always follow when making trades . If you can do this , you’ll be well on your way to success as an options trader.

10. Have realistic expectations . Finally, it’s important to have realistic expectations when trading options . Remember : there are no guaranteed winners in options trading ! Every trade involves some degree of risk, so don’t expect to win every single time. If you approach each trade with reasonable expectations and focus on long-term success, however, you’ll be well on your way to becoming a successful options trader

What are the top 10 Commandments of Options Trading Strategies


  • Thou shall always take 100% daily gains or 200% all time gains.
  • Do not fall into temptation and buy during the first 30 minutes of market open. (Selling positions is still permitted)
  • Thou shall not buy calls on green days.
  • Thou shall not buy puts on red days.
  • Avoid greed and do not buy consecutive options on 1 company.
  • Give thyself at least 3 weeks time to play the option.
  • End your suffering and sell if down 50% all time on an option play.
  • Avoid gluttony and do not day trade options. (Swing trades allowed)
  • Be fruitful, multiply earnings and sell covered calls if holding any.
  • Celebrate and binge drink after big gains (or losses)
  • Off topic, but relevant – You absolutely need to be doing a 401k or IRA as well as investing in crypto: 401ks and IRAs offer fantastic tax advantages that straight investing does not. Also if you have an employer who matches you are leaving money on the table by not taking advantage of that. It’s foolish. Crypto is great and should definitely be in your portfolio but it should not be your whole portfolio.
    1- WallStreetBets
    2- Wikipedia

Options trading can be complex and risky business, but by following some simple rules traders can increase their chances of success while minimizing losses

Finance and Binance Breaking News – Top Stories

  • Using Roth 401k Loans instead of Bond Allocation to Supercharge Risk Free, tax-free "Returns"
    by /u/skilliard7 (Financial Independence / Retire Early) on May 30, 2023 at 6:30 pm

    Under IRS rules, you can take out a loan from your 401k, up to a maximum of the lesser of $50,000, or 50% of your balance. Under such a loan, you make quarterly payments to the 401k, with interest. The interest rate is generally based on the prime rate, + 1-2%. The current prime rate is 8.25, which means you may pay as much as 10% interest to your 401k! This is substantially better than the 4% low risk returns that bonds provide. You may realize that this isn't really a "return" - you're basically taking money out of one pocket and into the other! And you would be correct- It's essentially a tax loophole. You're generating high safe returns in a Roth account(where withdrawals will be untaxed), at the expense of your taxable balances. Loan payments don't count as contributions under IRS rules, which is what makes this work. Where this may also come in useful is using the loan to put towards a down payment on a residence. With mortgage rates at 8%, a 401k loan can mean paying interest to yourself rather than a bank. Some caveats to look out for: Some plans do not allow contributions while you have an outstanding loan, or even have a "cooldown" on contributions after a loan. Make sure with your plan provider that this isn't the case. If your employment is terminated, you will need to pay back the loan within a short period of time. If you fail to, you will pay taxes + penalties on the withdrawal. So make sure you have flexibility to pay(ideally emergency fund, but Roth IRA contribution basis can be a last resort to tap to avoid penalties on 401k) Some plans will charge a loan origination fee. Depending on this fee, it might not be worth it for smaller amounts. Disclaimer: talk to a financial advisor and your plan provider before taking any action. I am not a finance professional and this is not financial advice. It is possible that I may be incorrect on some things or missing important details. submitted by /u/skilliard7 [link] [comments]

  • Sell investments for monthly expenses to increase 401k contributions
    by /u/throwaway522561 (Financial Independence / Retire Early) on May 30, 2023 at 4:36 pm

    28/M. 150k yearly gross. No debts, I rent at a steal of a deal via family so that won’t be changing for years unless the RE market magically gets better and I want to invest. 3,500 monthly expenses/spend. Have a ~8 month Emergency fund in SPAXX. Currently I am maxing my 401k/HSA/Roth IRA and on track to contribute ~15k to mega backdoor for the year. Received about 500k in December 2021. Put all of it in VTI right at the peak of the peak. So it’s currently at a loss still. At my current rate I’ll be short of the mega backdoor contribution limit by ~20k. Was wondering if there’s any value in selling a chunk of my VTI to help pay my monthly expenses so that I can increase my after tax contribution to reach my total 401k cap. I think this would be semi short term(1-2 years)? my next job or promotion would probably allow me to max these contributions without assistance. Just trying to be as tax efficient as possible. Or maybe some would argue i’m over contributing based on my income? Would be interested in any and all opinions regarding my situation. Edit: if I did do this process. What’s the most efficient way? Should I just sell VTI as I need it? Sell a large chunk to avoid a short term dip and transfer to checking as needed? submitted by /u/throwaway522561 [link] [comments]

  • Are we crazy to stop contributing to retirement to build our dream house with cash?
    by /u/iliketwurtles (Financial Independence / Retire Early) on May 30, 2023 at 12:32 pm

    Current situation Double income no kids Low cost of living area making $200,000 gross Current house paid off No debt other than small mortgage on rental house we plan to sell for about $60,000 profit Retirement accounts currently total $510,000 We are in our mid 30s and plan to stay in this house long term. My husband works for the government and will be vested in his pension in another 8 years. My job is very high paying for this area but has layoffs annually. I'm not sure I could get another job paying this much and not have to move. We've always tried to live below our means and have one of our incomes cover our living expenses. Interest rates on building loans (7%+) would put our mortgage out of that range for the house we want to build. We have about $200,000 saved to start land prep, etc and would sell our current home once the new home is built, worth about $250,000 now. We already bought the land for the new home and paid it off. If we stop maxing out retirement for a few years, we plan to have enough savings to pay for the house with cash. Once the house is paid for, we would restart maxing out our retirement accounts. Are we crazy to miss out on the potential market gains in our retirement accounts? submitted by /u/iliketwurtles [link] [comments]

  • Daily FI discussion thread - Tuesday, May 30, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on May 30, 2023 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Advice for house/investments/big move
    by /u/Commercial_Isopod541 (Financial Independence / Retire Early) on May 30, 2023 at 4:09 am

    Throwaway because high conflict ex stalker. Here goes. We have a house valued at 450k, 4.25% mortgage. Owe 204. No car loans, pay all credit cards monthly. Mortgage is only debt. We have 120 liquid; 30k emergency fund. We are 37 and 38. We have IRAs and 401ks. Leaving those out for now for simplicity but they are managed by a trusted financial advisor and he feels confident that we are on track to at least retire in our late fifties. But, we want to be financially independent and have money working for us as soon as possible and build our future. We are faced with a big decision w a lot of moving parts. We need to move closer to my sons school, and really are out of space in this home, it was never meant to be permanent (husband and I both have 1 son each and married during the pandemic when houses were so wacky). We found a house we love next door to my sons school. He’ll be in 4th, the school goes through 8th. My step son will now have to be driven to his school but we drive him less often (50% custody) so gas-wise it makes more sense even though we can currently walk him. The desired house is 725-800k. Has income potential by way of a rental unit attached separate entrance. It is a new build with a big national builder (not free of problems but imho none are). At 10% down, we’d be looking at an almost $5000 payment. The builder is offering a mortgage rate of 5% permanent 30yr. We currently pay $1800 on our home in PITI but set aside $3200 to see how it felt, and it’s fine. That’s been happening for maybe a year now and we have just been saving it. We can rent our current home and “profit” at least 1k (granted we will be landlords and have to keep some for repairs and vacancies). A hopeful but reasonable ask for rent here is $3000. Lots of updates, decent neighborhood. We can rent the ADU on the new property for about $1400. So that scary $5000 mortgage seems less scary with these two revenue streams and it also opens the door to landlording/semi passive income which we want. And we drive less and gain more space for the growing boys. We are also looking at other ways to make revenue with our advisor which is why we prefer to do 10% down over 20%, we’d like to keep some cash to put in stocks or principal protected structured income notes. Is the new home a mistake because it’s just so expensive? Do we stay in a home that feels to small cuz it’s so cheap and just invest like crazy? If we move, we see the current home as going 2 ways. an income stream for 2 years before we sell and reinvest the money, or keep as rental long term. Either way with the low interest rate we see it as a good investment to at least keep for 2 years while monitoring the market. Goal is passive income, money that earns itself, work outside and with our hands and away from desk jobs as soon as we can. We have dreams of hobby farming (we spend all spare time gardening and chicken tending and building now). I have a side hustle in addition to a FT job, cant logically take on any more work or anything as I’m already so stretched for time. But the side hustle is good assurance against any unforeseen issues with jobs in the future, although we feel relatively stable in our careers. We make about 165000 gross per year without my side job (this is currently bringing in an extra 10 or so per year). I have several very employable career options as I’ve got a strong background in both marketing and high end executive assistant work, as well as paralegal background. Any advice is so appreciated!!! submitted by /u/Commercial_Isopod541 [link] [comments]

  • 34F - Help Me Figure Out My Next Investing Move
    by /u/minkette (Financial Independence / Retire Early) on May 30, 2023 at 3:47 am

    34F, Approximately $120K Income (partially commissioned), Single, No Dependents. --- Current Portfolio: $22K in HYSA (Emergency Fund) $243K in Traditional 401K $16K in HSA $42K in Roth IRA Mortgage - $391K outstanding at 2.75% Other than my mortgage (which I split with another family member, 50/50), I have very few fixed expenses, with a lot of flexibility in my spending. I've maxed out my Roth IRA for the year, and on track to max out both my 401K and HSA before the end of the year. It is important to note that my work offers a Mega Backdoor Roth option and they continue to do a 100% match, up to 6% Depending on the month, I typically have around $500-$1000 leftover, which I've been just putting into my HYSA for the time being. I'm in a place where I feel like my emergency fund is in a good spot, but I'm hoping to build up more liquidity for future purchases (and to have a decent amount of money not tied to retirement accounts). I have thoughts about potentially buying an investment property, but this likely won't be for a few years. More immediately, I will likely be replacing my car sometime within the next year. What is the best option for achieving this? Should I up my current 401K contributions to max this out quicker? My thinking was I could potentially use the after-tax contributions from the Mega Backdoor to fund any large purchases I may need in the upcoming years if needed, but I don't know if that is advisable. Should I open a taxable account? Is there anything else I'm not thinking of? submitted by /u/minkette [link] [comments]

  • 87.5k gross a year, only saving 31.5K a year needing advice or resources
    by /u/Additional-Egg-9436 (Financial Independence / Retire Early) on May 30, 2023 at 3:46 am

    (throwaway acct. always gotta be cautious) Will try and make it as succinct as possible with some tables I recently discovered I hate working, but not in the sense that hard work is the bane of my existence (I've worked on my car for 20hours straight just to get to work), I just want to be able to do what I want, explore different trades, and not work 40hrs a week until I am 65. I have been looking into financial independence but come from a background and family that is not a source of information or help when it comes to that, both of my parents are "forever renters", and I am constantly being asked for help being the only child with stable income; they pay me back but more recently it seems like I will be taking a loss on some help I've given (about $800). I found this subreddit looking for advice on where to put my money, and advice given my specific situation. I graduated last year, worked for a year in a business casual, boring office, then got a different gig in a remote part of the country working for an undisclosed space company that has the potential to blow up in the next decade (3x investments almost guaranteed if I don't get fired during a purge). I am investing 1% of my income additional to an unvested 75kin stocks (not options) which I will need to pay tax on once vested. I used all of my savings to move to this part of the country for this opportunity, and am barely out of the red. I've got 2 dogs, I take pride in maintaining my home and car, and don't enjoy the typical early 20s lifestyle expected by my family. I want to enable my friends and family to come and visit and ideally I want to start my journey asap to FIRE. Ideally my goal is to build enough passive income to enable me to move to the Rockies with my dogs on acreage and build a home that is self sustaining (solar, well, tools etc., a place for loved ones to come and enjoy). and do this by the time I am in my late 30s. I also desperately want a new truck at some point (I want to have something that is truly mine from the beginning). My current short term plan involves saving the 3.5% down for a 203k FHA loan or FHA construction to permanent loan + closing costs, buying a larger plot (~100k) and building a garage with an studio apartment on top. This would enable me keep my 20y/o car on the road, and might be the cheapest option for housing while keeping my car garaged. However I don't know the correct investment vehicles that will allow me to achieve the goal, and retire early. Is it possible for me to build a smaller home to live in that is my own (I hate renting, asking to modify the home to be better, paying off someone else's mortgage, literally throwing money in the trash). Where can I start to find the passive income sources? Should I pay off my student loans now before attempting to buy land or a house? How should I reframe my mindset? ​ TLDR: 23yo recent grad have opportunity to invest 15% per pay period into a certain space company (investing 1% Currently) Want to own my home while I gather savings What are some places to look for investing and gaining passive income? is home ownership reasonable/worth it in the current stage of housing economy? am i doing something wrong in my breakdown below? Debt AMT($) Credit cards (want that 800 credit score) 600 Student loans Private (7.4% interest) 13k Student loans Federal (4%) 25k Invisalign (0%) 4k ​ Income/Savings AMT($) 87.4K Annual gross 69.1K (Post Tax) Savings (2% yield) 31.5k a year Current Savings balance 2400 FSA Contributions 3500 (Invisalign =/) 401K 5300 Stock Vested 15k a year (fully in 5 years no dividends) 75k Monthly income Net ~5400 ​ Expenses Est. AMT($) Pets 100 Rent 1600 Gas/Car 200 Insurance 97.68 Utilities 150 Entertainment 150 Internet 55 Phone 41.42 Food 460 other 100 Student loans (increase to 426 after payment pause) 173 Total Expenses 3127.1 submitted by /u/Additional-Egg-9436 [link] [comments]

  • 37/M/Married - Year 0 of an immigrant chasing my version of the American Dream
    by /u/Jazzlike_Security_63 (Financial Independence / Retire Early) on May 30, 2023 at 12:25 am

    **Background:**37 M, based out of the Northeast, USA. I chanced upon this sub just about 1-2 years ago and found myself reading it more and more often. Due to recent life events, I’ve finally decided to well and truly commit to pursuing FIRE. I’ll make a yearly update post to hold myself accountable and in case anyone can benefit from any ensuing discussions!I came to the US for college and graduated in 2012. I’m a Program Manager at a FAANG currently. I live in a VHCOL location and wasn’t in a position to start contributing towards retirement until 3 years ago and am trying to play catch up now.I struggled in college due to depression and subsequently was hampered due to the constraints of immigration and the uncertainty it imposed. My way of trying to overcome these was to work really hard (think putting in 70 hour work weeks).My desire for FIRE comes from wanting to achieve better balance, although I continue to want to do well at work, I want to track towards no more than 50 hours per work week and investing more in my health and building a life with my wife and as we expect a baby next year. I also want to be in a better position to be able to provide for my parents who poured their heart and soul into raising me, having come from nothing. ----------------------------------------------------------------------------------------------------------------------------------------------- Income Journey: 2013: $15k, 2014: 42.5k, 2015: $57K 2016: $75K 2017: $91K 2018:$35k (couldn’t work for most of the year)2019: $115K 2020:$135k 2021: $165k 2022: $206k (excluding RSUs) 2023: $199k (excluding RSUs)Rental Income began from mid 2022 and is $2580 a month.Partner makes $100k currently ------------------------------------------------------------------------------------------------------------------------------------------------ **Objectives for 2023:*** Reach $150k in investments by 2024* Create a 3rd income stream to reduce dependency on salary/mitigate RSU volatility ------------------------------------------------------------------------------------------------------------------------------------------------ **Current Assets:*** Emergency Fund: $15k in a HYSA at 3.9% * Checking Account: $5k for buffer always * Vanguard (Taxable investments): $50k (VTSAX) * Fidelity: $67k in total ($36.7k in 401k, Vanguard S & P 500 Index Fund + Vanguard Small Cap Index) $23.6K in Rollover IRA in Fidelity Large Cap Growth Index, $6.6K in Roth IRA in total market index fund). * RSUs (vested): $1.7K * Allocation: 10% Pre-Tax 401k, 5% Roth, 15% After-Tax 401k * Partner’s paid off car which we share **Current Debt:** * Primary Residence Mortgage: $742k ($697.2k left), 30 year mortgage at 2.99% (Ends at August 2051) - Currently worth $950K * Rental Property Mortgage: $400k ($302.4k left), 30 year mortgage at 2.75% (Ends at April 2051) - Currently worth $540K * Credit cards are paid off in full every month **Monthly Costs:** * Rental Property Mortgage: $1456 * Rental Property HoA + Insurance: $225 * Primary Mortgage: $4200 * Phone Bill (Google FI): $80 ($50 is reimbursed by work) * Train Monthly Pass: $250 (reimbursed by work) * Groceries/ Food: $500 * Electricity: $300 (Average and paid by Partner) * Oil: $125 (Average and paid by Partner) * Water/Sewer: $30 (Average and paid by Partner) * Misc: $100 Edit: I was with the same company between 2014-2018. It was a smaller firm and I put in the work (long hours + being excessively invested) and was fortunate to have it be appreciated via the raises for that period and am still able to consider many of my former colleagues friends. submitted by /u/Jazzlike_Security_63 [link] [comments]

  • Daily FI discussion thread - Monday, May 29, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on May 29, 2023 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Does it make sense to utilize a 529 prior to maxing all retirement accounts?
    by /u/Jr712 (Financial Independence / Retire Early) on May 28, 2023 at 10:01 pm

    I have a 2 year old and am considering opening a 529 account. Currently my spouse and I max out one 401k and 2 backdoor roths. We have enough additional income to partially fund the other 401k or a 529 but not both. The other 401k is a solo 401k for my spouses business so we would be making Roth contributions due to the QBI tax deduction. I'm wondering if we are best off sticking the funds in the other 401k and then using a combination of cash flow and Roth IRA contribution withdrawals to fund our child's future college rather than utilizing a 529. FYI we live in a state with no state income tax so no benefit to the 529 there. Reasons: 401k has slightly better long term spend flexibility 401k won't affect our child's financial aid eligibility, although if we haven't retired early by that time then our income will probably disqualify any aid anyway. Thoughts? Editing to state what I've already said to multiple commenters. I'm on track to FIRE well before 50 regardless of what I do with these funds so it's not really a question of "should I rob my 401k to fund my child's college expenses" and more a question of "where am I best off parking these extra savings which will be used to help with college either way". submitted by /u/Jr712 [link] [comments]

  • Lack of motivation after FIRE. Is this common?
    by /u/livelyyyyboat (Financial Independence / Retire Early) on May 28, 2023 at 7:04 pm

    I'm 40 and have enough to FIRE. Got 2 young kids and still in a job. However these days I don't feel like doing anything. Making any more money has become meaningless. After spending 20 years of hard work trying to get here, I suddenly feel no purpose or motivation to do anything. Has this happened to others? How did you overcome it? submitted by /u/livelyyyyboat [link] [comments]

  • How am I doing
    by /u/SwingComfortable7180 (Financial Independence / Retire Early) on May 28, 2023 at 3:27 pm

    This is a throwaway account. I have been reading the FI subreddit for some time but first time posting 38 years old, married with 2 kids, single income Current expenditure after tax is between 90-100k p.a. of which 29k is housing related. split 50:50 between interest payment and amortisation on our house which we bought for 1.6m and we have 1.14m in mortgage on it. We fixed the mortgage is 1.3pct p.a. for 10 year which has 5 years remaining. In retirement savings we have 128k, in cash we have 417k (i dont buy just indexes and hope to be fully invested within end of the year). In stocks we have 2.7m all in all a net-worth of 3.7m what concerns me is I will likely pay twice as much as i currently pay in mortgage payments in 5 years time, although i plan to put some cash aside between now and then to pay the principle down or alternatively stop working and move else where and I have two young kids who also in about 5 years will likely got to a private school which is and additional 25k a year Given a likely further increase in my living expenses in 5 years time, does RE make sense this year? ​ thanks submitted by /u/SwingComfortable7180 [link] [comments]

  • Anyone else planning for more control over how and when their life ends?
    by /u/GotTheC0nch (Financial Independence / Retire Early) on May 28, 2023 at 2:36 pm

    After watching several 85+ year olds close to me die slowly (at extreme expense), I began reading about ways to improve my chances of ending life on my own terms. I don't judge others for how they navigate their end of life decisions. These decisions are tough, and their decisions are none of my business. But I'll be damned if I'm going to spend my last $X00,000 prolonging an increasingly uncomfortable life that I've concluded is no longer worthwhile. I obviously can't guarantee myself full control over how and when I die, but I'm taking comfort in having several plans that greatly reduce the chance that I painfully dwindle toward death more slowly than I'd like. For some loved ones, I've watched this painful dwindling take years. submitted by /u/GotTheC0nch [link] [comments]

  • Just a reminder that the 4% has been revised to 4.7%, by it's creator
    by /u/supremelummox (Financial Independence / Retire Early) on May 28, 2023 at 10:50 am

    https://www.thinkadvisor.com/2022/05/09/bill-bengen-revises-4-rule-says-to-cut-stock-and-bond-holdings/ The active subscribers probably know this, but it's specified as the 4% rule in most of the wikis, so it was a big surprise to a new subscriber like me. And it does make a big difference to the time I'll need to be working. Update: One more article for the nay sayers https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/ submitted by /u/supremelummox [link] [comments]

  • Bond ETF=roller coaster ride....
    by /u/Master-Entrepreneur7 (Financial Independence / Retire Early) on May 28, 2023 at 10:33 am

    Put 40% of portfolio in well rated ZAG canadian govt bond ETF in March to use for stable retirement income/capital preservation. Value has dropped 3.4% in 2 months (correction from original post). Interest rates have been stable so I'm surprised. I know April CPI was higher than target so is this an anticipatory drawback? If so, then bond etfs are much less stable and prone to market swings/sentiment than I expected. Doesn't this volatile bond ETF model defeat the whole purpose of bonds in portfolio? Would holding on to recoup initial investment value, selling ZAG, then purchasing laddered bonds directly be a better plan for stability? If I wanted this kind of volatility, I would have gone all in on equities... *Thanks for the insights. I mistook total value drop for percentage. It is actually 3.4% not 10%. Not as bad as I thought but still seems a big swing in a short time. I am a new investor so maybe overreacting. submitted by /u/Master-Entrepreneur7 [link] [comments]

  • Daily FI discussion thread - Sunday, May 28, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on May 28, 2023 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • What are your recommendations for our financial plan moving forward? We are just starting out
    by /u/ExtentImpossible4416 (Financial Independence / Retire Early) on May 28, 2023 at 5:27 am

    Long post. My wife and I both grew up poor and have next to zero financial knowledge. I’ll give a little background about where we’re at, what we have planned for the next few years, and I would really appreciate advice and suggestions about where we should go from here. Background of where we are at now: My wife and I are both 26 and have no kids yet but plan to within the next few years. I’m military (E-4, ~3k with my special pays after tax) and my wife is about to start a GS-6 with a locality pay that brings her a little below 50k/annually. We have 25k student debt in the government loans for my Bachelor’s and my wife’s nursing program, however, it would all go away if student loan forgiveness is upheld this Summer. Not really counting on that, though. We are about to start a $140-160k mortgage (still deciding down payment) on a property and home of about $250k in value. We got a big family discount and intend to hold on to this home as our family home once we get back full-time in 6-10ish years. Both of our cars were paid in full with cash and are good for the foreseeable future. We presently live in base housing so our housing and utilities are a set amount each month and removed from my check. The home that we are in the process of inheriting/buying will have a house payment around $1,300-$1,500 for 15 years depending on the home insurance we’re able to find and if we’re able to get the property tax discount. It will have a mid 5% APR. We would like to pay this down quickly and we estimate we could probably do so in 7-10 years. In addition to my wife living in the home while I’m on deployments and such(she will take a leave of absence from her main job, will likely do short term contracting for a higher wage during this period) a sibling of mine will be staying in the house full-time as a caretaker until we return in a few year and they will be paying around half of total payment plus utilities. Raising the rent any higher for them is not something we will consider. I’ve recently started receiving TSP match for my military retirement account and only recently began contributing meaningful amounts for my portion. I’ve got it going with 5% Roth and the government matches 5% (which goes into traditional I believe) so I have 10% (~$300) of my pay going into TSP each month. To date it’s about $2.5k. My wife is beginning her federal job soon and will also have access to starting a TSP. We will have around 15k left in a MMSA account that has 1.1% APY after our down payment for the home. After taxes, my Roth contributions(wife hasn’t started her TSP yet), and all of our bills are paid we’ll have between $6,000-$6,500 extra each month. That doesn’t include home owning costs which will start in late Summer. After including my sibling’s rent ours will be ~$750 per month at the highest. Where we see the next few years: I have a little less than 3 years on my current contract but I’m considering a 3 year re-enlistment if the proper conditions are met. I’ll be promoted to E-5 in less than 2 years and then E-6 if re-enlist. I then intend to switch over to the reserves as an E-5/very close to E-6 or commission if the timing allows. It would depend upon unit location, school start, and healthcare costs. It will be hard to give up Tricare with a family, plus I’m content staying in the military until reserve retirement or until I get my professional career up and running. Once I get out I intend to go to medical school (I’ve been accepted to one in a low COL area, will immediately commission into the reserves in a program specific to medicine with this option) or law school (will only consider the top few schools and they are mostly in high COL, will most likely stay reserves until around graduation). We intend to buy a home in whatever city I do one of these programs in. The GI bill has a good housing allowance(E-5 BAH at school zip code) and the entirety of tuition for all of the schools that I’m considering. I plan for us to have a significant amount of savings by this point and my wife plans to work at least part-time (if we have kids by then) while I’m in school and she might be around a GS 7 or 8 by this point, or she might switch back to contracting. She wants to take off a few years after I finish professional school to stay home with the kids when they are young. I absolutely support this and it’s possible that she never returns to work. I’d like to switch down to part time work in my late 40’s/50’s. We plan to see a financial advisor on base within the month for a short term plan but I’m interested in a variety of recommendations and outlooks for our long term plan. Where to we go from here? What are some benchmarks for savings that you recommend for our situation? What do you recommend for our TSP contributions? What timeframe do you recommend for paying off the house? What extra investments do you recommend? What are your recommended financial literacy resources? Basically, where do we go from here? submitted by /u/ExtentImpossible4416 [link] [comments]

  • Lonely millionaire in Alaska - advice needed
    by /u/Critical-Flounder-78 (Financial Independence / Retire Early) on May 28, 2023 at 4:10 am

    Hi there, I’m a family doctor who decided to move to a remote oil town in Alaska about 8 years ago. The bonuses for working here are insane (and the taxes are low). In a typical year I gross $800,000 in earnings which compares to an average ~$200,000 income of a family doc in New York State. Once you consider professional overhead expenditures, taxes, and living expenses, I end up with about 15 times more “retained wealth” at the end of the year by living in this community than I would in New York. The problem is that I’m pretty damn lonely here. My life is work, 7 days a week. I miss my family (parents, siblings, nephews and nieces) in New York. No luck with meeting people or starting a family of my own here (so far). I am 35 this year. I’m further tied down by the fact that I decided a few years ago to pour about $2 million into developing a big 5000 sq. foot Medical Center here. I do love managing it and I love my employees. It’s become a profitable venture. Most of the other health professionals in town have set up shop at my center and I take a percentage of their overhead income. I also lease out space (at a premium rate) to a pharmacy and physio clinic. In addition to having this medical center as an asset, I’ve also saved up about $1.5 million and have it invested all in low cost index funds. Technically, I could get the best of both worlds by visiting my family in New York, but it’s an exhausting trip that I can’t do more than a couple of times a year. How much longer should I stay here? The money is so damn good, I love my job, I love running a medical center. But I feel desperately lonely. (NOTE- my future financial goal is to build a similar medical centre in New York near where my family lives The problem is that Property is crazy expensive in that place. To buy a decent quality 5000 ft.² facility, it would be about $3 million at least). submitted by /u/Critical-Flounder-78 [link] [comments]

  • Daily FI discussion thread - Saturday, May 27, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on May 27, 2023 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • Pensions, WEP/GPO, and Social Security
    by /u/ChillyCheese (Financial Independence / Retire Early) on May 26, 2023 at 10:40 pm

    My spouse has around $100k in refundable contributions to a state pension, for a job that did not pay into social security (California Teachers' Pension). This was about 16 years of service into this pension, and she has left the state and will never contribute to it again. We plan to retire in about 5 years, and she'll have maybe a few years of total contributions to social security from other jobs. Due to Windfall Elimination Provision law, if she attempted to collect half of my social security at retirement age, her pension would reduce the amount to nearly $0. If I die before her, the Government Pension Offset would likewise reduce her ability to collect my social security significantly. Her pension has around a $25k/year annuity value now, and will not get inflation adjustments until she starts collecting it at age 60. At that point it gets a 2% p/a inflation adjustment but only on the original benefit amount, not compounded. So 20 years from now I expect the real value to be about $15k/year, with decreasing value every year. From my understanding, if she requests a full refund of all pension contributions it will be like she never had pension. She can then roll those funds into her 403b and invest as normal, maintaining the tax-deferred status. At retirement age she should then be able to fully claim half of my SS, and not be affected by WEP/GPO. Between 4% withdrawal of the future value of $100k, and the pension amount, I think it's about break-even. Add on getting half my social security, and it seems like a no-brainer to refund the pension. There have been some hints of bills that would get rid of WEP and/or GPO, but they seem to have died a few years ago. Who knows if they'll come to pass in the next 20 years. Anyone who is more knowledgeable in this space that can double-check my plans? submitted by /u/ChillyCheese [link] [comments]

  • Madfientist: The Problem with the 4% Rule (and Why You Could Retire Even Sooner)
    by /u/bonafide_bonsai (Financial Independence / Retire Early) on May 26, 2023 at 1:18 pm

    https://www.madfientist.com/discretionary-withdrawal-strategy/ This challenges much of the thinking that a sub-4% withdrawal rate is necessary for early retirement. Main points: Early retirees can still find work if needed if things go south The 4% rule is actually 4.8% for a 30-year retirement, so likely about 4% for a 40-year+ retirement Discretionary spending further revises this calculation upward. As an example, if 20% of your withdrawal is discretionary, you are likely closer to a 4.25% withdrawal rate submitted by /u/bonafide_bonsai [link] [comments]

  • Daily FI discussion thread - Friday, May 26, 2023
    by /u/AutoModerator (Financial Independence / Retire Early) on May 26, 2023 at 9:02 am

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. submitted by /u/AutoModerator [link] [comments]

  • How much of your net income do you save?
    by /u/Strang3r_Online (Financial Independence / Retire Early) on May 26, 2023 at 1:32 am

    I’m curious how much of net income others put into savings account. I’d like to get an idea of how much others put into it. Currently cash I have excluding my liabilities and investments is about a years worth my monthly expenses. Majority of it is in checking, got about three months worth in a high yield savings account. A few CD’s. I was thinking of putting more of my money into the high yield savings account. Say roughly half of my cash. Or do I keep majority if it in my checking? It’ll hedge a bit against inflation, if taxes don’t go crazy on the interest I make. submitted by /u/Strang3r_Online [link] [comments]

  • Any good calculators for defined benefits retirement plan (aka "traditional" pensions)?
    by /u/TheAmericanIrishman (Financial Independence / Retire Early) on May 25, 2023 at 6:51 pm

    So my situation is a little bit unique. When I was hired by my company 12 years ago, they were in the middle of a transition from a traditional pension plan to a more normal (by today's standards) 401(k) plan with company match. There was a narrow band of people who were hired in the middle of the transition who were grandfathered into the old plan while also being eligible to participate in the 401(k) matching, and I was one of those lucky people. Unfortunately, I have a hard time thinking through how I should value my pension in my overall progress-towards-retirement portfolio. I can run a simulator in the tool that says "if I keep working X years and get an average raise of Y% every year and retire at age Z, my monthly pension payment will be P" but I'd prefer to automate the process with some kind of calculator using the company's pension formula that I can update in real time. Then I'd be able to run Net Present Value calculations on the future cash flows to calculate my progress towards FIRE. Open to suggestions. submitted by /u/TheAmericanIrishman [link] [comments]

  • [25m] Have I been investing too much of my money? Need advice.
    by /u/ridlehprime (Financial Independence / Retire Early) on May 25, 2023 at 5:50 pm

    I graduated college and started working in 2020 making 65k. Not knowing what to do with all of this money, I did some research. I followed the personal finance flowchart and discovered FIRE. Since then I every paycheck I've put a portion into savings, some into checking and the rest into investments. When I told my parents this back in 2020, they were fine with it. Though they warned me not to "put all of my eggs into one basket" and invest in real estate as well. I did not, and still not, want to get into real estate since in my mind putting money into an index fund every 2 weeks is significantly easier than dealing with real estate. Fast forward to today and I have close to 100k total across all investment accounts (roth ira, individual stocks, and taxable brokerage. Job does not offer a 401k) and 12k in my savings account. I told my parents about this, as this was a great milestone to hit, but they were more shocked than happy. They told me that i've put too much into my investment accounts and that by this point I should've had easily more than 50k in my savings account, because if/when an emergency happens the money in my investments won't save me. I told them I have 12k in savings, and that's more than enough to cover living expenses and emergencies but they wont budge. They see investing as gambling your money more than anything else. I think there's value in their advice, given that they have more years of experience paying bills and dealing with money than I've been alive, but at the same time I believe this is the best thing I can do right now in terms of helping future me financially. I recognize that I will (probably) never get this opportunity again to save so much of my money once I move out and have to deal with rent and bills, so it makes sense to try and save/invest as much as I can. Its not like I've been forcing myself to live off of 100/week, I very often splurge on uber eats, video games, clothes etc. because everything left over after I save and invest can go towards whatever I want. So sorry if this was too long, I just wanted to reach out to the FIRE community to get different perspectives/opinions on my situation, and what I can be doing better moving forward. submitted by /u/ridlehprime [link] [comments]

  • Can someone educate me on a back door Roth IRA?
    by /u/Nudol (Financial Independence / Retire Early) on May 25, 2023 at 3:48 pm

    So I understand that a Roth IRA has a income limit and once you pass that, you are not allowed to contribute. A back door Roth IRA is just converting a Traditional IRA to a Roth IRA. So you would open a Tradition IRA then put the money in that then converted to a Roth right away. So what I am confused on is; would this be a one and done type of thing? Such as, once you do this conversion, are you able to freely invest in the Roth? OR would you need to do this process every year? This leads me to my next question, What if you already have an existing Roth IRA? Would you just transfer the money from the backdoor Roth to your primary Roth account? Lastly, if you do just transfer money each time. Then what happen to the conversion account? Would you open a traditional, convert, transfer, then re-convert the "back door Roth" account back to a traditional then wait until the following year to repeat the process? Thank you for any explanation!! submitted by /u/Nudol [link] [comments]

  • The Official 2022 FI Survey is Here
    by /u/Melonbalon (Financial Independence / Retire Early) on May 5, 2023 at 2:11 am

    THE RESULTS AREN’T IN YET…DON’T ASK… Ok, now that that’s done…the official 2022 FI survey is now available. For those that are new here, this is a quasi-annual tradition for this sub. For previous results, go here. This post will be a bit long, so buckle up. ALL data will be released in a spreadsheet to the sub. If you’re not comfortable with that, don’t take the survey. Whenever possible, identifying information (such as age) is obscured in ranges. The survey does not ask for location, username, email, or other unique information, so your privacy is reasonably protected. Because there are several numbers involved, here is a preparation spreadsheet you can use to organize your information before opening the survey itself. Survey Instructions These instructions are also available on the first screen of the survey, but you may want to keep this post open in a separate tab to refer back to them***.*** Throughout the survey each section includes instructions at the top of the page as well. The survey will take 15-30 minutes to complete, depending on how prepared you are with your numbers. Enter all annual information for calendar year 2022 (January 1 – December 31, 2022). Enter all point in time data (like account balances) as of December 31, 2022 (or as close thereto as you can get). Enter all amounts in current dollars (or your native currency). Remember that personal finance is personal. Enter your numbers as you interpret them, personally. If you really get stuck, I will be watching the posting thread and answering interpretation questions as able. Because personal finance is personal, some buckets may not be precisely consistent with your personal buckets. The survey is long, and asks for a lot of information. You can skip to the end to submit, which will then provide you a custom link to come back to your answers and edit them. The survey will be available for the entire month of May. Enter dollar amounts as a whole number, appropriately rounded. E.G. $32,594.56 is entered as 32595, with no commas. Enter percentages as a number, not a decimal. For example, 4% is entered as 4 (not .04), 20.5% is entered as 20.5 (not .205), etc. Symbols for dollars ($) and percentages (%) are not needed. At the end of the survey, you will be asked for any comments on the survey. If you had issues with a question, please refer to it in your comments by the question number. Because the survey does not ask for identifying information, I will not be able to follow up with you, so please be as specific as you can about the issue or difficulty you encountered. The survey asks how many people contribute to your household finances, and thereafter your responses should include all assets, debt, etc. belonging to those people. You determine the number of people who contribute to your finances. Demographic questions include demographics for "contributor 2" and "contributor 3", if you have more than one person contributing to your household income, you can include their demographic information there. Almost all questions are skippable; if a question does not apply to you or you haven't yet determined the answer, skip it. Now that you’ve read all that… you can go take the survey! IF YOU ARE ON MOBILE - OPEN THIS AND NOTE YOUR COST OF LIVING BEFORE STARTING THE SURVEY. submitted by /u/Melonbalon [link] [comments]

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