Early Retirement

Hurricane · Apr 28, 2003

Doug,

I'm still working but have been doing much the same (i.e. shifting my portfolio into income producing assets) and doing some swing trading and the like on margin. Mentally I'm a bit hung up on the fact that a rise in interest rates will decrease the value of my portfolio but not significantly decrease the cash flow stream. It's one thing to hold a bond for 5 years but with preferreds, bond funds, etc., there's no such thing as recovering your principle by holding to maturity.

Have you done some things to offset this risk (e.g. by investing a portion of your portfolio in asset classes that will benefit from rising rates) or learned to live with it?

vulture · Apr 28, 2003

It's a good thing Tampa isnt around right now or we would have a slew of gratuitious "40 yo trader references"...

Quote from dougcs:

I "retired" at 48 and started trading. The retirement came about as I was "downsized". Fortunately, I had a bronze parachute-about 2 years salary to tide me over. I looked around at the jobs available and there were a lot but I did not want to start over at the bottom, only 2 weeks vacation, etc.

Since I have had an interest in stock trading going back to my teenage years, I naturally gravitated to it. Bought SystemWriter Plus (Tradestation's predecessor) and started looking for winning systems.

By accident, actually I was teaching myself how to code in EasyLanguage, I found a simple system that seemed to work.
After ridding myself of disbelief, I placed a few trades, disregarding money management principals that I did not at the time even existed. The first trade made about what I had been making in a month. The others did pretty good too. I think I had a string of 7 or 8 big winners in a row.

At this point, I started reading a lot about trading and realized that I wasn't smart, but lucky. (Luck is good.) I then started to trade smaller amounts and placed some of my winnings, the money from my separation package as well as other funds I had received from excercising company options into bonds and utility stocks. IE-I wanted income I could fall back on when the trading went south, which it of course did.

I have been trading now for over 8 years. I continue to put trading profits into bonds, utility stocks, royalty trusts, and REITs that generate nearly enough income for me to live on and my trading buys me extras-really liked my trip to Tibet and the African safari that I took recently.

My point is: I was well capitalized, was lucky at first, realized that my early success was luck and educated myself in other aspects of trading such as risk control, money management. I also realized that most if not all systems stop working at some time and you need a back up plan. Mine was to invest in income producing investments and keep looking for other systems.

One final point: I work harder now than I ever did, so my retirement is yet to come; but I like what I'm doing, don't have to commute, and the hours, income and flexibility are better.

Doug S

dougcs · Apr 30, 2003

Quote from Hurricane:

Doug,

I'm still working but have been doing much the same (i.e. shifting my portfolio into income producing assets) and doing some swing trading and the like on margin. Mentally I'm a bit hung up on the fact that a rise in interest rates will decrease the value of my portfolio but not significantly decrease the cash flow stream. It's one thing to hold a bond for 5 years but with preferreds, bond funds, etc., there's no such thing as recovering your principle by holding to maturity.

Have you done some things to offset this risk (e.g. by investing a portion of your portfolio in asset classes that will benefit from rising rates) or learned to live with it?

I don't worry about the bonds, as I have a "ladder" arrangement and most of the ones I have have decent yields (6+%). Nor do I worry much about the utility stocks as I intend to hold them long term. The royalty trusts have done extremely well but there best days are likely behind them. When interest rates rise, I will shift more into cash.

gnome · Apr 30, 2003

Quote from ShoeshineBoy:

I've got a full-time non-trading job and do swing/position trading on the side. And so I think my goal is a little different than most: early retirement. From posts I've read on et there are a few of you out there who have achieved this holy grail and I'd like to know how you did it.

1. How much of a role did trading play in your early retirement, i.e. was it through trading that you accumulated your assets or through a business or 401k, etc.?
2. How much of a role did margin play, i.e. did you successfully attempt to amplify your earnings to achieve your goal more quickly?
3. How much of a role did "expense/lifestyle control" play in it?

I'm looking for inspirational stories here. I think I can do this, but I'm at that juncture in my life where I have to decide if I want to undergo the discipline to pursue this for several years.

I don't believe you can succeed WITHOUT "extreme discipline for MANY years". If you were going to be one of the gifted or lucky, you'd already know that by now. Otherwise, it's dicey work... however, it CAN be done.

I've been at the markets for more than 20 years, and I don't think it's any easier in spite of the long experience. My history has been mostly a struggle with some spurts of big profits.... And while I'll humbly(?) admit to perhaps having made more than 99.9% of ETers, I've never thought trading to be "comfortably doable". It IS doable even now, but difficult.

Think about it this way... There's $$GAZILLION to be won and lost in the market place. For you to win, you mostly have to take it from someone else... Considering how much money, effort, brains, and talent "da Boyz" put into their play... you gotta be pretty sharp to harvest money consistently. And as compounding is exponential... you'll likely have to demonstrate significant prowess over several/many years before you cash in BIG.

Trading is the antithesis of a "part time" activity.

DHOHHI · Apr 30, 2003

Just registered with Elite Trader and saw your post. I always had an interest in the markets, TA, etc. I started trading more frequently back in 1995 while working full time and by April 1996 I had left my corporate job. I've been at it for 7 years now and wouldn't trade these experiences for anything. I report to no one other than myself. I have no one to blame for my bad trades. Years ago I read Elder's book and was taken by his intro "You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader." So very true are the above words. I live where I want to, not where some job is located. I trade when I want to. I learned many lessons along the way and the biggest was early on when I wouldn't take small losses. First year of full time trading I had 76% winners but made very little money. The reason was I let a few trades go badly against me which wiped out substantial profits. Over time, and especially the past few years, I've learned to take smaller profits and take them quickly. As far as getting to a point of where you feel you can make it (trading) work I'd suggest that you have no debt (or as little as possible). I found having no mortgage payment, no car payments, etc. made for a less stressful time when things weren't going as well as I expected. Stay focused, persevere and be disciplined and you'll likely make it.

ShoeshineBoy · May 1, 2003

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"You can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader."
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Thx for the post. That quote is awesome - it's how I think. I can't imagine that feeling. Congrats on finally reaching it. And I guess I've got step one down: I have no car payment, no mortgage, no loans and very little credit card debt.

I noticed that you got there pretty quickly all things considered! If you don't mind me asking, how did you build up your capital so rapidly? Was it through saving a large amount of your salary, margin, stellar returns, second jobs (or all of the above)?

So you're saying tighten the bands (which usually leads to a decreased win ratio) and sell south or north more quickly? (If that's what you're saying, I just recently started that and it seems to have helped.)

Also, if sounds like you got your start with position/swing trading? Was that and is that your core trading style?

Thx for any and all advice, stories, etc.

alfonso · May 15, 2003

Quote from candletrader:

You can find Kiyosaki's site at: http://www.richdad.com

He is one of my favorite non-trading authors...

He's a dream selling BS artist, that's what he is.

Maybe about 3-5% of the population could benefit from what he writes about, for the rest it is downright dangerous.

ChaosNSX · May 15, 2003

Quote from alfonso:

He's a dream selling BS artist, that's what he is.

Maybe about 3-5% of the population could benefit from what he writes about, for the rest it is downright dangerous.

No he simplifies complex free cash flow calculations to the point any one with at least the GE out of a GED could understand.

If you have a finance degree like me its not much help, but it sure gives you an idea how the rest of the world views asset management.

Pick up the book rich dad/poor dad . Its not a bad read.

alfonso · May 15, 2003

Quote from ChaosNSX:

No he simplifies complex free cash flow calculations to the point any one with at least the GE out of a GED could understand.

If you have a finance degree like me its not much help, but it sure gives you an idea how the rest of the world views asset management.

Pick up the book rich dad/poor dad . Its not a bad read.

It's not the "free cash flow" calculations I have a problem with.

I called it "dangerous" for other reasons. I'll explain later.

(I have read it. And his "Cashflow Quadrant". And his "If you want to be rich and happy, don't go to school?" (!) And browsed his thousand other offerings from the only business he's ever been successful in (teaching others how to be successful in business.)

DHOHHI · May 15, 2003

Quote from ShoeshineBoy:

I noticed that you got there pretty quickly all things considered! If you don't mind me asking, how did you build up your capital so rapidly? Was it through saving a large amount of your salary, margin, stellar returns, second jobs (or all of the above)?

Also, if sounds like you got your start with position/swing trading? Was that and is that your core trading style?

Sorry I missed your followup questions ... but to answer the above.

I built up my capital mainly through having a decent corporate job, saving a pretty good amount of my income and avoiding debt as much as I could. I paid off the mortgage in less than 10 years and never financed a vehicle. I'm not a terribly materialistic person so I guess you could say I lived below my means. Never had a 2nd job. My returns were pretty good also and I invested in a 2nd home (rental) that basically paid for itself through the rental income. So I had some real estate diversification to complement the stock market. And real estate has appreciated nicely so all of the above allowed me to bail out of my job in April 1996.

As far as trading style .. the swing/position was while I was working full time. After I started trading to support myself I did a lot more daytrading. As far as style I've tried to adapt to what felt right given the market behavior. My background is highly quantitative so I've used a lot of TA over the years but been doing less and less of that in the past couple years. Lately my daytrades tend to be the SPY or QQQ and I tend to take fairly quick profits. I also put on position trades (both short & long) to complement the daytrading.