My Retirement Plan At 35

[KopiKat]

Most of the 1mil was accumulated over three years when I worked as an investment banker, the bonuses was particularly generous in the good years and so was the retrenchment package during the financial crisis.

I have always wondered what an Investment Banker does, so I finally decided to check the internet. This site sounds credible and I extract part of their Job Description,

An investment banker must know all about the trends that have an impact on the investment industry. They must have a deep knowledge and understanding of how government regulations, policies and economic trends affect the investment industry as a whole. Investment bankers must know how to assess risks, and how to limit financial losses of the company and individuals that they represent.

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Many schools offer courses where graduates can receive a certificate in investment banking. There are also advanced certifications available in the investment banking industry. The certification courses cover topics related to debt, financing, public offering, corporate restructuring of businesses, joint ventures, business mergers, global relations, alliances, derivatives, securitizations and a host of other topics that directly impact investing around the globe.

The mental image I get would be one who ought to know lots about Investing, not just in Stocks but also in a lot of other more complicated stuff that many of us don't even know about. So, it seems a bit strange to me that 'Janjansen' is saying he finds Bonds complicated and hard to understand and even don't know what else to invest in,

Bonds, I feel, are actually more complicated than stocks because you need to consider the yield curve and interest rate movements, in addition to fundamental company analysis i.e. better not to buy what I do not understand. I will not buy into a bond fund or any mutual trust as it doesn't make sense to pay fund managers a 1-2% management fee when most of them under perform the index.

I considered preference shares as well, until I read an excellent article in this forum on its risks and how the investor is actually shortchanged - it basically revolves around the option for the issuers to redeem the preference shares when interest rate decline.

I don't know what else to invest in

In my imagination, an Investment Banker would be able to give us lots of good advice in this forum and we'd be learning a lot of great stuff from him through interesting exchanges. Perhaps my understanding of the Job Description of an Investment Banker is wrong? I think too highly of their Investment knowledge, skills and ability?

Please do pardon my ignorance and enlighten me, thx!

[dzwm87]

My personal view on bonds is that:

1. In general, inflation favours the borrower over the lender. Therefore if you want income it is better to buy the stock of a dividend-paying company than its interest-paying bonds. The dividend has a chance of rising to match (or even beat) inflation. The bond coupon has no such opportunity.

2. For the active investor, bonds offer a lower-risk route to capital gains. In a crisis, investment grade bonds often get marked down below par. This means that a buyer at that point can reasonably expect to obtain capital gains when the bonds are redeemed at par. Since there is a maturity date, he locks in his rate of return at the point of purchase.

In other words, stocks for income, bonds for capital gains. Totally at odds with conventional wisdom. But then, success is by definition not the normal state of affairs and therefore unconventional, is it not?

This is intriguing. By conventional wisdom, we all assume it is the contrary. Great insight!

But I will suppose capital appreciation for bonds will never be as extensive as stocks? I'm (still) not familiar with bonds market but will we get to see at least one-bagger case for bonds? It only will seem to be so for distressed cases but that alone is a whole lot harder to analyse.

[Janjansen]

In my imagination, an Investment Banker would be able to give us lots of good advice in this forum and we'd be learning a lot of great stuff from him through interesting exchanges. Perhaps my understanding of the Job Description of an Investment Banker is wrong? I think too highly of their Investment knowledge, skills and ability?

Please do pardon my ignorance and enlighten me, thx!

Hi Kopikat,

Investment bankers are not investment specialists at all, quite the contrary, it is a sales job with a fat commission. The word "investment" in the title is very inappropriate, and throws people off. There is no investment in the job requirement at all. Investment banking is all about helping companies launch their IPO, or raise capital through debt issuance. We will take a cut of the transaction size, say 1%, which is substantial because IPOs are at least a few hundred million or more. There are a few departments - debt capital markets (DCM), corporate finance, rating advisory. Without going into too much details, they focus on equities issuance, bond issuance or just providing advice to clients on the best capital structure, and are very specialized.

I was with the equities group focusing on corporate IPOs and large institutional investors.

Perhaps your description would better suit an "investment adviser" that sell insurance and unit trusts to the small retail customer. That said, I wouldn't trust 99% of the investment advisers out there with my money.

[Choon]

I think with $1 million and lots of time on hand and no institutional pressure to perform every quarter on your investments, it is possible to target 10-20% return p.a..

I am 30 with much less capital on hand. All my cash is either waiting to be invested or invested in shares. Sometimes with margin. Some may think I am too risky.

But I am quite stringent with my investments, I do a simple financial model projection for each investment. They tend to be powerful but conservative companies.

I am encouraged by this attitude of early-retirement and freedom in this forum and all the discussion and advice on the subject.

Thank you.

[CityFarmer]

I think with $1 million and lots of time on hand and no institutional pressure to perform every quarter on your investments, it is possible to target 10-20% return p.a..

I am 30 with much less capital on hand. All my cash is either waiting to be invested or invested in shares. Sometimes with margin. Some may think I am too risky.

But I am quite stringent with my investments, I do a simple financial model projection for each investment. They tend to be powerful but conservative companies.

I am encouraged by this attitude of early-retirement and freedom in this forum and all the discussion and advice on the subject.

Thank you.

IMO, Margin by itself is not a bad tool, but a dangerous tool. When use wisely, it is a good tool. When use wrongly, it can be very dangerous.

An analogy of using a knife, it is a good tool to use in kitchen. But it is dangerous to be used out of kitchen.

[valuenewb]

Hi Janjansen

I think you are an inspiration for many of us. Congrats on reaching this option this early in your life. Not many would be able to have this choice at such a young age.

I'm a 1-2 years your junior. I have been off-work by choice since Jan 2012. I took the chance to travel on a tight/low budget and basically took the time and opportunity to enjoy the world, enjoy having your time all to yourself.

Ultimately, at the end of the day, I think you would still need to have goals and a sense of direction. And I think that's why your other interests will come in. You may end up working with ASD or something similar but I think my advice would be to follow your passion, get into a regular partime/flexible arrangement and get paid for it (even part timer wages otherwise I think it wont be 'sustainable' if people start taking advantage of your kindness).

I do tend to love track of time/day since I don't have to be in the office at 830 on weekdays and not on weekends. But other than that, I haven't even missed corporate life for 1 sec.

Just my 2 cents worth of thoughts. All the best.

[CityFarmer]

Hi Janjansen

I think you are an inspiration for many of us. Congrats on reaching this option this early in your life. Not many would be able to have this choice at such a young age.

I'm a 1-2 years your junior. I have been off-work by choice since Jan 2012. I took the chance to travel on a tight/low budget and basically took the time and opportunity to enjoy the world, enjoy having your time all to yourself.

Ultimately, at the end of the day, I think you would still need to have goals and a sense of direction. And I think that's why your other interests will come in. You may end up working with ASD or something similar but I think my advice would be to follow your passion, get into a regular partime/flexible arrangement and get paid for it (even part timer wages otherwise I think it wont be 'sustainable' if people start taking advantage of your kindness).

I do tend to love track of time/day since I don't have to be in the office at 830 on weekdays and not on weekends. But other than that, I haven't even missed corporate life for 1 sec.

Just my 2 cents worth of thoughts. All the best.

You are the lucky one to retire at age below 35. Congratulation.

Is the regular partime/flexible arrangement is related to your previous profession? It may not be feasible for most of us, probably?

Part-time or flexible arrangement is one of the options among others when i decided to retire

[KopiKat]

In my imagination, an Investment Banker would be able to give us lots of good advice in this forum and we'd be learning a lot of great stuff from him through interesting exchanges. Perhaps my understanding of the Job Description of an Investment Banker is wrong? I think too highly of their Investment knowledge, skills and ability?

Please do pardon my ignorance and enlighten me, thx!

Hi Kopikat,

Investment bankers are not investment specialists at all, quite the contrary, it is a sales job with a fat commission. The word "investment" in the title is very inappropriate, and throws people off. There is no investment in the job requirement at all. Investment banking is all about helping companies launch their IPO, or raise capital through debt issuance. We will take a cut of the transaction size, say 1%, which is substantial because IPOs are at least a few hundred million or more. There are a few departments - debt capital markets (DCM), corporate finance, rating advisory. Without going into too much details, they focus on equities issuance, bond issuance or just providing advice to clients on the best capital structure, and are very specialized.

I was with the equities group focusing on corporate IPOs and large institutional investors.

Perhaps your description would better suit an "investment adviser" that sell insurance and unit trusts to the small retail customer. That said, I wouldn't trust 99% of the investment advisers out there with my money.

Thx! I learnt something new today!

In this forum, if you're willing to ask and learn, there're many experts who're more than willing to share their knowledge and experience. Many of the knowledge gained is priceless, even tho' it's free (let's hope 'cyclone' doesn't suddenly becomes too 'enterprising'). If you come with an open mind, I'm very certain you're going to be a lot more successful in your 'retirement' planning than at CNA forum.

IMO, even tho' $1Mil sounds like a lot of $$, I doubt that it's going to be enough to last you another 35-45 years, if you're unable to get returns better than the inflation rate. Even if you scrimp and reduce your basic needs to a bare minimum, it becomes a curse if you happen to enjoy a long life! Further, I don't see much enjoyment in life if you have to constantly worry about this.

You may not remember me, but I remembered our exchanges in CNA forum on Starhub when it was battered down to $2 and below. You subsequently became a champion of Starhub, so, all you need to do is to find more such stocks...


PS. I don't believe the resemblance is coincidental as all the background you'd posted so far is chillingly almost identical..

[Musicwhiz]

Janjansen, yours is a happy problem indeed! I guess I am already over the age mentioned in this thread (I am 36) and well, it's too late for me to aspire to be financially free by 35!

Considering I've been working hard, saving and value investing (for the last 5 years), I still feel I am nowhere near my targets of early "retirement" or financial freedom (where passive income > expenses). Guess I have to try much, much harder.

Oh yes, I also realize (as what d.o.g. mentioned back in 2002-2003) that having a kid means it takes much more to be financially free, but it's a joy I can hardly describe (intangible benefits).

[wsreader]

2. For the active investor, bonds offer a lower-risk route to capital gains. In a crisis, investment grade bonds often get marked down below par. This means that a buyer at that point can reasonably expect to obtain capital gains when the bonds are redeemed at par. Since there is a maturity date, he locks in his rate of return at the point of purchase.

If the YTM is < inflation rate, the bond investor is actually locking in his loss at the point of purchase.