Saturday, 12 August 2017

Annual rebalancing Excel calculator

Over on the excellent Monevator site the following question was posed by Gregory today:
“You are an early retiree and have a portfolio of £875,000. You don’t follow the 5/25 rule but withdraw Your inflation adjusted money and rebalance Your portfolio once a year for example on Your birthday.  On Your birthday You want to withdraw £27200.  The current (£;%) and target asset allocations:
- UK equities: £70000; 8% vs. 6% target
- Developed world ex-UK equities: £350000; 40% vs. 38% target
- Global small cap equities: £70000; 8% vs. 7% target
- Emerging market equities: £96250 ; 11% vs. 10% target
- Global property: £35000; 4% vs. 7% target
- UK gilts: £192500 22% vs. 26% target
- UK index-linked gilts: £61250 7% vs. 6% target
How would You withdraw and rebalance?”

I suggested that firstly Gregory hadn’t really given us enough information:
  • You say you don’t want to use the 5/25 Rule but don’t detail what rule you are using. Surely you’re not going to rebalance every fund no matter how far from nominal you are as that would incur trading costs that might not be economically sensible. I’m going to assume you’ll rebalance if an asset class deviates more than £4,000 which means in this instance you’re going to be buying/selling every asset class this time around.
  • You don’t say if your assets are held in Inc or Acc products. Given you have no cash anywhere I’ll assume Acc. Inc would have made this easier during both the accrual and drawdown phases IMHO but let’s move on.

Saturday, 5 August 2017

Making a difference

As each week of Financial Independence (FI) passes, particularly the last few weeks, I can feel quite a bit of change occurring within myself.  The stresses of work just seem to continue to melt away and excitingly that energy is then able to be channelled elsewhere.  One area that I’ve been thinking about is what’s important to me spiritually and how I define myself.  Interestingly, what keeps coming to mind is that in life I’d really like to make a difference to the world.  That might be a little arrogant but do bear with me...

With this in mind I’ve then been asking myself have I already made a difference and the answer I came up with is a resounding yes.  I’ve definitely made a big difference to my family but let me stay away from that to protect the innocent and talk about a few other examples.

During my work life and particularly in more recent years I have made a lot of money for the companies I’ve worked for which has then been distributed to a lot of people – both private and public owners.  That however means absolutely nothing to me as they are just rentiers living off my back.  Something I’ll be doing in FIRE so some hypocrisy here but let’s keep going.  What does mean something to me is that to make all that money I’ve had to rebuild, grow and develop teams into very high performing teams.  They are now efficient and very competent which has secured their foreseeable future in a very competitive industry not frightened to send jobs to low cost countries.  One of the reasons I started on my FIRE plan in the first place.  This means I’ve then helped secure a little bit of their families financial future.  That’s hundreds of families I’ve made a difference to and that is motivating for me.