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Comment by pilom | Hacker News Reader

I've cut my expenses and invested the extra in index funds. Currently at a nest egg of around $300k which spews off dividends of around $500/month and is currently appreciating a bit faster than that.

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Are you reinvesting the dividends? If not, why?

Yes I am, just used those as the metric for meeting the $500/month landmark from the title.

Curious~ age income occupation? I'm seeking to do this as well.

30, ~125k household income for two adults no kids, IT and teacher. Our income made it a little easier to get here but the $200k hole of combined student loans we started with (now fully paid off) probably counters that pretty evenly.

Interesting off-topic: considering your current income (salary), do you think $200K college was worth it? I believe you could command same amount with a degree from free/state/cheap university, no?

Is there more to the story? Started with -200k and now sit on +300k with a 125k salary? House? Came into a windfall of cash in addition to salary?

I'll be honest I'm glossing over some details about house refinancing and sales etc. About 40k of it was gains from a house. I'll give you that. About 75k of the 300k is investment gains. Income has remained pretty stable over that time (when I got a raise, my wife worked less or went back to school etc) and we started at that income level right out of college at 22 years old. So of the 500k, 115k is gains, so $375k is contributions/debt payment. In the 8 years since graduating that would be ~$45k/year. $125k-45k= $80k in taxes and spending per year for two people which isn't hard at all. Lived in DC for a year then moved to Denver.

In a LCOL area and putting out 50% of income over 8 years would do it. FIRE people are a lot more aggressive than that.

Think he meant 125k combined between him and his partner.

Nice to hear, I guess I'm on track. Thanks for the open answer!

Did you get to that size of nest egg through investing?

At this point, of the 300k, about 225k is from contributions (savings) and 75k is from gains. The bigger the account gets though, the bigger a percentage the gains will be as the account grows faster than my annual income does.

Nice, that's awesome you were able to save so much. What expenses did you cut to be able to save like that? What are your non-negotiable expenses?

Which index funds, if you don't mind me asking?

Vanguard mutual funds. About an 80/20 split between VTSAX (Stocks) and VBTLX (Bonds). Nice and simple. I re-balance with monthly contributions.

I'm not the OP but I have some investments in high-yield ETFs. These are worth a look: REM, YYY, LVL, ROOF

You aren't investing it well then. This year S&P has gone up something like 20% (thank you, Donald). From 300k that would net you 60k which is 5K/mo. All you'd need to do is rebalance into VOO.

it's not possible to decide if something was a good decision or not by looking at realised performance over a short time scale.

having a portfolio that is entirely concentrated in the S&P will have less risk adjusted expected reward than one that allocates a bit in some other buckets as well (e.g. international shares). c.f. the book "random walk down wall street".

It's very hard to outdo index funds. Even Warren Buffet said as much. My personal observation over the last decade confirms it. I also trade individual stocks in industries where I understand the underlying trends, and those do outperform s&p, but I'm very much aware that betting the wrong way could instantly undo those gains. Index funds are much safer.

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