Australian FI Weekly #20 – 16 Dec 2019 – with A Family on FIRE

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It’s Michelle here from FrugalityandFreedom.com, bringing you the latest #AusFIWeekly. Each edition is a handpicked selection of great financial independence links, news, and events from Australia and beyond.

Got some news or milestone to share on your FI journey? Share your December highlights via this survey to be featured in an end-of-month post.

This week, I welcome another guest curator who has thoughtfully selected these featured links. Say hello to Ms FireMum from A Family on FIRE!

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Hi, I’m Ms FireMum. My husband and I are seasoned investors, having started our investing journey early in life, but we’ve only just discovered FIRE! So we’re now on a mission to turbocharge our nest egg and achieve financial independence by our mid-40s. I write about our journey at A Family on FIRE – with stories on being frugal, saving, investing, and learning new things. Sometimes just for fun, I comment on the financial services industry and how new regulations or financial products might affect FIRE.

I’m an analyst in real life and a bit of a nerd, so I’ve compiled some data-driven blog posts that I think are pretty interesting and thought provoking. Hope you enjoy them!

www.afamilyonfire.com | Facebook | Twitter @AFamilyOnFIREau

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Australian Links

A commonly asked question in finance circles is: what is debt recycling, and how can it help me in my FIRE journey?

Everything you need to know about debt recycling – A Family on FIRE
“Most people who advocate for debt recycling tend to emphasize reducing non-deductible debt. In my opinion, the more important point is being able to invest in assets that benefit from long-term compounding growth.

The amount of this long term growth, while miniscule in the early years, will snowball later on – and could well far exceed the amount of tax you will save by employing a debt recycling strategy. If you choose assets that pay dividends, the dividend stream (whilst financed by deductible debt) could also help pay off your non-deductible debt quicker. There is a way to have your cake and eat it too!”

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Anyone who’s serious about FIRE knows about the importance of having an emergency fund. But should it be held at-call, or working hard and earning a return in the sharemarket?

Emergency Funds Revisited: Real World Simulations – Ordinary Dollar
“The question of whether we should invest our emergency fund in the stock market or in an offset account is essentially a question of risk vs reward. Are we willing to risk losing some of our emergency funds 25% of the time in order to make more money 65% of the time?”

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Many FIRE proponents plan for the time our nest egg reaches that magic number so we can stop work – but can we assume that our investments will be as cooperative?

Can we control when we hit FIRE? – Aussie HiFIRE
“As much as we might like to think we are in control of our own destiny, when we hit FIRE is very much going to come down to the returns of whatever we’ve invested in. This is due to the returns on our investments likely making much more of a difference to the value of our investments than whatever we are adding to them.  A big fall at the wrong time might derail our FIRE plans for several years.”

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How can one reach FI quicker? Here’s one possible way.

Can internally geared ETFs accelerate time-to-FI? – Pearler
“Bank IGEs, like GEAR and GGUS, are appealing  –  they seem to offer a way I can accelerate my FI progress without any change to the other elements of my investing process. As a non-homeowner, I am happy to have found a way to leverage cost-effectively (from the shallow investigation I’ve done to-date debt recycling seems to be a better option for homeowners looking to use leverage).”

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Australian Events

Adelaide: FI/RE & Mustachian Meetup – Sat 21 Dec 2pm, CBD
Want to meet Michelle in person? This is where you can do it!

Melbourne: FI Meetup Melbourne – Monthly Wed Night Meetup, Wed 18 Dec 6pm, CBD

Sydney: Mr Money Mustache Sydney Tribe – Sydney Mustachian Meetup – Sat 1 Feb 12.30pm, Neutral Bay

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International Links

Ever wondered whether you should wait for the dip, or dollar cost average your investment? Here’s a post that analyses both strategies.

Even God Couldn’t Beat Dollar-Cost Averaging – Of Dollars and Data (US)
“I wrote this post because sometimes I hear about friends who save up cash to “buy the dip” when they would be far better off if they just kept buying.  My friends do not realize that their beloved dip may never come.  And while they wait, they can miss out on months (or more) of continued compound growth.  Because if God can’t beat dollar cost averaging, what chance do you have?”

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So you’ve got a lump sum to invest. Should you invest it all at once, or drip feed it into the market?

Lump Sum or Dollar Cost Average Investing? Part 1 – Actuary on FIRE (US)
“If you are investing over long periods then there is much greater certainty that you will benefit from a Lump Sum, rather than Dollar Cost Averaging, strategy. The mean reversion of long term equity returns is unrelenting, you can’t afford to be out of the market for long.”

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Popular investor Michael Burry caused a bit of a storm, claiming that index funds are like subprime CDOs (you know, the one that caused a little known event called the GFC). But is it really?

Debunking the Silly “Passive is a Bubble” Myth – A Wealth of Common Sense (US)
“Are index funds perfect? No. They give you all of the upside of the stock market but also all of the downside. And indexes can go nowhere for years on end just like individual stocks. They can become overpriced and underpriced. They own the good stocks and the bad stocks. But that’s nothing new. That’s the stock market for you.”

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And finally, how random is the sharemarket? Are there ways to take advantage of its randomness (or otherwise)? Economist and famed early retiree Big Ern explains it all.

How much of a Random Walk is the Stock Market? – Early Retirement Now (US)
“Since stocks don’t follow a precise Random Walk there is room for actively/tactically timing the stock exposure to manage risk. There is a huge benefit to being able to avoid some of the significant drawdowns like 2001 or 2008/9. Of course, nobody will ever be able to precisely time the market and sell equities at the peak and buy them back at the bottom. But even being able to avoid a small fraction of the drawdown can make the difference between a scary shaky retirement and a safe retirement.”

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What a great selection of data-driven posts from Ms FireMum from A Family on FIRE. Thanks for sharing!

Do you fancy yourself as a guest curator? Got some other Australian events or favourite blogs to include? Get in touch. 

Yours in pursuit of FI,
Michelle @ Frugality and Freedom

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