財務自由計算表 (Financial Freedom Calculators)

I have gathered a few tools that can help us in measuring how far we have journeyed (or yet to journey) towards FI.

“That which is measured, improves”

Through this process, there is also great learnings, e.g. through the "When can I retire?" page at Netwothify we can see the significant impact on the savings rate.

Networthify requires that we input the following information :

• Annual after-tax income
• Current saving rate 
• Current portfolio value 
• Assumed 5% real annual return on investment 
• You will withdraw about 4% of the portfolio each year to spend 

This simple yet powerful concept has also been explored by Mr Money Moustache:

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

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我在網上收集了一些小工具，可以幫助我們估計我們到FI需要的effort 和時間。

而這個估計的過程其實很是好的學習，例如通過Netwothify在“When can I retire?”的頁面，我們可以看到對儲蓄率的重大影響。

Networthify要求我們輸入以下信息：

• 年度稅後收入
• 目前的儲蓄率
• 當前的組合價值
• 假設每年實際投資回報率為5％
• 每年將提取約4％的投資

 Mr Money Moustache 也探討了這個簡單而強大的概念：

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

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Links to the spreadsheets / online calculator

Google drive spreadsheet from Reddit
https://docs.google.com/spreadsheets/d/1JFDi0QLc7_FCepb-y49YOnq6733c_ZrV3WymihJyqjo/edit#gid=451098708

When can I retire?
https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=20000&annualPct=5&withdrawalRate=4

Three Funds Portfolio

I recently stumbled upon this simple ETF buy and hold strategy, called the Three Funds Portfolio. This is advocated by the Boggleheads.

I. Components of the three mutually exclusive total market funds:

a)    Vanguard Total Stock Market Index Fund (VTSAX / VTI) – introduced in 1992, allows investors to own more than 3,500 U.S. company stocks at extremely low cost. 

b)    Vanguard Total Bond Market Index Fund (VBTLX / BND) – introduced in 1986, allows investors to own more than 8,000 very diversified, high-quality U.S. bonds. 

c)     Vanguard Total International Stock Index Fund (VTIAX / VXUS) – introduced in 1996, allows investors to hold more than 6,000 international stocks, including emerging market stocks. 

II. Steps to construct portfolio:

Step 1: Decide what funds to include in your portfolio. Hopefully you’re convinced that the three funds listed above are the only three you need.

Step 2: Choose an asset allocation. This will determine your expected return and expected risk. A portfolio with a higher stock allocation has a higher expected return with higher volatility.

In reference to international stocks, Larimore references Bogle:

“Jack Bogle says he’s fine with 0% internaional but feels that 20% may be okay for investors who want some international exposure.”

III. Benefits of the three funds portfolio:

Larimore explained the appeal in a 2012 post on the Boglehead forum:

* Avoids wasted time, confusion and the possibility of mistakes trying to pick the best of thousands of mutual funds and ETFs.

* Very diversified with over 15,000 worldwide securities (lower risk).

* Very low expense ratios.

* Very low (hidden) turnover costs.

* Very tax-efficient.

* The many Advantages of Simplicity.

* Fewer but larger funds results in earlier eligibility for low-cost Admiral shares.

* No adviser risk.

* No fund manager risk.

* No style drift.

* No asset bloat.

* No tracking error to cause abandonment of the strategy.

* No fund overlap.

* No front-running that reduces sub-index returns.

* Automatic rebalancing within each fund.

* Less worry. Never under-performs the market.

* Easy to maintain for the owner, spouse, caregivers and heirs.

IV. Reference: 

Three-fund portfolio by Boggleheads

https://www.bogleheads.org/wiki/Three-fund_portfolio

The Bogleheads’ Guide to the Three-Fund Portfolio

https://fourpillarfreedom.com/the-bogleheads-guide-to-the-three-fund-portfolio/