The down market of 2008-2009 was very helpful to me when I ERed in November, 2008. The bond fund I use my company stock (ESOP) proceeds to buy into was down about 20%-25% from its usual levels. This enabled me to buy 20%-25% more shares than I expected. So, as long as the monthly dividend was not 20%-25% lower than its norm, I would come out ahead.

What happened was that the monthly dividend did drop a little in early 2009 but rebounded later in the year. Even though it has fluctuated in the last 2 years it has never been worse than 10%-15% below its norm so I have been able to generate more dividend income than I had originally budgeted.

I was also able to buy additional shares while the bond fund’s NAV remained low in 2009 so I have additional shares to offset any slight decline in the monthly dividend per share. Furthermore, cap gain distributions from the fund, while taxable, get reinvested and that further boosts the number of shares I own and the subsequent monthly dividends.

In short, the down market was a huge blessing for me.

True.

Incidentally, I’ll lend money to the government the day they pay interest in gold There’s a certain moral hazard associated with lending money to people who can print money at will to pay you back.

To be truly FI you need guaranteed returns. So, if you need $5,000 a year, you need enough in 30 year bonds (or an annuity) to cover that.

But, then, you need to account for the possible and likely effect of inflation on that income. But inflation will seldom affect all our indiviudal consumptions equally. Food is probably it but one can obviate that by growing some of the necessities, composting, and keeping chickens.

The tricky part is housing; even if you own your home without a mortgage a single-family residence is probably the most expensive option. I own four rental units (free and clear), live in one and the others provide me income and inflation protection because I can raise the rents to keep that income constant.

I keep half my money in cash and half in bonds although I don’t need income from either to meet my living expenses since I own an inflation-adjusted annuity that is almost double my cost of living.

Certainly, it is possible to accomplish FI using stocks (or playing the lottery, or 21 in Vegas) but I don’t believe it is prudent or hardly the most desirable or even sustainable means to that end.

I see the stock market as a gambler’s ploy to avoid the longer-haul of saving enough to buy sufficient 30 year (Federal government) bonds or some form of federally-insured annuity.

More buying opportunities ahead for many stocks.

1) diversify accross industries
2) diversify across companies ( hold at least 30+)
3) focus more on dividend growth prospects and less on the highest dividend yield
4) make sure you research your positions and that their dividends are adequately covered
5) sell after a dividend cut, but hold on if the dividend is kept unchanged
6) If you are ready to live off your cash flows, place at least 25% of your portfolio in fixed income. I am a fan of laddered CD’s, as the only risk there is inflationary as long as you are not over the fdic limits.
7) As a general rule i would prefer to own my place of residence at retirement so that I am “hedged” against rent increases and in the worst case scenario live off my house either through a reverse mortgage or sell it a move into a smaller house in smaller towns

You declared that you became financially independent a few years ago. As the market decreased since then, is that still true? does your current investment income still cover your current level of expenses?

I am sorry to report that the funds I hold (about 25% of my fortune) have been doing way better than market and better than me too. A solid blow to my ego. One of them (the largest, HSGFX) is down 15%, another (FPACX) down 25%, PRPFX down about the same .. the one that took the heaviest hit was DODFX.

I don’t think any of them are doing worse than the market, DODFX is on par depending on which day you check.

Who said I’m not market timing? No, I’m not picking trends or bottoms, but there are times to sell, .. well in my case buy less .. and then there are times to buy more. I’m picking statistical outcomes. Right now, long terms gains are likely to be high. Short term? Who knows? Who cares? I’m still getting income (that’s what I care about).

Currently, I am moving money from stocks that have held up and putting them in things that have been punished. I’m also decreasing my cash position with the goal of getting it down to 5% … and then there’s of course new cash.

As for inflation, some dividend payers tend to increase their dividends often 10-20% although lately that has kinda sucked. You have the same inflation problem with an asset based model though and don’t forget that the underlying stocks are still assets. This is also why I’m not too keen on bonds.

You are right about looking at the income. It has been easier for me to look at assets just because I can figure out how many years and then figure out how much money. Looking at income is tough for me because it’s difficult to adjust for inflation (it seems like you need to keep putting more and more money). I need to start looking at this model more closely.

One thing I don’t understand is how it’s a buying opportunity. How do you have cash? Are you moving money from cash to stocks (- and if so how is this not timing the market? -), or just new cash?

http://www.moneymonk.net/2008/03/net-worth-is-joke-cash-flow-is-better.html

Ouch!

What I really am asking is how/why you are confident that your individual selections aren’t going to go bust and wreak havoc.