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:

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  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 .

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


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What are the top 10 Commandments of Options Trading Strategies

Furthermore:

  • 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.
    Sources:
    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

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    by /u/Simon_Inaki (wallstreetbets) on May 26, 2024 at 5:25 pm

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    by /u/AutoModerator (Financial Independence / Retire Early) on May 25, 2024 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]

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    Hi all, I long wondered what the opportunity cost would be if you choose to save for a 20% down payment opposed to saving for your first $100k. I decided to do an analysis. $100k is likely the first milestone most people strive for. This is a raw analysis and probably does not consider all factors. I've longed believed that every young adult should do anything possible to get 100k invested as soon as possible. The compounding of 100k saved in your 20s will do most of the heavy lifting of compound interest into your 60s. However, I welcome feedback on how I can tweak the calculation to be fully comprehensive. What works for me may not work for you. Personal finance is personal. Your journey will certainly look different than mine and that's okay! For the first part of the analysis I researched the cities with the highest home price-to-income ratios and conversely the cities with the lowest. (Cities included in the highest: LA, San Jose, Long Beach, San Diego, New York, Miami, San Francisco, Oakland, Boston, Seattle, Portland, Denver, Tucson, DC, Austin. Cities with the lowest: Detroit, Cleveland, Memphis, Wichita, Oklahoma City, Baltimore, Tulsa, Indianapolis, Kansas City, Louisville, Philadelphia, Milwaukee, Columbus, Omaha, Chicago). I calculated the ' median home price ' by using these ratios * the median income in these cities. This may not be completely accurate, but I believe this is accurate enough for the sake of this post. For this analysis, the average time to reach 100k in investments in the cities with the highest income-to-home price ratio (assuming 20% savings rate of median household income in city & 8% rate of return) is 5.10 years. The average time to reach a 20% down payment for a home in these same cities is 7.55 years (assuming 3% return & the same 20% savings rate). Assuming you never contribute to your retirement after reaching 100k, you would have on average $1.381m invested at age 60 (if you started investing at age 22). If you decided to wait to invest for 100k AFTER obtaining a 20% down payment, you would have $761k at age 60. On average, the opportunity cost would cost you about 620k. The average time to reach 100k in investments with the lowest income-to-home prices (assuming the same variables as above) is 6.33 years. The average time to reach a down payment in these cities is 3.24 years! Again assuming you never touch your $100k again after reaching it, you will have $1.253m at age 60. If you saved for a down payment first and invested afterward, you would have $968k at age 60. The opportunity cost is much smaller in the cities with an average of 286k. It's no surprise that the 100k will grow less the longer it takes to get there but what do you think about this analysis? There are so many factors missing in this post. For example, home prices increase if you decide to wait. Interest rates increasing/decreasing, rate of return, etc. Let me know your thoughts! submitted by /u/TehM0C [link] [comments]

  • Understanding 401k rollover if it 'has roth money in it'
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  • Deflation Never Happens, Except Right Now
    by /u/Well_Socialized (Financial news and views) on May 24, 2024 at 6:04 pm

    submitted by /u/Well_Socialized [link] [comments]

  • Looking for advice for where I am at financially and where I need to be
    by /u/Detroitsaab (Financial Independence / Retire Early) on May 24, 2024 at 5:11 pm

    I'm 32M (married) living in a average cost of living city (Metro Detroit Area) with about 450k net worth. Annual salary is $114k. Wife makes about 30-40k a year. I also have a sole-prop business which had $60k in sales last year (about 50% profit) that I run out of my basement. Been working in the engineering field since 2015 starting around $80k salary and moving my way up since then. Currently in a indefinite contract position with limited benefits and currently looking to move to a direct hire (preferably at a automotive OEM) to gain much better benefits. My goal with this post is any feedback or suggestions to improve my situation. My current numbers are as follows: • $7.5k Roth IRA • $184k 401k • $12.5k HSA • $3k stocks • $21k in savings • House is a unique situation, use to be owned by my grandparents, transferred to my mother and am privately purchasing from her making monthly payments. • House valued around 330k • Owe her still around 130k on it at 0% interest, $1200 monthly payments • Business is a toy resale business has an inventory cost of $115k • Own 3 cars total (2 paid off, one owes $5k) I'm trying to figure out my next steps to improving. I currently deposit 10% of my salary to my 401k, I will randomly contribute to my Roth IRA and deposit $220 a week into my HSA. I invest most of my time into my business along with a large percentage of my disposable income. My hobby also aligns with my business and also includes my 3rd car as an automotive enthusiast. We do eat out a lot which hits my monthly income but am working on reducing that spending. Monthly take home from paycheck is about 6k a month and I would say about 5k is expenses. My thoughts has been to continue to invest in my business as it is growing (60k in sales last year, probably going to be around 70-80k this year but is hard to tell) as well as invest more into some ETF’s through my stocks (Robinhood) as I am seeing decent growth over the last year or two. For the house we are comfortable in it but may want to build a barndo eventually further out of the city, which will be a huge expense but would be our forever home. My long term goals are to retire from my engineering career hopefully in the next 10-15 years (or sooner) after my business grows enough to support my family. I have a fear that I might not be far enough along at 32yo where I currently am at. Any other ideas on where I should put my money or anything specific I should be doing to improve my situation or if I might be a bit behind or anything of that nature? submitted by /u/Detroitsaab [link] [comments]

  • What's a good tax planning strategy for FIRE w/ spouse still working?
    by /u/CP_615 (Financial Independence / Retire Early) on May 24, 2024 at 4:39 pm

    Hi Everyone, should I change any of my contributions for future tax planning? My goal is to FIRE at 48 but my wife will likely still be working with moderate salary ($65k/year). I'm only contributing to my 401k at the moment and my loose plan is to do Roth conversions when I FIRE. Between my wife's income, selling my employers stock when I leave, and Roth conversions, it looks like that could be a high taxable income. Would it be best to max out my Roth IRA contributions and then put the remainder to 401k? Other ideas? My employer also offers Roth 401k. I am 32m, married, no kids. Combined Gross Income $140k. Current Expenses: $40k (just me, not combined) Current Investments: Traditional IRA: $15k (rollover from previous employer) Roth IRA: $67k HSA: $2k (I no longer qualify to contribute) 401k: $81k Employer Stock: $8k By age 48, given current contributions and 7% gains, I’m projecting assets to be: Traditional IRA: $41k Roth IRA: $185k HSA: $6k 401k: $959k Employer Stock: $227k (this is a rough guess) Estimated Net Worth = $1.4M I’m loosely planning for $50k post-FI annual expenses @ 3.5% SWR. submitted by /u/CP_615 [link] [comments]

  • My Second Major Update: Nearly 10 years in, and my, how things can change!
    by /u/NewJobPFThrowaway (Financial Independence / Retire Early) on May 24, 2024 at 2:23 pm

    I realized earlier this month that my Reddit account is now 10 years old, which means that I've been on my FI journey for about 10 years now, as this account's creation was somewhat inspired by the start of a new job and the financial questions that arose from finally making enough money to start seriously thinking about early retirement. My last update post was about five years ago, so it felt reasonable to make another. Especially so, since things have changed so much since the last one. Put shortly, I've fallen victim to lifestyle inflation. I'd phrase it moreso that I'm "Building the life that I want", and realizing that life includes far more travel and more expensive experiences and things than I'd expected I'd wanted earlier in my life. However, many of my priorities have not changed. Travel and gifting have stayed at the top of my list of discretionary expenses, and while my income has somewhat stagnated and my savings rate dropped, I've still ensured that I'm at least able to max out all of my tax-advantaged savings avenues. Another thing that I'll mention is that my partner, who I referenced in my two previous posts, is no longer in the picture, so the numbers described in this post are mine alone. We amicably divorced during the height of the COVID pandemic - a period of time that was incredibly difficult for both of us, made doubly so by how difficult it was to safely spend time with friends and family, all of whom were incredibly important support structures for us. Fortunately for both of us, the financial impacts of the divorce (both then and now) were kept to a bare minimum. Category 2014 Value 2019 Value 2024 Value Income $110,000 $225,000 $265,000 Expenses $50,000 $66,000 $90,000+ FI Target $1.5 mil $2.0 mil ¯\_(ツ)_/¯ ($2.5 mil, give or take?) FI Savings $20,000 $750,000 $1.4 mil Examples of my Retirement Spreadsheets Net Worth and Invested Savings Graphs Income The income numbers provided are inclusive of salary/bonus/stock grants, but because of the variability of bonus/stock values, they are more of an estimate than an exact number. My income has risen over the past five years, but compared to inflation, it has barely moved at all. As I described in my previous post, I've reached a plateau in my career and am rather comfortable with my income staying flat against inflation. Expenses In the past five years, I've purchased and moved into my dream home, and spent far more on travel and other experiences than I had ever expected I would. The only categories where spending has dropped are "stuff" related - possessions, consumables, groceries. This is due to both me already owning everything I want to own (almost), as well as me prioritizing the things that are important to me (experiences) over possessions. Also, when I eat at home, I eat cheap. A few of these categories are suffixed with "ish" - I don't really keep a strict budget or a strict eye on my spending anymore, so these are largely estimates. The last thing I'll mention here is the category called "Gifting". I'm not doing a great job of defining this clearly right now. This is largely due to laziness and a lower motivation towards tracking this all, but is also partially due to the variability of it. Many of these are one-off items - I gave one friend a car, I paid off another's debt, etc. Some of them are more fixed: I contribute to 529s for some of my younger relatives. This category is rather large and nebulous right now, but I expect it to become better-defined as I get closer to retirement. This category isn't included in my "expenses" above (aside from being the "+"), and is largely why I haven't set a fixed FI Target yet. I had one year where the gifting number had exceeded $60k, but on average, it's probably closer to about $2-3k/month. This is a category that I expect will shrink considerably once I do retire, but I'd love to be fortunate enough to continue this somewhat. Category 2019 Value 2024 Value Mortgage $1770 $3100 Utilities $800 $800 Vehicles $350 $400 Hobbies $400 $500ish Experiences $--- $600ish Stuff $1400 $800ish Travel $700 $1200ish Gifting $--- ¯\_(ツ)_/¯ (a lot) FI Savings About half of the growth over the past five years has been a result of market movements, and the other half from new investments. My income hasn't really increased, but my spending has - I am now saving very little beyond my tax-advantaged buckets: 401k/BDR/MBDR/HSA makes up about $80,000 in savings each year, and that's largely the bulk of what I reliably save every year. There's another $20k or so each year that ends up in various accounts (brokerage/stock/bank) that I've been rather lazy with tracking. You may ask yourself why my investments don't appear to be doing as well over the last five years as they should've, given the market. Well, part of that is because of the new house (which required me to cash out much of my invested stock), and part of it is just dumb bad luck. Take a look at my Invested net worth graph at the end of 2020. During the roughly 3-month period where I had a large sum of money out of the market from selling off my old house and making the down payment on the new one, look at how much my 401k and IRA (which were untouched) grew! Holding that $250k or so in cash for that short period cost me over $25k in lost gains, which would've compounded over the last four years. Furthermore, you can see from the full net worth graph that a larger percentage of my net worth was tied up in my home equity in 2021 than in 2020. I don't count my home equity as part of my FI savings, so moving cash from investments into a mortgage caused a drop in my overall FI savings. Mental Health This is a section I'm adding, because well, to be honest, nearly every challenge I've encountered in the past five years has been largely due to my own mental health struggles. I'd rate my mental health "pretty good, all things considered" right now, but that's still nowhere near optimal. I frequently think of the dimensions of my mental health in the following measures: Mood, Stress, Focus, and Gratitude. These are all interconnected in many ways, but they tend to be the largest drivers of my overall well-being as well as that of my relationships, both personal and occupational. I feel the categories are rather self-explanatory with the exception of "Gratitude". This measure describes my outlook toward the people and world around me. A low measure here would be "feeling like a Grinch/Scrooge" and a high measure would be "feeling like Tiny Tim/Cindy Lou Who". I've included this section because I think it's incredibly relevant - if I don't like my life, odds are that retiring isn't going to improve things much (though it will likely improve my stress considerably, I don't expect the other values to really change. In fact, it's possible I'll end up losing both focus and gratitude if I don't have something challenging to put my mind to!) I'm rating each category 0 through 10, where 0 is where I'm unable to function and need to do something about it, and 10 is effectively an asymptotically unachievable ideal. For any of these, 5 is what I consider "normal", which is likely only a valid measure for me specifically. My "5" for stress might be someone else's regular Monday, while their "5" for stress might leave me near a nervous breakdown. For these, I would consider my mental health "good" if all of these are around a 6, but higher is always better (and lower is always worse). Mood Rating: 4/10 and somewhat stagnant Stress Rating: 6/10 but dropping Focus Rating: 5/10 and hopefully(?) rising Gratitude Rating: 7.5/10 Obviously the big callout here is low mood, and it has been this way for a month or two now. My medication has felt less effective over the past few months and it's time for a change, but my doctor's office has been slammed lately and can't get me in for an appointment until July (I set the appointment a month ago!) Also worth noting, I've noticed that with work, my focus and stress tend to move opposite each other - as I get more stressed (as say, a deadline approaches), I get better at buckling down and focusing on the project. FI Plan More of the same, mostly. Not too much has changed here. My funds have tended to accumulate in tax-advantaged, because I haven't allowed myself to touch those, while I've allowed myself to raid my stock and brokerage accounts more often than I should've. Looking forward, I think my next few goals are to look towards rebuilding these, as they'll be necessary for some of my early withdrawals in retirement. It's also worth noting that while I said earlier that I currently live in my "dream house", it's entirely possible I may end up moving to a lower cost of living area (I already live in what I'd consider low-medium COL), or may end up renting this house out as I backpack across Asia, or something similar. But, what seems more likely is that I'll keep this house, figure out my actual plans for gifting, and fix a FI target number somewhere in the upper $2M, which will hopefully allow me to retire in my mid-40s. After all, I've had "mid-40s FI Target" in my flair for quite a while now. Though, come to think of that - it really should say "RE Target". Fixed. Goals (short-and-long-term) Hit my annual target of $100k added to investments by September Get my Advanced Open Water Diver certification in 2024 Travel across Northern Europe with family in 2025 Get my weight back into the "normal" range for my height (I gained 40 pounds in 2022 and haven't been able to shake it off) Watch a sunrise or sunset from the top of a mountain (definition of mountain is flexible) Start or join a club for a hobby (either a hobby I already practice or a new one - specifically a club that meets ~weekly, to expand my social circle) Conclusion Anyone have anything to add? I know I've written a lot. I've tried to use feedback from my previous posts to improve this one, and will continue to use your feedback to improve my next one. Odds are I'll still be around the Daily Discussion, but likely won't be posting another major update for another five years, by which point I'll hopefully be very close to my RE date! submitted by /u/NewJobPFThrowaway [link] [comments]

  • Actual FAFSA financial aid results for a FIRE'd household (2024 edition)
    by /u/Zphr (Financial Independence / Retire Early) on May 24, 2024 at 1:25 pm

    TL,DR: The new FAFSA implementation under the FAFSA Simplification Act was a total shitshow due to government incompetence and other factors, but the actual formulas and process eventually worked out as I anticipated based on my reading of the law. Our second eldest got maximum aid awards from all FAFSA schools and our eldest will get another year of maximum aid from the school he is already attending. The new AGI-FPL test worked as the law said it would, which reduced the FAFSA to some basic demographic entries and a handful of financial questions about our 1040. Having an AGI lower than 175% FPL on our tax return yielded an SAI of -1,500, an automatic maximum aid award, and the removal of all income and asset questions from the form. The entire FAFSA process took just a few minutes total and required no prep or documentation on my part. This is a second-year update to my post last year on our experience with FAFSA as a FIRE'd household. If you want to know more detail about our overall finances, our funding plans for college, the morality/politics/legality of FIRE folks using FAFSA, or anything beyond just the straight-up numbers or application experience, then please look at last year's FAFSA posts (links at bottom of this post for the lazy) in my account profile. I included a lot more information/commentary in those posts and there was plenty of good debate/explanation in the comments. I put up variants last year in the three different FI subs I primarily inhabit and the commentary for each was varied and might be of interest. We can obviously talk about these topics in the comments here too, but I wanted to keep this actual post tighter since it's just an update and a lot of those conversations already happened in detail with last year's threads and are unchanged one year later. Although the FAFSA itself has had many highly publicized problems this year our experience was uneventful, minus the months of unexpected delays as they fixed broken production systems so that they could actually process all of the applications. Our natural AGI is under the 175% FPL line established by the FAFSA Simplification Act for maximum Pell Grant awards, so once I finished what little information the application wanted the site automatically assigned maximum aid to our kids, gave them an SAI of -1,500, and terminated without asking or allowing for any income or asset questions/verification. It seems that FAFSA now does the direct pull of financial data from the IRS in the moments before opening the questions to you, so the whole process took around three minutes from start to finish and was mostly a dozen or so demographic questions, most of which were simple things like marriage status, state of residency, and such. There was a single page with a handful of simple questions about possible modifications to our 1040 data, like TIRA rollovers, but none of those applied to us. This highly abbreviated process was pretty much exactly what the law suggests should happen, though I expected there to at least be the option to enter in detailed financial data on a voluntary basis. However, those sections were not made available to us as being under the AGI-FPL line skips the vast majority of the full FAFSA application. In terms of actual aid awards, our daughter ended up being really interested in only three schools, all of which are public universities in our state of Texas that rely exclusively on FAFSA for aid determination. Results for all of them were fairly similar overall, except for institutional grants/waivers, as might be expected given that they are all in-state public schools. Federal Pell grant - $7,395, maximum federal eligibility Texas state TEXAS (it's an acronym) grant - $5,000 to $6,500 University institutional grants/waivers - $6,000 to $14,000 Federal workstudy - Up to $5,000, maximum federal eligibility, optional. Federal subsidized loans - Up to $3,500, maximum federal eligibility, optional. Federal unsubsidized loans - Up to $2,000, maximum federal eligibility, optional. Merit scholarships/grants - Variable, not listing these since they aren't FAFSA-driven. Cost of attendance at all three schools is somewhat similar, with tuition/fees ranging from $11,000 to $14,000 and additional costs (room/board/personal/insurance/transportation) ranging from $14,000 to $20,000, depending largely on housing and food choices. Around $6,000 of the additional costs are for non-school items like health insurance, personal spending, transportation, supplies/tech, and so forth. We are covering most/all of those for her by simply continuing/reallocating the normal spending we already do for her as a household member, so paying those costs will not cause any change in our routine withdrawals/spending. The net result for our daughter was effectively a full ride at all three schools, inclusive in some variants of some moderate use of workstudy or loans, owing to things like different housing and food options. The ultimate result is that our being FIRE'd did not interfere with our kids being able to go to very nice colleges for minimal cost/free due to the way financial aid law works in the US. This results primarily from our spending being naturally low and under the 175% AGI/FPL line. We do not manage our AGI, with all dollars we spend/withdraw adding to our AGI, and a FAFSA is required for high school graduation in Texas, as well as being required for many/most merit scholarships. Although the process was different and simpler this year, the result is effectively the same as we had last year when the old FAFSA rules were in place without the AGI/FPL rule. For people with modest AGIs, natural or engineered, the FAFSA works similarly to how the ACA works, with lean and lightly regular spenders getting subsidies large enough to cover the entire cost in many cases. Unless folks live in a state that doesn't require FAFSA for high school graduation and want to deny their kids the ability to compete for merit scholarships, then these are the sort of results that many FIRE'd households will likely be looking at, particularly given how many people plan on managing AGI for tax optimization (both normal income tax and ACA tax subsidies). 2023 FAFSA post links: https://reddit.com/r/financialindependence/comments/11m3r2n/actual_2023_fafsa_financial_aid_results_from_a/ https://reddit.com/r/Fire/comments/11m3s83/actual_2023_fafsa_financial_aid_results_from_a/ https://reddit.com/r/leanfire/comments/11m3sui/actual_2023_fafsa_financial_aid_results_from_a/ submitted by /u/Zphr [link] [comments]

  • Daily FI discussion thread - Friday, May 24, 2024
    by /u/AutoModerator (Financial Independence / Retire Early) on May 24, 2024 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]

  • Using margin to deal with sequence of return risk
    by /u/Basic-Arachnid9233 (Financial Independence / Retire Early) on May 24, 2024 at 6:49 am

    Hi everyone, I was wondering whether there were any resources to discuss using margin to deal with sequence of return risk? Given how important the first 10 years of early retirement are in long term performance, to me it seems like the following idea might have merit. IE if there is a downturn some time during first 10 years of retirement, borrow margin against portfolio so not to deplete capital, and then once markets return to expected levels you sell the capital back. Given rates would be lower during market downturn, it would be cheaper although one would still have to reduce living expenses adjusted for costs of the margin. It seems like paying the 2-5% is more worthwhile rather than selling if the market is down a certain X% for the moment of the downturn. No margin call risk due to only doing it at the beginning of the life of the portfolio and small amounts relative to portfolio. Does this make any sense? submitted by /u/Basic-Arachnid9233 [link] [comments]

  • Jane Street Avoids Disclosing Secrets to Millennium in Dispute
    by /u/bloomberg (Financial news and views) on May 24, 2024 at 5:17 am

    submitted by /u/bloomberg [link] [comments]

  • Part of portfolio, higher than 4% rule rate
    by /u/Indy2022MidAmer (Financial Independence / Retire Early) on May 23, 2024 at 5:26 pm

    Got three streams of income, 2 apartment building that cash flow 7k each, fully funded cap ex for both properties. Selling another property that will net us around 1mm after taxes. In my mid 50s and want to do a "staggered" safe withdrawal from that 1mm, 6% for the first 10 years, 4% for the next, then 3% for the rest of my life. Figure between the cashflow from my rentals and those accelerated withdrawals could enjoy that money more in my "go-go" years and the the lower rates in my "slow-go////no-go". Burn rate around 10k a month now. Am I being to aggressive with the early withdrawal rate? submitted by /u/Indy2022MidAmer [link] [comments]

  • Tips for helping family plan for retirement
    by /u/AffectionateBench663 (Financial Independence / Retire Early) on May 23, 2024 at 4:38 pm

    For starters, this is not unsolicited advice. My mother is in her late 50s and wants help with retirement planning as she nears retirement age. Father passed away so plans only include her. She lives in a LCOL area and will have her house paid off in the next 10 years. Car is already paid for and has somewhere between 5-10k in cc debt. She lives a simple life with earnings I assume to be in the 50k range. She has been good over the years about contributing up to company match for 401k but was paycheck to paycheck beyond that and has no savings outside of 401k. I haven’t seen her account yet to run the numbers but we looked at it years ago when my father passed and I believe she would land in the 450k range at retirement age. I’ll obviously need to get a new pulse check on this. High level bullets 450k 401k at 4% SWR - 18k/yr SS benefit (a space I know little about as I’m 32 and don’t factor it into my long term plan at this time). I assume 1500-2000/mon based on estimates from SS website. Total monthly income - about 3k net. This paints a bleak picture in my opinion. Has anyone had experience with these types of hard conversations with family/parents? What advice would you give to her? Hard to be completely objective with this one What other questions should I be asking her. My judgement is very clouded as I feel obligated to help based on my own financial situation. submitted by /u/AffectionateBench663 [link] [comments]

  • Adding Small-cap for a higher WR
    by /u/aspiringFI_throwaway (Financial Independence / Retire Early) on May 23, 2024 at 9:57 am

    I'm reading again the 2014 Kitces report and I see in page 6 that having 30% small-cap to the portfolio increases the WR in 0.2 points (i.e. a 5% lifetime increase in expenses). Any thoughts? I see no reason to not include this in the portfolio if the objective is to increase WR (not returns). My only concern is that 30% seems a bit too much, but I guess adding any amount of small caps will improve WR. Edit: Related to this, Bogleheads wiki provides suggestions on how to replicate the total market, including low caps. The suggestions are 5% to 9%, far from the 30% suggested by Kitces. So What Kitces suggests is that having a portfolio overweight in small-cap increases the WR. submitted by /u/aspiringFI_throwaway [link] [comments]

  • Daily FI discussion thread - Thursday, May 23, 2024
    by /u/AutoModerator (Financial Independence / Retire Early) on May 23, 2024 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]

  • Early 30s and Finally hit 1 million
    by /u/Humble_Recover9974 (Financial Independence / Retire Early) on May 22, 2024 at 11:12 pm

    Recently my wife and I, both in our early 30's, hit a Net Worth of over $1M. Which we celebrated in true FIRE fashion by making ourselves a cake and enjoying it together! This has been a long road of consistent "mini sacrifices", due diligence, and a penny pinching mind set. Most of the accumulation years our household income was around 60-80k as we worked in the public and non-profit sectors. In the last couple of years we moved to private sector roles which helped increase salaries. We currently live in an area where the cost of living is 2% lower than the national average. We also do not own a home or have kids which allows us to enjoy a flexible lifestyle. Profession Comp - $200k gross Net Worth Breakdown: 401k: $186k Roth IRAs: $120k Trad IRAs: $270k HSA: $7k Taxable Brokerage: $433k Cash: $3k HYSA: $181k - 5% Debt: $0k No real estate - Rent Net worth: $1.2M Our overall goal is to support a $70k a year lifestyle and by using ProjectionLab, that looks to be doable in the next 4-5 years. Our thought with a large amount in HYSA is we could either look at attaining a home through an Assumable mortgage, buy a large amount of property, or simply hedge against a downturn. A year ago I hit the burn out stage and although hitting a major milestone is great the excitement was quick to fade. Lately, our discussions have been around how can we enjoy our "younger" years now that we have a very solid financial cushion. Whether this be taking a gap year to travel, career opportunities abroad, or moving to higher COL area that has better outdoor amenities (PNW, Denver, etc.) Although I'm not sure what the future holds I'm thankful that I learned about this community in my 20s! submitted by /u/Humble_Recover9974 [link] [comments]

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Even if you’re small, you want people to see you as a professional business. If you’re still growing, you need the building blocks to get you where you want to be. I’ve learned so much about business through Google Workspace—I can’t imagine working without it.
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