The real question you should be asking is whether one should spend all of that income…

$200,000k – whats the most annual income you could get from this?

“I want to be a billionaire; not to spend a billion dollars, just need it to play a game of Monopoly without the jail square.” ~Myself

An order of magnitude difference between the two alternatives? Am I on talk show with an agenda, or the most rational ERE site on the net? I’m forgetting….

How about ‘$500k – Frugal where applicable, but still fond of some of life’s pleasures that aren’t free”.

But, there are situations where long term risk lowers and long term potential gains go up! This is amazing to me. This happens when you buy and no one else is. Most cannot take advantage of these opportunities because the short term risk spikes. Anyone who can float through this period can actually lower risk, increase potential return.

Real estate, stocks in 2008, are two examples. Price goes down, long term risk goes Dow, payoff goes up.

Sure, not every apparently strong company now will be strong and dividend paying in 20 years time. But holding 30 or so companies spread sectorally and geographically mitigates this. And I do keep a watching brief on the portfolio which, one day, may lead to selling off real (dead) dogs and divi suspenders.

If in a decade’s time, utilities, miners, oil companies and big pharma have ceased to be profitable then I suspect we’ll all have more immediate worries than the state of our portfolios.

Your preferred option 6 doesn’t make sense to me – where do you find 10% returns on something that is safe, unleveraged and understandable?

http://www.fundadvice.com/articles/buy-hold/the-ultimate-buy-and-hold-strategy.html

It is an index strategy by Paul Merriman that involves own a diverse set of funds. He updates the article regularly.

It is Fidelity’s Focused High Income Fund. It invests in bonds rated in the Bs, some just at investment grade and some just below investment grade, in the low Bs. I get some of the better yield of lower rated bonds without the added risk of bonds rated in the Cs and Ds.

Because I bought most of my shares about 2 years ago when the NAV was depressed, following my ER, my personal monthly dividend yield expressed as the ratio of the DPS and the average cost basis NAV of the shares I own has been just over 8% (about 7% on a current NAV basis). This does not include an unrealized cap gain of about 25%.

Besides my holdings in this fund, I also have holdings in muni bond funds (from my working days), stock funds, and and IRA which contains a stock index fund and an investment grade bond fund.

Since discovering my frugal side, I found that my expenses can be covered by one 10-hr weekend shift each week. And if you’re reliable (ie anyone here) you can pretty much set your own schedule.

Finding an employer willing to let one work only 3 days per week might be tricky. Had it been possible for me, I would have given it serious consideration. However, that employment was an all of nothing proposition.

Get enough savings in place to achieve FI and then cut back to four-day weekends until you reach an age where you really want to retire to the rocking chair.

Unless you have enough to buy a lifetime annuity or thirty year bonds with returns sufficient to cover your cost of living, your status as FI will be dependent on too many variables that can turn against you at any time.

And besides, four-day weekends are more than enough free time for most people. And working three days a week, especially if you like your job and the people you work with is much less of a hassle than the five-day workweek.

Self-employment is OK if you’re cut out for it and sufficiently self-disciplined and don’t mind the constant marketing that is required but, the fact is, most of us are better suited to be employees where most of the logistics are taken care of for us; all we need to do is show up on time.

Personally I’m a strong believer in Harry Browne’s Permanent Portfolio for its simplicity, effortlessness and safety. I’m implementing it now for more than a year with very satisfactory results and peace of mind.
Some portion of your capital should be risked for higher returns, that’s what Harry Browne calls his Variable Portfolio.

If I’m ever going to reach FI, this will be my investment strategy.

For the money I can afford to lose, I like the ETF strategy-Over time investing in the sectors that are down for the moment, making your buy in cheaper. I also like that I can put in stop losses, limiting the down side. In a mutual fund I have to wait to settle up at the end of the day, which might be too late.

I agree with just about everything you said. I’m just saying, that investing is like anything else…you can find “bargains” in active management just like you can with anything else. Most funds are not going to fill the bill, but a few will (like the ones I mentioned, and probably others as well).

I don’t think index funds are all bad. But there are a few funds (like the ones I mentioned) that have consistently beat the S&P 500 over the years.

.75% as an expense ratio is a general rule of thumb. An expense ratio that’s lower than that is better if all other things are equal. But of course, in real life, all other factors are not equal.

One other thing to consider…..when you’re withdrawing from a portfolio, it is possible to slightly underperform the index and still come out ahead. If your fund holds up better in down markets, then your personal rate of return may still beat what the returns of the index. This is why I think low expense balanced funds like the ones I mentioned are a good idea for most people, especially those who don’t enjoy thinking about investing.