Learn The Stock Market And How to Trade

What to Do With Your New Found Wealth?

Isn’t it funny that when the market is down everyone is so sad, but when it pops 11% in one day they are ecstatic.  Unless you were planning on retiring tomorrow the market is likely to gyrate some more, and I’m still upset that I didn’t get some more money in the market while it was way down.  For those who have 10, 15, or 20+ years to retirement you need to change your paradigm.  If you can recognize these deep draw downs as buying opportunities you can truly pad your nest egg in the long run.

In this hypersensitive market I find myself tempted to try to guess the market.  I want to pull my money out of stocks after such a quick run up, let them slide back down, and buy back in.  However, I want to do this on the back of working a full time job, caring for my Arabian horses, and my 200 mile a day commute.  I know I don’t have the time to properly digest this market to help myself in any way other than luck.

If this sounds like you, I think this is a good chance for us together to take a deep breath and review our strategies and our goals.

The Goal

I want to have $100,000 per year in income from my stocks within 30 years.

The Understanding

$100,000 inflation adjusted at 3% per year to the year 2038 is $242,726 <sigh>

The Self Reflection

I know when I retire I don’t want to want to stress about my pay anymore and since I plan on living to 120 I will only pull 4% per year from my nest egg.  Why 4%?  According to National Savings Rate Guidelines for Individualsby Roger Ibbotson, Ph.D.; James Xiong, Ph.D., CFA; Robert P. Kreitler, CFP®; Charles F. Kreitler; and Peng Chen, Ph.D., CFA this is the discounted rate assumed by annuities to pay a given amount for the rest of a person’s life.  I’m fairly sure this people know what to assume to make their profit.

$242,726 / 0.04 =  $6,068,156 <sigh again>

The Plan

The goal is to return 15% per year.  The easiest way to determine the the monthly payment required at any annual return is to use the handy dandy PMT function in Excel:

So now I remember that I just need to keep coming up with my $880 per month and find solid investments to earn my 15% per year.  Makes these crazy days seem not so critical.

I’ll let you know how I’m doing over time.  If I get to wild please help remind me of my goal.

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