1 week ago

Most people retire once and they are done.

I wish life was that SIMPLE.

But life had other plans for me, I guess.

Last year 2021 November, I quit my job and retired.

Great, right?

I had my retirement all planned out.

I had DOUBLE of what I thought I need for retirement.

If the market continues to go UP for a FEW MORE years, I am done.

Welp, the market crashed continuously 8 months after that.

During this 8 months, I was kicked out of my retirement goal (my LEAN FIRE to medium FIRE goal) and positioned me into a stressful situation.

During this bear market, it made me reflect on some fundamental flaws of my strategy.

FLAW: My strategy focuses on exclusively on getting capital gain (30% per year). While this is great for tax free compounding, there are expenses that need to be paid during retirement which can’t be built on an unreliable source of capital gain.

This is a problem you will encounter with ANY capital gain type strategy.

Thus, I am glad you are reading this email because you need to SOLVE this problem as well.

Capital gain is Unpredictable

Retirement requires stability and predictability

This is where the monthly passive income strategy is born.

Monthly passive income functions similar to a salary payment.

Every month – I know AHEAD of time how much I will get from the stock market using the monthly passive income strategy.

I know with around 90% to 95% certainty that this is the amount I will get.

For example, if I am investing $300K and getting 3% per month, then I know I am getting $9K next month.

This certainty has a trade off.

Even if the stock market goes up 1,000% tomorrow, my gains are capped at the pre-determined amount.

This means if the stock market goes up by 1,000%, my gain is still $9K regardless

It is only when a deveasting situation (which happens < 5% of the time) would derail my plans.

This makes my retirement much more comfortable and much more predictable.

Then, I further enhanced this strategy with better tools that built on data and took it to the extreme.

This brings me to the topic of financial freedom

I think a lot about financial freedom and what it is

If I have a million dollar portfolio but the capital gain of 30% ($300K gain) is not predictable, is that truly financial freedom?

If I have a business that makes $50K-$100K per month but the profit is unpredictable due to various costs, is that truly financial freedom?

My answer to those questions are – NO.

It makes you RICHER but it is not FREEDOM.

The uncertainty and doubt makes it hard to spend capital gain. For the business, I always need a large buffer in case anything happens.

Thus, there’s a importenace of generating a predictable return from the market using the monthly passive income strategy

Within the last 8 months, the bear market has forced me to revise my strategy to make my long term strategy more resilient and MORE IMPORTANTLY making my monthly passive income strategy more profitable as well.

As I reorganize my capital:

1. I shuffle my portfolio to an emergency recovery plan. Stocks that I would only invest during a market crash for faster recovery. In the last month, my long-term portfolio increased by 40% and it is still recovering.

2. I contribute capital to my monthly passive income strategy to reach my minimum threshold to be considered retired again.

This has a few benefits:

1. When the market recovers for the remainder of 2022, my long term portfolio will be more than enough for my actual retirement (retirement plan A)

2. For my monthly passive income (retirement plan B), I am able to achieve my retirement goal of $10K per month in a more predictable manner.

Even if Plan A takes more time to recover, mid 2023 instead of early 2022, I know my retirement plan B will provide me with monthly passive income where I can withdraw regularly.

This means, I have essentially built a fail-safe for my retirement plan.

Once the market recovers by mid-end 2023, I would be 4x my retirement goal (based on my rough calculation)

This should enable me to weather through more storms as times go on and avoid sailing in dangerous seas in the future as well.

Now, my goal is to double and triple my retirement goal using monthly passive income and long term investing to reach my desire state again.

The next 12-18 months will be very exciting.​

About the author 

Eric Seto

Eric Seto is an investor with over 10 years of experience. He travelled around the world to help with auditing, accounting, purchase and sale of companies.

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