Diversifying an HYP with a global index

Most PF savers have a stock market accumulation horizon measured in tens of years. I don’t – I realised I was going to take the expressway out of the world of work because otherwise it would drive me round the bend. I was James, not Pat, in this story of how to be a wage slave and play the game, so I did the celibate monk in a brothel thing, saved up shedloads of money and jumped out of the runaway vehicle of my erstwhile career and let it crash.

I was dealt a kind hand by the stock market. You didn’t have to be smart in 2009 to do well out of the stock market. You had to get in it, despite everything saying Wrong Way; it wasn’t easy.  I started building a HYP in my ISA in the eye of the storm that was simultaneously terminating my career. On a 4% SWR on my HYP investment capital I can make up the damage done to my pension from quitting early and losing a third of my pension contributions[ref]Because of crafty changes made by The Firm to the pension scheme that last third of my working life wasn’t worth a third of the accrual, reducing the amount I had to catch up[/ref]. From 55 which is not so far now I can use a short SIPP to give me a DC pension for five years before drawing my main pension at the NRA for The Firm, so no actuarial reduction for 90% of it.

Nothing comes for free – I had little fun in the last three years of working, and I’ve run down some separate cash for the last two and a half years. Later this year I am probably ready to re-enter the middle class income fray, but hopefully without pissing away my income/wealth on the sort of garbage I used to do when working.  I will spend more, but not at wage slave me levels. There is an interesting perspective from one of the Telegraph’s interviewees about realising a pension that is adequate. I shall never be rich or poor, assuming, of course, that society survives reasonably intact. War and hyperinflation can change that in the blink of an eye, of course…

The Coffee Can portfolio and HYP Rule #1 – do not sell

I started off with a HYP because my experience of stocks have shown me  I am a rotten seller – jumpy and fearful, I will bail too early. With an HYP one of the tenets is you don’t have to do that. Over the years I’ve also learned how to benchmark a portfolio. Unitise the sucker – compared to XIRR and all sorts of other ways unitisation is simple, it’s the basis of how mutual funds work except you are the mutual fund manager and, although I don’t decumulate at the moment, it can track how well you are doing as a manager even through decumulation. The instructions are here. My aim is to beat VGLS100, over my investment period and with what I’ve put in over time, because that’s probably what I’d have bought otherwise. So far I’ve done fine. And I don’t have to sell units to derive the 4% SWR income.

The Ermine is a capricious investor, many would say irrational. I aim to buy in bear markets and when people are rioting in search of decent trainers at a knockdown price (revisionist alternative view that this was a correct response to Not Having Stuff here) and things that people hate. I try and take breaks in times like the last couple of years, just buying my own stuff back tax-wrapped instead of unwrapped. It’s a messy approach. Observing that most of the behavioural biases that clobber my returns are usually on the selling side and taking that out probably helped me.

bunch of contract notes from two years of my dotcom days
Two years of my dotcom days. I have a natural tendency to churn 😉

The Do Not Sell was inspired when I read Robert Kirby’s The Coffee Can Portfolio from 1984[ref] the formal reference is DOI: 10.3905/jpm.1984.408988 though I am not educated enough to know what the hell to do with that. A Google Search will be a profitable source of PDFs if you want to read the whole thing[/ref]. That sings to me because my errors were in churning, and here was a way to stop that. I like the standfirst

You can make more money being passively active than actively passive

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