August 2016 Freedom Fund Update: 6.3% in Market Gains

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Freedom Fund

Welcome to the monthly update of our journey to financial independence, where we report on the progress of our FI tree, aka Freedom Fund. Our mangoes are almost ripe and we’re projecting to reach our goal by July 2017. This means that we’ll have enough investments to live off of without ever having to work again to pay for living expenses. We’ll consider ourselves financially independent when our Freedom Fund is able to support our lifestyle indefinitely. Our goal is to reach financial independence by July of next year. Our Freedom Fund is comprised of mutual fund investments, short-term reserves and a real estate property.

Freedom Fund Progress

Percentage of Freedom Fund reached in July

In July we reached 90% of our Freedom Fund goal. Yay! We’re ahead of our goal by a couple of months, but with the short-term volatility of the markets, we could just as well fall behind. Therefore, we concentrate on longer time frames to measure our progress.

Year to date gains

Our year to date progress shows a steady upward trend from 73% to 90% in seven months. That mango tree is growing beautifully!

July FF Monthly Chart Update

Freedom Fund Portfolio 

Portfolio breakdown

Most of our Freedom Fund assets are in our retirement accounts. We’ll need to wait five years after early retirement in order to access those funds without penalty. How would we access these funds before age 59-1/2 without penalties? Well, we’re planning on doing a Roth IRA Conversion Ladder. We’re also contributing to our Roth IRAs and we’ll be able to access those contributions at any time without penalty.

One of our current goals is to be able to build our non-retirement assets and ensure that we have enough funds to withdraw from during the first five years of early retirement.

ret-non-ret July

Performance

We started using all the powerful free tools that Personal Capital has to offer. I love the graphs and how you can measure the performance of the entire portfolio. The Market came back nicely last month and we had a 6.35% gain. That helped our tree grow a few branches for the month. We’re showing these because we have the data available and it’s nice to see the progression, but we no longer pay close attention to the daily or even monthly swings to make buying decisions. We found the perfect asset allocation for us and invest our new money accordingly. That takes the market-timing element out of our investment decisions.

July 16 performance

Investment mix

I thought it would be neat to have a chart that shows what percentage of the balance is principal (our contributions and employer contributions) and what constitutes the investment returns. Since we’re in our accumulation stage of retirement, the principal makes up a bigger chunk of our investments. That will change with time because once we stop working we’re not counting on adding any principal other than reinvestment of dividends and capital gains that we might not spend.

Principal vs. Returns July 2016

I think the visuals help to paint a story where words might fail. This is where time in the market, not timing the market, plays to our advantage. If the market was to drop by 20% right now, we would still be in positive territory since 23% of our balance is made up of our investment returns. By continuing to invest according to our asset allocation, we stay invested longer, get investment income sooner and don’t lose any sleep over what happens in the market.

What were your financial goals for the month? Did you meet them?

Risk disclosure: All investing involves risk, including the possible loss of principal. The material contained on this website is for discussion purpose only and should not be misconstrued as financial advice.

Featured image by Pexels

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September Freedom Fund Update: We're in Good Shape for Retirement!

Mr. Enchumbao

Mr. Enchumbao retired at 44. He worked for 13 years at Vanguard, primarily as a Communications Project Leader in the Institutional Division, helping people save for retirement.

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2 Responses

  1. Wow! This is awesome! Congrats on reaching another milestone! It’s so motivating to follow graphs of your progress, isn’t it?
    I also love that you guys explained how you will convert your non-retirement assets. That was a question we struggled to find an answer to in this world of very late retirements. As a result we did what you are doing now- built up the non-retirement fund to avoid early penalties and fees, because who likes those, right?
    Great work and keep it up!

    • Hi! Thank you. It sure is motivating and I like that the blog provides me with a reason to track the progress via different charts. Yes, we gotta do our best to avoid those fees!!! It’s amazing how little people know about the loop holes available. I found out about it a few years ago as well. Thanks for dropping by!

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