When I first decided to start investing there was an information overload. Which platform? Which funds? What asset allocation? How much to contribute? Pound cost average or lump sum?
The desire to make things ‘perfect’ from the off was overwhelming. Guaranteed decision fatigue. You may well have felt the same.
Eventually I decided that I didn’t need a perfectly crafted investment portfolio from the outset. What I required was an MVP – a minimum viable plan*.
I chose a platform and an equity fund. I invested an amount (probably ~1% of my net worth at the time) and got the ball rolling.
The goal way back then wasn’t to optimise returns or reach peak investment efficiency. It was to overcome the initial trepidation that comes with one’s first foray into investing. As someone naturally cautious, and taking heed of the many, many “capital at risk” warnings, greasing the cognitive wheels enough to overcome this initial friction was the most important factor.
My MVP at the time could have been called ‘Just. Start. Investing‘.
I didn’t have a plan that covered the next two weeks, let alone the months, years and decades ahead. Of course, since then I’ve tinkered as my knowledge has expanded and my goals have become clearer. The key, however, was simply taking that very first step.
It was a similar story when I discovered financial independence; there were a formidable array of considerations to take into account. FI numbers. Savings rates. Asset allocations (again). Finding the optimal strategy for that sweet, sweet early retirement. As before, trying to craft a bulletproof plan that would satisfy all these different factors would have been paralysing. Perfection from the get-go was equally fallacious this time around.
In perfection’s place was another MVP. Something along the lines of ‘widen the income-spending gap.‘
There was no £500,000 or £1,000,000 goal. No savings rate target. No stringent investment criteria. No seismic shift in behaviour.
Of all the factors that would influence if, when and how I could become financially independent the most apposite was (and to a large extent still is) how I much I saved each month.
There was the objective, the MVP. Increase the difference between what’s coming in to the bank account and what’s leaving it. It doesn’t matter if it’s a 0.5%, 5% or 50% change. Just get the ball rolling.
As with my investment strategy, answers to some of those FI questions have crystallised over the course of time. I have a savings rate I hope to achieve. An asset allocation I stick to. A (very ballpark) FI number.
Crystal ball gazing
There are another set of questions to answer that pertain to the FI endgame, the decumulation phase. At what net worth can I pull the FI trigger? How should my asset allocation change once I reach that figure, if at all? What should my SWR be? How will I fill my time if not with employment? Will my expenses remain static indefinitely?
Answers to these questions are mired in the fog of the future. The paths I might take fan out from today like the tail feathers of a peacock, tendrils of future life spreading into the aether of spacetime. How can I predict what the Mr. MedFI of tomorrow will need, want, value or prioritise?
Can there be an MVP in the face of such uncertainty? ‘Masterful inactivity‘. That’s the MVP. That’s the current decumulation strategy; no real plan at all. Be aware of the need to plan, but leave the actual planning for the future. Don’t get distracted, delighted or dismayed by predictions that are based on (too) many instances of ‘if this then that‘, over timeframes spanning decades. Don’t straight-jacket the future me in the guise of the present me.
Perhaps my faith in this intentionally procrastinatory MVP is naive. Fail to plan, plan to fail? Should I keep my eyes on the FI prize or on the FI ball? I’d go cross-eyed trying to do both to a high degree. Perhaps the future Mr. MedFI will curse his past self’s lack of forethought. Perhaps it won’t make a blind bit of difference. Whether I drawdown using plan A, B or Z won’t affect my behaviour of today, so is there merit in having anything more than an MVP?
*My own bastardised version of the term ‘minimum viable product‘, as applied to personal finance.