Archive for the ‘Financial Independence’ Category:

Shall We Play A (Market Timing) Game?

Posted In: Financial Independence | Money
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The Market Timing Game simulation is premised on the idea that buying-and-holding index investing and index funds are a no-brainer investment strategy and market timing (i.e. trying to predict market direction and trading accordingly) is a less than optimal strategy. The saying goes “Time in the market not timing the market”. In this simulation, you are given a 3-year market period from sometime in history (between 1950 and 2018) and you start fully invested in the market and can trade out of (and into) the market if you feel like the market will fall (or rise). The goal is to see if you can beat the market index returns.

If you get the 80’s movie reference to “WarGames”, then you might guess the best way to avoid losing the Market Timing Game.

Another way to put this is just to buy and hold. Put your investments into low-cost index funds and don’t worry (too much) about the ups and downs of the market. They always happen, but over time, stocks tend to go up and trying to time when to get into or out of the market leads to sub-optimal result for most regular investors and even many professional investors.

Data and Tools: Daily, historical dividend adjusted prices for the S&P500 stock index (between 1950 and 2018) were downloaded from Yahoo! Finance. The game was programmed in Javascript using the Plot.ly engine to create the graph.

Financial Freedom Calculator (Multi-Period FIRE Visualization)

Posted In: Financial Independence
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This is an update to the Financial Freedom Calculator. That one still works well, but this version adds the ability to add multiple savings amounts representing different periods in time. This allows you to visualize your progress towards financial freedom rather than just giving you the latest value for your freedom date. It does so by showing different colors for the different periods (you specify them by adding different savings amounts and names). It should be fairly obvious looking at the calculator, but if you had a total of 25000 in savings in 2016 and 70000 in 2017, then your calculator is colored in two sections representing the freedom days you had achieved in the two different years.
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Financial Freedom Calculator

Posted In: Financial Independence
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The goal of the freedom calculator is to let you know how close to financial independence (i.e. freedom) you are, measuring your progress in terms of freedom days.  The key determinants for retirement are total retirement savings and annual spending.

Freedom days refers to the number of days that your retirement savings could sustain you (without working) each year (indefinitely) at your current spending level. Once you reach 365 freedom days per year, you’ve got enough money saved up to never have to work again. The freedom date then tells you the date through which your retirement savings would support you each year.  For example, if you have 100 freedom days then your spending could be covered through April 10th, each year.

How close are you to 365 “freedom days”?

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