I think you have the right general idea. Your point about annual savings/future savings being an unknown moving target is a good one. You put the cutoff for 2.5x about 4x where I did which would be a stretch based on your current savings but might make sense if your savings rate ramped up as quickly as you expect. You would have a couple years to get a better read on that. Do consider things like burnout risk. Tech is a very hot space right now and obviously the nonsense about AI replacing developers is not an immediate concern, but as someone who lived through the 2009-2015 job maeket, tech probably won't stay this hot forever. Also your spending goals may change (house, kids etc.). Your numbers are fairly aggressive. I feel comfortable with 2x leverage for much of early career because the book simulated that out all very well. Conceptually going to 3x makes sense very early career and I did simulate it out for myself. I feel confident going to 3x for at least the earliest part of career is correct, but without testing it out I wouldn't go too long at that level since it is likely above the kelley criterion. The expected return is lower for 3x leverage than for 2x leverage, the upside is that the variance is much lower by lengthening the investment time.You got it in one, lol. Thanks, yeah I feel being blessed enough to have such a high savings rate allows you a lot more leeway in risk-taking which is why I want to make the most of it if I can.So you're putting away 3x per year what my estimates were based on. Guessing FANG lol. Congrats. Took me a more of a circuitous path.I think this is the hardest part imo. It's really challenging to figure out how your future savings will pan out considering the massive jumps you can have by job-switching every few years in this profession. Compared to a stabler profession with more linear, gradual growth, my future savings will prob have a bunch of erratic movements.You should define your glidepath as a function of current wealth / future savings.
On the flip side, it's likely that my savings amount actually grows faster than my investments for the first few years (e.g. 100K this year, 125K next, and so on, until it starts slowing down once I reach a relatively high professional level). Based on my career expectations, obviously barring any extenuating circumstances, I'd expect the yearly savings to be in the following ballpark:It's mostly due to the above that I really want to push the envelope regarding leverage early since my expected savings would strongly outpace the volatility I take on my earliest career years. However your advice to start at 3x, quickly ramp down to 2x, and then slowly deleverage after that makes perfect sense considering the Kelly Criterion. Based on my projected saving amounts, this was the glide path I was considering. Note that 3x would mean 3x/3x equities/ITTs. Would you say it makes sense or is still erring on the side of being too aggressive?
- 2024: 125K
- 2025-26: 150K
- 2027-28: 200K
- 2029 onwards: 250K - 300K <- prob close to peek savings
Also, any thoughts about the lump sum vs DCA question?
- Up to 150K: 3x (300K borrowed - 450K total)
- 150K - 300K: 2.5x (450K borrowed - 750K total)
- 300K - 600K: 2x (600K borrowed - 1.2M total)
- 600K - 1.2M: 1.75x (900K borrowed - 2.1M total)
- 1.2M - 2.5M: 1.5x (1.25M borrowed - 3.75M total) <- peak borrowing
Another thing I wanted to ask about was lump sum vs DCA: for my Roth IRA portion, that has to be a lump sum since I would first max out my Roth 401K (investing in VOO or something) and then roll it over to the IRA where I could lump sum invest the ~50K in this plan. However, for my taxable brokerage, I'm curious what you suggest. Start with the bare minimum you need, then DCA every month's contribution to make it bigger or save a substantial chunk (like the ~75K I plan on investing) by investing in something like VOO and then transfer it to IBKR and lump sum invest it fully into the plan. In terms of logistic, the latter is obv the more convenient option, but I'm wondering if there's any benefit to doing the former?
Also with that kind of savings rate I think lump sum is the easy call.
Statistics: Posted by skierincolorado — Fri Dec 15, 2023 11:19 pm — Replies 2845 — Views 324996