Sustainability Of Investment Portfolio With No Emergency Fund As A Back-Up

There is a formula which determines the number of years in which one can sustain with the investment portfolio without the active income. This is applicable for those with the generated dividends from the invested portfolio less than the annual expenses of one. The annual expense will be deducted from the invested portfolio. This means one will need to liquidate the invested portfolio equivalent of the annual expense at the beginning of the year. Hence, it will be advisable to cater for the allowance to the annual expenses. An example is that one’s annual expense is $26,549. It will be prudent to allocate $30,000 for such expenses.

The formula is as follows:

(Value of Invested Portfolio – Annual Expenses)*1.07 (Assuming the annual yield of the invested portfolio is 7%)

Based on the above formula, one will be able to estimate the number of years one can sustain based on his/her investment portfolio. One will need to re-evaluate the feasibility of such plan on yearly basis. The above is based on one with no emergency fund as a back-up.

Take it with a pinch of salt on the strategy

WTK

Author: firewtk

A middle-age Singaporean currently having a minimalist and simple lifestyle. I am not longer in full-time employment with effect from 1 May 2019. I try my very best to write one post per day on this blog. The purpose is to share my prevailing thoughts to interested readers. It is up to the interested readers to decide whether they want to take action in embarking on the FIRE journey. I do not gain anything from this blog and it is solely for sharing hopefully for the benefits of all interested reader. WTK

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.