Summer Plans

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Last Thursday was Jr’s last day of school. In each of the 3 prior years, at this time of year we were on a plane to Europe. Paris, Barcelona, Florence…. ahh, the good life. After a few months, we would hop across the pond to the good ole U S of A to visit friends and family before returning to Asia.

But when it came time to plan this year’s epic adventures, none of us were feeling very… epic. Or adventurous.

So this year we pieced today something different.

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Accidental Market Timing

In rough terms, market timing is the practice of trying to make money by predicting future market performance. It is almost universally agreed to be a poor investment practice… “time in market is more important than timing the market.”

Predicting future market performance is… difficult. Even when your hypothesis is sound the market can remain irrational much longer than you can remain solvent. Not only do you need to be correct (often twice) but taxes and fees can erode any gains you do make.

But sometimes, when the stars align, it happens accidentally.

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Rent vs Imputed Rent

A lot of people dream about the day they finally finish paying off the mortgage. Free and clear, baby!

What might you be willing to pay to live in this house you already own? Economists refer to this concept of a mortgage-free living space having market value as “imputed rent.” Some countries even tax it.

Beyond being a fun topic at cocktail parties, for most people imputed rent has few real-world considerations… you pay off the house and you have more $$$ every month. Good times.

But for an early retiree with a tax-minimization hobby, the choice to pay rent or imputed rent has some interesting implications.

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