Trading stocks on your own

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Maybe any of you, or you know such guys in the fin.industry who after a few years working for a corporation decided to quit (at early age) and are sucessful at trading fixed-income/stocks/derivatives with their own savings?

What is is your opinion enough money and median age to quit? (provided you feel well-off at $3000/m)
 
You're basically asking how much money you need in order to retire early. Because quitting to "trade" with their own savings is the same thing that most early retirees do, although they wouldn't pretend that investing their own money is similar to a job.

If you feel well-off at $3000/mo, then I'll equate that to $40k/year after you take into account healthcare costs etc. If you were employing a passive or conservative buy-and-hold strategy, you can generate a lifelong income equal to about 4% of your savings without any risk of going broke, so you would need one million dollars to do your plan.

If you're an excellent investor and you're willing to take a hefty risk of abject failure and loss of your savings after 3-4 years of $40k withdrawls (or $50k if you need 3k/month after taxes), you might be able to get away with $750,000 in net worth excluding your house for this plan.

Anything less than $750,000 and I would consider it very unwise.
 
newsmaker Wrote:
-------------------------------------------------------
> You're basically asking how much money you need in
> order to retire early. Because quitting to
> "trade" with their own savings is the same thing
> that most early retirees do, although they
> wouldn't pretend that investing their own money is
> similar to a job.
>
> If you feel well-off at $3000/mo, then I'll equate
> that to $40k/year after you take into account
> healthcare costs etc. If you were employing a
> passive or conservative buy-and-hold strategy, you
> can generate a lifelong income equal to about 4%
> of your savings without any risk of going broke,
> so you would need one million dollars to do your
> plan.
>
> If you're an excellent investor and you're willing
> to take a hefty risk of abject failure and loss of
> your savings after 3-4 years of $40k withdrawls
> (or $50k if you need 3k/month after taxes), you
> might be able to get away with $750,000 in net
> worth excluding your house for this plan.
>
> Anything less than $750,000 and I would consider
> it very unwise.



While those numbers seem correct (I didn't do the math), I'd recommend a goal of at least doubling or tripling them before you consider going the early retirement route. Inflation can kill that nestegg if you go the "risk-free" route and if you go a little more aggresive, there is always the risk that a nasty bubble can take away 30%+ of that base in any given year.

Just picture yourself as 70 years old realizing you calculated incorrectly and you've run out of money. Its not like you can just go back and work a few years to get back on your feet.
 
this is a very interesting topic...

When I first began to self-direct my investments I became a member of a group of early retirees. About 60-70% of our talk (in a yahoo chatroom) was about investments, the other portion was about "value living" and I'd argue that part of the success was keeping the liability side of the equation flexible. A common theme was to structure a low overhead lifestyle and channel excessive returns into things that will improve/maintain the efficiency of our lifestyle. Most of the early retirees I knew had a smaller nestegg than $500k but they had small, flexible overhead expenses.

It comes down to examining the rigidity of your req'd liabilities ($3000/month) before you begin to guess at any sort of required rate of return. Also, I've found using monte carlo simulations to be essential & helpful because you can make them infinitely detailed/customizable and they help you understand what kinds of risks you are really taking and to what you are most sensistive.
 
virginCFAhooker Wrote:
-------------------------------------------------------
> this is a very interesting topic...
>
> When I first began to self-direct my investments I
> became a member of a group of early retirees.
> About 60-70% of our talk (in a yahoo chatroom) was
> about investments, the other portion was about
> "value living" and I'd argue that part of the
> success was keeping the liability side of the
> equation flexible. A common theme was to
> structure a low overhead lifestyle and channel
> excessive returns into things that will
> improve/maintain the efficiency of our lifestyle.
> Most of the early retirees I knew had a smaller
> nestegg than $500k but they had small, flexible
> overhead expenses.
>
> It comes down to examining the rigidity of your
> req'd liabilities ($3000/month) before you begin
> to guess at any sort of required rate of return.
> Also, I've found using monte carlo simulations to
> be essential & helpful because you can make them
> infinitely detailed/customizable and they help you
> understand what kinds of risks you are really
> taking and to what you are most sensistive.


Long story short, be prepared to live off cup of noodles and saltine crackers for the rest of your life. Hey, it worked in college right?
 
You should become a high school football coach...they seem to do well in Texas.

Mad props to "Friday Night Lights"
 
"cubicle for 70 hours/week tweaking spreadsheets."

what job is that exactly?
 
$40k is a very livable income everywhetin the south, west, or midwest, if you assume that one would not retire early before paying off one's mortgage.
 
Maybe I exagerated with 70 hours/week. However, read some of those "day in the life" vignettes for a typical analyst... junior, senior, whatever. Find me one that works less than 50 hours per week.
 
Turkish Wrote:
-------------------------------------------------------
> "cubicle for 70 hours/week tweaking
> spreadsheets."
>
> what job is that exactly?

Oh come on man, every single junior/junior associate does EXACTLY that.
 
40k would be pretty rough in a lot of cities in the west. that would still basically be a cup o noodle lifestyle. im not talking about san fran or la either. 40k in those cities might get you a cardboard box on a street corner with easy access to a nearby dumpster (two meals a day only and no hot water for the noodles).
 
I'm glad this discussion has shifted to "what $40k will do for you" instead of the required return on your assets. Continue to exam the amount of $ you need. Break it down to 2 (or more) amounts... (1) what you absolutely need to survive, (2) what you need to live well.

People who work suffer. They need to spend money just "to get themselves through the day", i.e. they need a vacation during Xmas time in order to go back to work happy in the new year; they need expensive entertainment & meals to relax after a 70 hour week; they end up relaxing at times when everybody else is trying to relax (never surf on a weekend on the west coast)... workers pay a steep implicit lifestyle tax.
 
yeah, economic gravity. you don't have enough money to invest to make any sort of significant headway against taxes (wow, i posted a 25% return (not sustainable), so i now have 25% more of practically nothing!) unless you already have a lot of money. then you're so tired and mentally beat down from working all the time (gotta make that money!), that you justify things... well... i don't really have time to cook tonight, so just going to eat out again (adds up)... well, i hate my life, but at least i can go buy a new suit / go on vacation / spend $ at a strip club / buy a too expensive car / whatever to feel better. not really sure how people get seriously ahead without some sort of scam, big time luck or by being an extreme outlier-- the 1%. maybe im just bitter from studying too much.
 
You can live relatively comfortable on $40k/year anywhere in Ohio.

Excepting the larger, more expensive cities (e.g., DC, NYC, LA, San Francisco, etc.), you can live comfortably at $40k. As long as you don't waste your money on living in an upscale neighborhood, taking out-of-town vacations, buying your wardrobe at Nordstrom's, buying a brand new BMW 6-series, or some crap like that.
 
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