This series of portfolio posts will show you each month how we are using leveraged mutual funds to increase our gains during bull markets and minimize our downturns during bear markets.
This extra leverage resulting in lower downturns and bigger upturns should help us reach our Financial Independence number faster.
What is the definition of the Rat Race?
A normal American would define the Rat Race as being financially forced to get up and go to work for 40 hours a week for 52 weeks a year until you can claim social security at age 67.
What is the definition of a “Normal” American?
A Normal American would need to go into debt to buy things rather than buying things with cash like our grandparents. The typical loan amounts American’s have these days are staggering:
- $29,800 in student loan debt according to Lending Tree
- $9333 in credit card debt from Business Insider
- Average car loan is $31,707 and the average loan length has reached 69.1 months, according to NBC News
- $202,284 Average U.S. mortgage debt per borrower according to Experian
Why do I want to Escape the Rat Race?
By definition, normal sucks! Every day I am forced to get up and go to work which defines me as a slave to the job. If I chose to go to work because I wanted to rather than having to, that would make ALL the difference. Most mornings I leave for work before they get up (or a few minutes after they do in time to say goodbye) and an average week night, I get to spend 2-3 hours with my kids and wife before they go to bed.
If I achieved financial independence, I could retire early and spend more time with my family. Travel the world while we are healthy and enjoy life rather than working away a 3rd of it. Nobody knows what the future has in store for them health wise. All we know is the present and we can try to do as much and make the most of what we have now.
3rd Generation FIRE
My dad retired at 56 1/2 and my grandpa retired at age 58. My goal is to beat them both and become the 3rd generation FIRE.
How am I going to Escape the Rat Race?
We are saving for our retirement in my 401k, SEP IRA, and starting an IRA for Mrs. Rat. We are planning on paying our house off early by making additional principal payments. By leveraging our portfolio, we can get to our number faster and lower risk. Through endless hours of research I found a back-tested investment strategy to increase gains, minimize draw-downs, and minimize losses to reach financial independence faster. Check out my back-tested portfolio data here.
Leveraged Portfolio Update for February 2020
The goal of the Leveraged Portfolio is to beat the S&P 500 (SPY ETF) & The Total Stock Market (VTSAX) on both upturns and downturns of the market so we will track the performance each month and then at the end of the year how the portfolio stacks up.
The Leveraged Portfolio Balance will start out with the same initial balance as my 401k started 2020 with. Below we show how the portfolio stacks up if we started 2020 with the same exact initial balance that matches my 401k balance where the Leveraged Portfolio resides with all three scenarios, their corresponding monthly return, and the corresponding ending monthly balance.
Monthly Portfolio Summary
| Portfolio | Initial Balance | % Return | Ending Balance |
| Leveraged Portfolio | $314,291 | 1.35% | $310,095 |
| SPY (S&P 500) | $298,473 | -7.78% | $276,919 |
| VTSAX (Total Stock Market) | $298,370 | -8.09% | $276,043 |
| Comparison | Balance Difference | % Difference |
| Leveraged Portfolio vs SPY | $33,176 | 10.70% |
| Leveraged Portfolio vs VTSAX | $34,052 | 10.98% |
As you can see the Leveraged Portfolio greatly outperformed both the SPY & VTSAX this month. We will keep tracking the Leveraged portfolio each month and will have an annual summary.
2020 Year-to-Date Summary
| Portfolio | Initial Balance | % Return | Ending Balance |
| Leveraged Portfolio | $296,518 | 4.58% | $310,095 |
| SPY (S&P 500) | $296,518 | -6.61% | $276,919 |
| VTSAX (Total Stock Market) | $296,518 | -6.91% | $276,043 |
| Comparison | Balance Difference | % Difference |
| Leveraged Portfolio vs SPY | $33,176 | 10.70% |
| Leveraged Portfolio vs VTSAX | $34,052 | 10.98% |
As you can see the Leveraged Portfolio is greatly outperforming both the SPY & VTSAX in 2020 Year-to-Date and even still remaining positive for the year despite the largest 1 week drop in the market since 2008!
I will be showing how this portfolio has performed during the past two downturns in an upcoming post.
We will keep tracking the Leveraged portfolio each month and the year to date. This Leveraged Portfolio is how we plan to achieve Financial Independence faster!
