When to go Full Time (Investing)

From my perspective

It goes without saying that this isn’t financial advice. I have said this before, but I am at best a novice at this. You should be chatting with someone who has actual qualifications before making any financial decisions. I must emphasize that this not something you decide in isolation, if you are in a serious relationship you MUST involve your partner/spouse (if you have one). 

I was thinking about this the other day when my friend asked me when it’s time to try this investing thing full time. He has had some serious success and was excited at the prospects that he may not have to “punch a clock” at some point in the near future.  If I am speaking frankly, I don’t know when it’s right for you or anyone else to move to full time investing and, if I am being even more honest, I didn’t know it was the right time for me either. It was an educated guess. 

These types of questions come up more frequently as a strong market benefits more participants. The line between skill and luck gets blurred. Many times our time in our feedback loop gets shorter and shorter. Many people romanticize the idea of living off their portfolio and the freedom it provides. I won’t lie it’s awesome. But there are also times when you have to draw from your investments in a down year. This is psychologically very difficult.

Background

I left my full time job in the summer of 2018. It was a couple months before my 35th birthday. Man, it was scary. I didn’t have a guide on how to do this. By this, I mean making the jump to full time investing. I asked a couple of other investors I knew at the time what they did to help guide me. While this was helpful, all had a two income household or no kids, which was not my path and thus I did not have the same safety net as them. This would be something additional I had to consider. 

My Mindset 

Maybe it’s a hint of ODD, but I wanted my freedom and I wanted it yesterday. I didn’t really like the corporate world. I joke with people saying I was looking to leave the corporate world before I entered it. I did try several different careers and I was successful at them, but I was never energized with the idea of working for several decades for someone else. I always felt like I was building someone else’s empire. I was always looking forward to having my time back and don’t you dare use the r-word, “retired”. 

Again, I can only speak about my own journey but here are some points that gave me comfort in making the leap.

• Know your numbers. 

  • What is your lifestyle and how much do you need? I mean the lifestyle you want when you leave work. If you are currently reusing bath water to save money, is that something you want to continue after you leave full time employment? I would expect that your lifestyle will get more expensive as you leave the corporate world (mine did). You can use things like the 4% rule or whatever if you want, but I think it’s deeper than that. Hopefully, the numbers made sense a while ago and this is something you have already considered. I mean, why would you think you can support your lifestyle by investing full time if you are only earning an average return?

  • For me, I have a spreadsheet that I use to track expenses. Before I made the jump, I tracked EVERYTHING. This gave me precise numbers to work with. The sheet is split into different sections, such as essentials, lifestyle, luxury, etc., and I could easily tell where to cut and how much it would move the needle. 

  • I also tracked my monthly net worth to make sure I was above a minimum threshold.  When I say “net worth”, I mean the net worth that matters (what earns income) and not all the toys and houses that sit there and do nothing but cost money.

  • Some people, however, need their money segregated into specific “savings” accounts to give them some comfort. For example, they may find safety in having 50k in a savings account and, as such, they actually need an account that always has 50k in it. If this is you, then you should have that set up with a specific amount in the account at all times. 

• I didn't burn any bridges when leaving. 

  • You may need to go back or seek employment with a prior co-worker. We all fantasize about leaving in a dramatic way, like something you see on TV. And then, due to our exit from the company, the business starts a gradual decline to zero. This will, then, validate that your genius was single handedly keeping the business afloat. Right? . Or, perhaps, maybe that was just me. Well you never know what will happen in the future, so why burn bridges? Even if there are coworkers you don’t like, the good news is you likely never have to deal with them again. And if you do, why make it harder for yourself in the future.

  • Maybe it’s not about going back but getting another opportunity in the future to do something cool and unique. Maybe you get bored and want to try a new business and a co-worker can help you get your foot in the door. Or maybe your co-worker holds the secret on how to break through a deadlift plateau, so be nice. 

• I had a contingency plan. 

  • For me, this was a line in the sand on when I would execute a contingency plan. My plan had several layers, with timing for each step. If my number got below a minimum, I gave myself one week to get my resume updated and two weeks to reach out to old contacts to see what opportunities were available. If in three weeks I didn’t have something, I would blow the dust off my tools and start doing cash repair jobs in the driveway (I am a mechanic by trade). While this might not sound glamorous, I have two boys to support and I am not willing to let my pride stand in the way of the bills getting paid. If the portfolio rebounded in the meantime, I would shut things down and go back to full time investing. 

  • My thinking was that even though I left, I could always go back because I was good at my job and didn’t burn any bridges. Even for less pay I would still have a position. I understand, however, many people have an ego that won’t allow this. And that’s fine but call it what it is. Going back to a lesser paying job is a non-starter for many.

• Battle testing your investing style.

  • I took comfort in knowing that I had already been through some rough years. 2008/9 were the obvious ones, but there was also 2011 which was a hard one for me. I know many focus on big drawdowns, but I think what is equally as important is long stretches of underperforming (although with positive returns). These years seem to really grind away at your soul. When everyone is getting rich by throwing money into something hot and you are digging deep and doing work, but not getting rewarded. I had both big drawdowns and longer periods of underperformance under my belt.

• Checking my ego. 

  • To many people, the thought of leaving and going back is failure. Even if I had to, I would push a lawnmower around the neighborhood or shovel driveways. I was brought up with the belief and mindset that there is always work. There was no such thing as “unemployment”. You just are too fussy. 

  • It’s hard to admit when you were early or wrong. Thankfully, investing in public companies should have given you plenty of times at bat when you strike out. Being early or wrong looks the same. Going back to a 9 to 5 may feel like failure, and maybe it is, but I would rather try and fail than grow old with a bunch of “I wish I would have…”

Closing Thoughts

It is worth saying again, I don’t know when YOU should go full time. Many of the points above were for me alone and don’t apply to you. I wanted to go full time ASAP. I also wanted my body and mind to be sharp so I could enjoy the extra autonomy. “I’d rather be a year early than 10 too late” is something I used to say to myself.

So many people will tell you that you are crazy. You may lose friends. Many people will be confused or jealous or both. There will probably, also, be people who will want to know what you do so they can do it too.  However, they will probably lose interest once they see how boring it is to invest and actually make money.

If you are young enough, it can also be quite isolating. If you succeed in transitioning to full time investing, you will now have so much autonomy over your day. You will likely go from feeling time constrained to being a time glutton. And there will be a honeymoon period for sure but then this will become  the “new normal” for you. 

Again, I can’t know or tell you when to go full time with investing but I would love to hear from you if you are a full time investor or thinking about going full time. Please feel free to share your story. 

Thanks for reading

Dean