Portfolio Value Curve

 

Inspired by Investment Moats Accumulation-Decumulation curves, I decided to draw one (with much less artistic talent) to represent where I see my portfolio value heading. 

My curve is characterised by an accumulation stage where I am earning a salary. As my passive income is sufficient to pay all my bills, I am effectively using my entire salary to invest.

At some point, I will no longer have income from work. I guess this is retirement. I will then fund my retirement expenses with my passive income.

In the graph, I mention the margin of safety concept where my excess passive income above my expenses get saved and ready to be used in years where there is a bad market (eg: GFC, COVID19). The plan is therefore not to sell anything but to rely on interest payments and dividend income.

However, if the margin of safety is large enough, which maybe could be passive income = double current standard of living, then there is really no need to 'save' the extra passive income. If dividends fall by 50% during a bad year, it will still be equal to my current/expected standard of living.

I hope to use any extra passive income I happen to have each year to do some charity work to keep myself active during the retirement years. That is better than spending it on myself which may lead to lifestyle inflation and a 'money no enough' syndrome when a bad year comes along.

Having achieved FI in 2021 and not hating my job, I still hope to continue working. If I am not retrenched, achieving 2X is a distinct possibility. I am also grateful that I am in pretty good health. At least my blood tests show that I am not in immediate risk of terminal disease - I am happy that I able to avoid needing cholesterol medication as I have quite a few friends on medication. However, my health can still be improved further and I have a plan to improve it, all I need is the discipline 😃

Finally, not everyone will be able to achieve 2X passive income on retirement. Therefore, someone with a different accumulation pattern may not find this applicable to them but will find the curve in Investment Moats to be more applicable. That's fine, as this post is about sharing my own experience, I am not a trained financial planner so I would hesitate to provide more general advice.