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BiggerPockets Money Podcast
Has the FIRE Formula Changed? Why 100% Index Funds Isn’t the Answer
00:39:15
Is a 100% index fund portfolio no longer the FIRE formula? The market has changed, and maybe your portfolio allocation needs to change with it. With index funds at all-time-high prices and price-to-earnings ratios at an eye-watering 29, you might be feeling a bit worried about whether your FIRE will last or you’ll even make it to FIRE in the first place. You’re not crazy; Scott is feeling the same way, too. Recently, Scott decided to make a move much of the FIRE community would protest—he sold 40% of his index fund portfolio to reallocate to real estate. Why did he do it now, even as a strong index fund believer? On the other hand, why is Mindy sticking with her stock and index fund portfolio, ready to ride out whatever potential market downturn could be coming our way? Scott explains, in detail, why real estate is a better choice for him at the moment, the reason prudent FIRE chasers should question the conventional wisdom of a 100% index fund portfolio, and why his new rental p...
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- [00:00]
Mindy Jensen
Everyone in the fire community talks about throwing money in an index fund like it's the holy grail of investing. Today we're going to challenge that conventional wisdom. And who better to talk about this than somebody who actually went against the grain? Scott literally looked at his index portfolio and said, maybe this isn't the optimal strategy for me anymore. Hello, hello, hello and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen and with me, as always, is my vtsax fan co host, Scott Trench.
- [00:32]
Scott Trench
Thanks, Mindy. Great to be here and ready to chill with you. What an inside fire joke there, Vt Saxon. Chill. All right. Biggerpockets has a goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order. Because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting or how deeply trapped in the middle class trap with an index fund only portfolio you are.
- [00:53]
Mindy Jensen
Ooh, Scott, that was a little deep already. Let's jump right into it. I am on the opposite side of you with the vtsax trap that you alluded to. Starting off this year, you made a pivot in your portfolio. What change are you making and why are you making this change?
- [01:12]
Scott Trench
I looked up and after 10, 11 years in this fire journey, realized that, you know, while I have some real estate, my financial portfolio outside of my house, for example, is. Was essentially, essentially 80% in index funds. I am not comfortable with an allocation like that at this point in my life. I would be very comfortable with that or 100% concentration if I was just starting out in year one of accumulation for the long term value that index funds provide. But in what is a portfolio beyond that which I initially set out to achieve? At this point, I'm not going to have so much as a percentage of my wealth in all stock market index funds, passively managed stock market index funds. So I sold 40% of my position and I'm reallocating that to a rental property that you are actually helping me buy, Mindy.
- [02:03]
Mindy Jensen
Yes, and that was a leading question. Scott, I know where you're going with your portfolio, just as you know where I'm going with mine. Because this is not the first time we've had this conversation. I want to point out that you and I are in different phases of life. I am almost 20 years older than you, my children, I have a. A child who is graduating high school this year. You are still having babies. So we have a different financial outlook over the next 20 years of our lives. In 20 years, I'm going to be. I'm going to be 72. In 20 years you're going to be 50 something.
- [02:41]
Scott Trench
54. Yeah, I'm getting up there, Mindy.
- [02:44]
Mindy Jensen
54, yeah. Wow, I forgot you had a birthday. 54, you're 34. So, yeah, we're in, we're in different positions of life and I don't need my portfolio to perform the same way that you need your portfolio to perform. Also, I've been through downturns and the downturn that is coming up that has been preached about since what, the last downturn in 2008, it kind of started recovering in 12 or 13. So 14 is when people started predicting the next downturn. I've been through several and they don't scare me. So I am continuing to keep my money in the stock market.
- [03:24]
Scott Trench
Yeah, well, let me be very clear. I am not predicting a market crash. I am not saying 20, 25 will have a market crash. It may have a crash. I don't know. I am saying that I cannot, I do not want to experience a market crash with that large of my portfolio. And I know that two to three times per lifetime, statistically in American history, at least US stocks will crash 50% or more from their peak pricing. And in multiple of those cases, it has taken 10 years or more for them to recover to the previous pricing, to the previous levels of pricing. So that it could be that we are at the peak pricing for the stock market right now, we're very close to it, and that it will not return to current levels for 10 more years. Now, if I'm thinking 30 or 50 years out, then I believe that whatever I have in stocks will continue to accrete at an 8 to 10% compound annual growth rate over a very long period of time, 30, 40, 50 years. And that that is a very effective way to build wealth. And I am not totally abandoning an index fund portfolio. I'm selling 40% of the index fund portfolio because I cannot handle that concept here. And I will be lying if I didn't say that the current pricing of the market is also influencing that decision. Right now, as when recording this, the market is trading at a 29 times price to earnings ratio. Now, I've actually had multiple people reach out and say, Scott, I looked it up on Google and it's actually trading at 26 times price to earnings ratio. Well, Google's first result, for whatever reason, it'll probably change right after this podcast is showing the price to earnings ratio from September 2014, people. Okay, if you look at the charts for the current, it's just like, it's just like a snippet from AI or whatever. That's what's coming up there. But if you actually look at the charts of where it's trading at, it is trading at about 29 times price to ear earnings right now as of January 30, 2025. And it's bounced up around between 29 and 30 times throughout the month of January. It'll probably go higher. The target market on average generally tends to go up. I am just not, you know, I'm not, I'm not, I don't. I'm not willing to experience or put at risk that portion of my portfolio at this stage of my financial journey in a position where it could lose half a huge chunk of it and take a decade to recover from.
- [05:46]
Mindy Jensen
So, Scott, what I'm hearing you say is that you are looking at your portfolio. I like that you're looking at your portfolio. You are taking into consideration all of these different factors and you're making a decision based on information that you have now and your opinion of this information. You're not getting your information off of TikTok where some guy's like, oh my goodness, the sky's falling. And Scott's like, well, that One guy on TikTok said it was, so I better sell. Like, you're taking this information, you're thinking about it. Anybody who has ever listened to you knows how cerebral you are and how much you think about things. So this is not a spur of the moment decision. Even though it may seem like it to somebody. This is something you've been thinking about for a long time. I know a lot of people who invest in this in the stock market who are like, what's a P E ratio? And that's fine. You don't have to know what a P E ratio is. But you can't make decisions based on a P E ratio if you don't know what a P E ratio is. So you do. I like that you're thinking about this. I think it's, I think it's a great decision for you because you've thought about it. Because you have rental property experience and you, your rent, your real estate is, is essentially acting like a bond in a, in a similar way, but in a way that you are very experienced with this property because I am helping you buy it. I'm a privy to all of the numbers. You're getting a great deal on a property. You're getting a great deal on a property that's going to be a cash flowing property for you from day one. So you're not just oh well, I have to sell because the PE ratio is too high, even though I don't know what a PE ratio is. And I'm just going to put it in real estate because that other guy on TikTok said real estate's a great deal. That's when you get into a lot of trouble. So all of the thought process that you have behind this makes me think that this is going to be a good decision for you. Are you going to have the most money possible in 20 years out of this decision? I don't have a crystal ball either, so I can't say yes or no. I, um, I do know that again, I'm in a different position of my life. I'm looking to take complications outside of my life, so, or away from my life. So I am looking at keeping all of my money in the stock market because I have a big buffer between my phi number and my actual net worth. I'm not concerned if the market goes down, but I do want to make it clear I don't want to go through a downturn. I'm not excited for a downturn and I hope that you are wrong and it just keeps going up.
- [08:15]
Scott Trench
Not predicting a crash. I am not saying that the market is going to go down in 2025. I will probably be making a mathematically worse decision with my portfolio because the market will be likely to, you know, will potentially go up on a long term basis. But there is a part of me that is worried about that. Right. That says the market is pricing in a lot of things that have to go very right. A lot of people. One of the things that scared me, Mindy about this was I polled the bigger pockets money audience here. I'll pull it up here on the screen. I pulled them and I asked at what point would you begin to worry that your index fund portfolio is overvalued or at risk? I'm worried now at a 26 times price to earnings ratio. I also made the mistake clearly of using the Google snippet instead of the actual price to earnings ratio at the current period. So 25%, 23% said they're worried right now. 3% said they're worried at a 330 times price. They begin to worry at a 30 times price to earnings ratio. And 2% said they worried at a 40 times price to earnings ratio. 72% said that they would buy the United States, U.S. stocks or index funds at any price, no matter what it was trading at and never worry. Right? And like that's where I think we've gone too far. We've gone too far as a fire community. Right. At some point, right? Like that, that one for me says I have. I'm not going to turn my brain on and think about what assets should be priced at in a general perspective. Right. Like, and that is where I would, you know, I'm sure I should get some angry, nasty comments. That is in direct violation of the rules. The sacred text of the simple path to wealth written by my friend J.L. collins, who I absolutely respect and love and recommend his book to a lot of people with there and he's probably right there. But at some point the price becomes not worth it. Right? And that's where I'm at right now. I don't know if that means there's a crash. I don't know if that means that there will be a decade of wrong returns. It probably like maybe this time is different and it will probably go up in perpetuity. I'm still invested in it. I just can't have that much as a percentage of my wealth index funds given where we're at. All right, we've got to take a quick break. We're going to be talking about how you should be thinking about your portfolio allocations, depending on where you are on your FI journey. Coming up next, if you're in the.
- [10:49]
C
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- [11:29]
Mindy Jensen
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- [12:03]
C
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- [12:33]
Scott Trench
Welcome back to the show.
- [12:34]
Mindy Jensen
My net worth is Not Solely Index Funds we started off as stock pickers, for lack of a better word. We were investing in individual companies because we didn't know that the index fund existed. Once we discovered the index fund, it made it easy for us to take some of the money that was in individual stocks that we didn't really want that much money in individual stocks anymore and move it over to the index fund. So I do have more of a diversified portfolio in that respect and I do have some real estate. I've got some, some pre IPO investments that I have done. I've got some syndications, I've got some private money lending. So I do feel like I have a fairly well rounded portfolio. It's not just a hundred percent index funds. And I think that a 100% index fund portfolio, while diversified because it's all the stocks in the stock market, might not be your best choice. But again, how do you determine what is good for other people? Like would you suggest not just vtsax but vti totally blanking on all the other index funds right now.
- [13:49]
Scott Trench
The vtsax and VTI I think are the same thing and it's just like so long been unchallenged as the right answer. The only other one that I invest in, I invest in VTI, which is the S&P 500 index fund. It's the same thing as VT Sachs. It's just the ETF version. And then I invest in Voo, which is the S&P500 version of that index fund portfolio. Personal Finance Club. If you follow him on Instagram. If you don't, you should I follow him. He has put really good content out there. He posted Like a chart the other day that showed the differing performance of various index funds. And the headline is there's no differing performance of these various low cost index index funds. It's remarkably similar and it's so close that I would, I would even go so far as to say is it's not, it's not really a decision to perseverate over pick one and invest in the index fund if you're going to invest in index funds. So my two choices have been VO and VTI to this point.
- [14:46]
Mindy Jensen
Yeah, and I think that's a good point. I had not seen that particular infographic from Jeremy at Personal Finance Club. I love Personal Finance Club, I think it's awesome. But that, that's a good point. If they're all the same, then you don't need to pick and choose. You could just put your money in whichever one you choose. But for somebody who is listening to this, Scott, what should they be doing if they have all index funds?
- [15:10]
Scott Trench
So I think there's different answers, different time periods. I'm 23, I'm getting started out in life. I have very little. I have what seems to me to be a lot, 30, $40,000 in index funds or whatever at that point in my life, but is less than 1%, 2%, 3% of the amount I'd need to actually fire. Well, I would go with a very aggressive undiversified investment portfolio. That's what I did. I went all out into index funds and house hacks. Why would I do something very conservative when I have no wealth to protect at that point? I certainly don't want to go bankrupt with a house hack, for example. So I want to make that decision very carefully because it is a highly leveraged, it was a highly leveraged bet at that point in time and it would be for anybody doing that. But I'm a big believer of the things that I put into set for life. I would go all out, save as much as I possibly could and invest it in the highest long term yielding opportunity. And let's say that the market, let's say the market crashes in the next year or two, 50%. Well that's a good thing for that person because they're going to be investing into that down market with many more dollars than what they currently have because they're likely going to be earning more, likely going to be spending less and they're going to have a long period of time to invest into that portfolio. But if I'm at or near the end of my fire journey that same Crash is absolutely devastating to a 100% index fund portfolio. People who think they're fire right now will fall way out of that. You could lose 10 years of accumulation in a market crash in there. If the market crashed with 80% of my wealth in the index fund, 50%, that's 10, 15 years of my accumulation on an average year on a regular income year. I do not want to go through that. I work this hard to get to this point from a fire perspective. I want to sustain a position of fire for the rest of my life. And I'm willing to accept lower terminal, long term end of life net worth in order to get there. And for me I'm like, okay, if I buy our paid off rental property at a seven, the seller claims it's a seven and a half cap, let's call a six and a half cap for our purposes on there. But still, still going to be pretty good from that. And that thing goes up 3.4% a year over the next 30 years on average in line with inflation. That's a 9.9% return. It's pretty close to the index fund. I find it really hard to believe that in the event of a market crash that this property which I think I'm buying for 20% less than it would have sold for in 2021 would crash another 20% in the event of a market wipeout. So if there is a large crash and all asset values come down, I believe that real estate on an unlevered basis without any loan on it, which is what I'm doing here, will crash as a percentage far less than a market index fund. So that's the math there. And again, probably what will happen if you just take average out history. The index fund would actually perform a little bit better than what I'm doing. And I won't have to deal with tenants and I won't have to deal with the odd CapEx project on there and my life will be a little simpler. But again, I think that this is a way to de risk it. A better way to de risk it totally passively might be bonds and that is a textbook answer to this question. But I'm not willing to invest in a Vanguard bond fund with a 4.6% yield to maturity right now and bet on interest rates going down in a crash. That's just not, that's just how I'm, how I'm wired.
- [18:42]
Mindy Jensen
You are proving my point that you have thought this through, probably perseverated on it for many, many weeks. Even though this just came out, oh, I'm going to sell this. You didn't just wake up one morning and be like, you know what I'm selling. And another thing to point out, Scott, is that the 4% rule, the bill Bengan article said the safe withdrawal rate is based on a 60% stocks, 40% bond portfolio. It is not based on a 100% stock portfolio. Now, this is a risk that I am willing to assume because the gap between my phi number and my net worth is so, so big that it can weather this. I, um, I have, I have been very fortunate to take advantage of the stock market going up. I do believe that we're going to see a bit of a downturn sometime in the future. That's not really groundbreaking declarations. I'm not going to sit here and say it's going to happen next week. Although there was that one time that I was off by one day back when Covid dropped on the 14th. I declared that it was going to be on the 13th or something. But I'm not, I've used up all of my prediction abilities and I'm not going to predict anymore. But I don't, I don't want to gloss over the fact that The Bill Bangin 4% rule is based on a 40% stock portfolio. So if you have a hundred percent stocks, if you are nearing the end of your journey, the, the middle end of your journey, and what Scott is saying is making sense, maybe you should start looking into a bond like investment vehicle for you, Scott, that is this, this real estate, it's acting like a bond in that it's pretty safe. You know what you're doing with it with regards to real estate, and you're getting it for a really great deal. It's not as volatile as the stock market where you have no control over. Let's talk about the experience you had selling your stocks. Something tells me it's just, it's more than just like, okay, I'm going to sell it all.
- [20:44]
Scott Trench
Well, the issue is, Mindy, I host this podcast and we preach about index fund investing for so long. I've talked to Bill Bingen and talked to JL Colle and talk to Mr. Money Mustache and talk to all the folks in the industry. So I have this feeling of betrayal of the principles that we've Talked about on BiggerPockets money for so long, which is why we're having this conversation to a certain point. There's like a guilt almost like I don't know what to do in this position. I don't know what the right answer is. I don't know what the market's going to do. I just know that I'm uncomfortable, given the set of realities facing my portfolio and what I perceive to be real about the market, that I'm making this move. And that's why I'm going. Talking about it here is like, maybe, maybe I'm making a foolish move that's going to create huge problems for this, or maybe the market crashes in two months and I look like a genius on it on there. But I really just got lucky because I just woke up one day and decided to move it. But like, I don't, I don't know. Like those are all the things that are going through it. So that was the hard part. The mechanics of selling the stocks was ridiculously easy. I open up my Schwab account, I put a sell order. Three seconds later the cash is in my account, transfer it over to the money market. I open up a Wells Fargo business checking account for my LLC that's going to purchase the property and wire the money into it like, like it was, it was, it was so mechanically easy for that. I did a last out, last in, first out trade order to minimize my gains on the taxes with that very easy mechanical item in Schwab. And the exercise took me moments to do is kind of astounding.
- [22:19]
Mindy Jensen
What about taxes? You alluded to them a little bit with that last in, first out. Are these all long term capital gains that you are selling?
- [22:27]
Scott Trench
Yeah, there will be a little bit of short term capital gains in there, but not, not a ton. So my last, even last in, first out on the amount I'm selling, I have, it's not a large, huge, it's not a huge near term gain.
- [22:42]
Mindy Jensen
Okay, and let's say in, in terms of round numbers, did. Let's say you sold $100 in stocks and you're going to buy this property for $100. Did you also take out a little bit more for taxes? Are you just going to pay those out of pocket? My dear listeners, I have a huge request for you. We have a goal of hitting 100,000 subscribers on our YouTube channel. If you are not already subscribed, please do me a favor and go to YouTube.com biggerpocketsmoney and subscribe to our channel. All right. Stay tuned for more right after this.
- [23:14]
D
Some things in life are hard. Like carrying a couch down a stairway by yourself or telling a good friend their poetry is very bad.
- [23:21]
C
No, it's not.
- [23:22]
Scott Trench
Yes, it is, Terry.
- [23:23]
D
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Mindy Jensen
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- [25:18]
C
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- [25:55]
Mindy Jensen
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- [26:31]
C
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- [26:59]
Mindy Jensen
Thanks for sticking with us.
- [27:00]
Scott Trench
I'm going to pay those out of pocket over the course of the year. I have a large cash emergency reserve for those types of things. If you are not a real estate professional, you cannot use the capital gains to offset those. We'll see how that goes for me in 2025. That's one way to do that. And then there's a couple of other. There's a couple other things there, but I may owe taxes on a percentage. I may owe taxes on a percentage of the gains for those. The tax burden is really not going to be a material part of this decision. I mean we're talking about maybe like a few tens of thousands of dollars in the context of the overall move. But yes, I've gotten that feedback a lot. It's not going to be a major item in my case. Also, one other thing with this you can see tell them fearful or paranoid or worried or conservative, whatever word that is around my portfolio and have moved from a How do I accumulate as much as possible to a How do I protect a little bit more of what I have here but still stay somewhat aggressive. I'm not going to like a savings account going to a rental property of course with this, but it's not going to be a levered one. So that's going to make it a lot much safer. But I also feel like I am in a high tax bracket today and I believe that because I am fi and relatively young and am unlikely to spend down my portfolio, I'm likely to continue to produce or allow my investment portfolio to produce more than I spend that I will continue to accumulate wealth throughout my life and that I will I'm in a high tax bracket today and I will be in a high tax bracket at retirement in traditional retirement age because of that fact. And I would be willing to bet that tax brackets will be higher in 30 years or in the future than they are today. Although I may be specifically wrong in the next four years with the current administration for that. But I believe that that's the case. I also polled the BiggerPockets money community on this one and here's the poll. Do you believe that tax brackets will increase over the next 30 years? 60% of BiggerPockets Money listeners agree with me that yes, probably tax brackets will go up a lot for both income and capital gains. 35% think that tax brackets will be out the same and 5% are crazy people who think that taxes will be lower over the next 30 years. I'll take that bet against you all day long if you'd like to, if there's some way to make a wager on that. But I think that that is not going to happen. And so I am not afraid to realize some short long answer. I'm not afraid to realize some capital gains in a year like 2025 and pay taxes. Right now my basis on the proceeds is now that higher. My after tax wealth remains unchanged or may even be favorably increasing. If I believe that when I sell this rental property in 30 years or stock portfolio, future stocks or whatever, however I end up deploying this money over the next 30 years, that basis will be I'll have a lower long term capital gain basis for that sale. Is that making sense?
- [30:04]
Mindy Jensen
That makes total sense. First of all, don't call the 5% of my listeners crazy that they that they think it's going to be lower. Misinformed. I hope they're right. The 60% that say that it's going to be higher. I hope they're wrong, but they're probably not going to be wrong. I think that this is a strategy that gets lost in our tax optimization group. The, the FI community is, I don't want to say cheap or even frugal, although there are a large contingent that are frugal, but they definitely don't want to pay more taxes than they have to. And accessing these retirement funds early, accessing these, these investments early is all about, or it seems to be all about how can I get out of paying taxes? I mean, that was one of my first questions when I, when I thought of this as, you know, oh, what are you gonna do about the tax burden? But paying the penalty, paying the taxes is an option and I'm glad that you thought that through. Again, there's that I'm thinking about it. I'm not just making a quack decision based on something that I saw on some, you know, random social media site that, that, oh, I, I don't worry about this. And then you're slapped with a big tax bill. I mean, if you do decide, my dear listeners, if you do decide that you agree with Scott and you want to start moving some of your money out of your investments in the index funds and into a different vehicle, definitely consider your tax obligation for 2020. You'll be paying the taxes in 2026. If you're selling now, consider that and don't let that hold you back. But you know, look at the real dollars versus what the benefit is you're getting out of. Might not be worth it to you. It might be worth it to you. But definitely consider every angle and that includes the tax angle. I'm glad you, you shared that part, Scott.
- [31:57]
Scott Trench
Yeah. One other thing I'll also talk about is cash flow in a general sense, like cash. Mindy, you're looking at this property, right, and it's listed as seven and a half cap. Do you agree that unless I get very unlucky, I should generate a six and a half cap on this particular deal on an annual basis?
- [32:14]
Mindy Jensen
I would be surprised if you didn't. I would be unsurprised if it went up. And in the real estate market that we're in, that's a pretty great deal.
- [32:26]
Scott Trench
This property will pay for 100% of child care for a 2 year old and an infant on a full time basis easily. It will pay all of the property taxes for my primary residence, all the insurance costs. I live in a fancy schmancy HOA. It will pay for the HOA dues on that and it will pay probably $1,000 to $2,000 on top of that after those items. So it is not going to cover the entirety of my living expenses, but it will go a long way to defraying some very big buckets in the next couple of years that I would not. There's no world where I would be withdrawing 6.5% of my index fund portfolio in order to pay for those items. So that is another item that is very freeing from a mental standpoint on this property. Again, like, again, I could be making, like, there's so many things wrong with the decision, and I'm gonna pick. These are the reasons why it's right for me or I feel it's right for me.
- [33:29]
Mindy Jensen
Yes. And I think that's a really great point to note. Scott. This is Scott's decision about his financial situation based on the information that he has and his feelings on that information. If you are thinking, oh, Scott sold all his index funds, so I should sell all mine, first of all, he didn't sell all of them. He sold 40%. And, Scott, knowing what I know about this property, I think there's a lot of opportunity for you to be able to increase your numbers in the near future, you know, when the, when the leases, the current leases come up. So I am. I am excited about this property for you. I am cautious. For anybody listening to this, it's not just a blanket. You should sell everything or you should sell 40% and then invest in real estate. You should look at the market like Scott has looked at the market. You should look at the history of the market like Scott has looked at the history of the market. You should look at the current PE ratio. You should look at the current. Any bit of information that makes you leery and then look at the implications for that. If you've got a thought about Scott's decision here, you should email him scottigerpockets.com and let him know your thoughts. I would love to. To hear some of these. I think it would be kind of fun to have some of these people who are like, oh, I think you're making a big, big mistake. Here's why. Or, hey, I think you're making a great decision. Here's why. Maybe we could read those on the show or even have those people on the show.
- [35:01]
Scott Trench
I'll read one of them right now. We released an episode about this with Dave. I did a recording with Dave Meyer, which released in the Biggerpockets Money Channel as well, about why I'm reallocating away from stocks and to real estate and the top Response, I believe is from Tyler, it's a mistake, bro. Lots of likes on that. He's probably right. This is why I'm doing it. And this is, this is my rationale.
- [35:26]
Mindy Jensen
You know what, Scott? It would be a mistake if you just woke up and said, I'm gonna sell with no reasoning behind it. You're just like, I don't know, I'm just gonna sell because some dude said it on the Internet.
- [35:38]
Scott Trench
But I think it, I think it would also be a mistake not to be like, you've read the. I know you read the book on index fund investing 10 years ago, listener, and you've been putting your money into it. Just be real. Like, remember that book reminds you to stay the course through really severe drops around there. And if you're 100% in index funds and you're at or close to the finish line, I don't know what the right answer there is, but I do think that a beginning of that right answer is to remind you that you can fall out of fire and that 10 year gap of the market going down. If you're not in the 6040 portfolio, you're not at the 4% rule. You cannot safely withdraw on a 100% index fund portfolio for 30 years and not run out of money. You can safely withdraw 4% of a 60:40 stock bond portfolio and not run out of money for the next 30 years per the 4% rule. And that's the fear that I feel. And I want to. I think that it is appropriate to put in the minds of some people who are at or close to the end of the journey there, around there is like that 10 years between 2000, 2001 and 2013 where it took the market to recover from, from one peak to the Next. That's my 30s.
- [37:05]
Mindy Jensen
I think it's great. You have. Well, I don't think it's great like, oh, yeah, you had all this terribleness in your 30s.
- [37:11]
Scott Trench
I didn't spend my 20s living in fricking duplexes for that. So that I said I was, I wouldn't fall out of fire in my 30s. That's, that's, that's more of my point there.
- [37:20]
Mindy Jensen
So, yeah. And again, this all comes back to. This is a decision that you are consciously making based on your information, your research, your thoughts about the market as we stand today. So if you're not willing to think about it like Scott has thought about it, if you're not willing to do research like Scott has done research, and if you're not willing to you know, really form an opinion about this, then don't make this decision right now. All right, Scott, I think we've covered this. Should we get out of here?
- [37:49]
Scott Trench
Let's do it.
- [37:50]
Mindy Jensen
All right, that wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench, and I am Mindy Jensen. And I'm going back to basics, saying, see you later, alligator.