Saturday, August 30, 2014

Targeting 100%+ savings ratio in a couple of years

Before fully retiring, I plan to have a few years when I will be very close to a 100% savings ratio (as defined by total net cash amount invested in new stocks / net after-tax salary). After that I think I will have a few years (about two or so) of buying various stuff I would like to have in order to have a lot of fun when fully retired, and hence having a 0% savings ratio. Then it would be good to have one final 100%+ savings ratio year to get the really, really proper margin of safety for the rest of my and my kids' lives. 100%+ should be possible to reach by having my dividends pay for all living costs (incl. those incurred by having to work) and a slight margin (I.e. having some additional cash from dividends reinvested) while investing 100% of my salary. With this approach I hopefully never will come into a situation where I will become stressed due to a severe downturn in the stock market, as the dividends (in general) should keep rolling in, at least if I have selected good stocks for the long run.

Within 6-12 months I expect to reach a savings ratio of about 80-85%.

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