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Thursday, March 23, 2017

Dumb Luck Is Also Required

Posted by Tim Stobbs on September 28, 2007

Larry MacDonald recently had a post on his blog about Derek Foster which was questioning weather the math of Derek’s strategy would let other people follow in his foot steps.  The short answer I believe is no.

Each early retirement story I’ve read of very young retirements (ie: under 50) all seem to have a common thread.  Each person will tell you how it is possible for you to do the same as them.  Yet the reality of it all is a bit of dumb luck is also required.

Granted most of the very early retirees do have plans to make some money with real estate or stocks and they do have a strategy.  Yet in every plan there is that wild card of luck.  Where the results of your plan far exceed what you expected to happen.  For example, when I bought my first house I knew it had a good potential for fixing it up and reselling.  Yet the renovations were more expensive than I would have guessed.   About $10,000 more expensive due to a leaking roof.  So I was hoping to just break even and not lose my shirt.  The reality was the local real estate market was hot and I made about $55,000 in profit in two years.  You could try to call it good planning or anything else, but in reality it is just dumb luck.

So you see each early retirement path is unique.  I don’t expect anyone to take the exact same path as me, because they will have different values and different opportunities.  Yet learning from each of these very early retirees teaches you something different such as controlling your spending, dividends are good, or avoid tax is important.  Yet each one echoes a similar lesson: luck favours the bold.  If you want a retirement under 50 you are going to have to take a few risks.

Comments

6 Responses to “Dumb Luck Is Also Required”
  1. In my opinion, it comes down to the old saying “No Risk, No Reward”.

  2. Traciatim says:

    I’m with MDJ on this one. I was going to come in and point out that the people with the plans and the people who took action, more often than not it just works out.

    If you sit in front of the TV and spend your money at the mall every two weeks, guess where you’ll be in 20 years? Probably in front of your TV.

    What if you take all that money and spend a little time each night (even if it’s just 10 minutes) looking for investment opportunity? In 20 years you may be in front of your TV, you may be retired at 45 . . . in front of your TV ;)

  3. Yup, you need to just get out there and try things. You will make mistakes but learn from them. There might be risk but if properly managed it would decrease.

    In the case of Derek Foster:
    1) He admitted to using excessive leverage at times.
    2) He apparently remained invested during the last bust and took advantage of some deals (such as Riocan yielding 11%).

    Was it luck or was he shrewd?

  4. Luck dictates the short-term
    Principle dictates the long-term

    I don’t think Warren Buffet succeeds solely on luck, but opportunity (luck) is left for those who are prepared

    Or luck finds you the company to be acquired/merged and win big :)

  5. Canadian Dream says:

    Excellent comments everyone.

    WC – I think it’s a bit of both. Shrewd planning can only get you so far. A bit of luck can turn good planning into a huge windfall.

    NSB- Luck only dictates the short term. I like that.

    Thicken – Excellent post. Thanks for writing it and the link.

    Tim

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