Challenge "cash flow" update 2017

Challenge "cash flow" update 2017

For the year 2017 the overall investment income (realized gains, dividends and interest) were slightly over $49,000.
This almost covers the calculated yearly expenses of $50,000 (which I calculated with a nice comfort margin) and my number of $49,000 comes close to the challenge status "swimming". 

Below is the graph with income per month for 2017.

      2017

Below here is the SPY monthly return in %. 

SPY 2017

Since I didn't reach $50,000 in 2017 I didn't reach the "swimming" status of my challenge. Maybe next year. But it is nice to know that in 2017 I have basically covered my expenses with non-work income.

The numbers are pre-tax and will be taxed at the highest % bracket. But if I was not having any other income, the taxes would be much lower and that still should have covered my bare-bone expenses (if I take out all the margin for entertainment, dining and travel).  

  

Challenge "cash flow" - why?

Why do I want this challenge?


The most common advise is to do "indexing". That means to invest long term in an exchange traded fund or a mutual fund that tracks a major index like S&P500. I already do it in my 401k. 

But I don't feel like I am in charge of what is happening. It is a very passive position. I feel like I am carried by the waves on a flotation devise. 

Indexing is easy and the wave may take you up for a nice ride when the market goes up. Buth the wave can also take you down when the market goes down. 

Instead of just floating up and down with the wave I want to learn to swim by myself. I plan to add individual stocks and not be restricted to the ETFs.

So I am starting a new challenge: "Cash flow"

0. "Floating" = yearly expenses are not covered by investment income
1. "Swimming" = yearly expenses are covered ($50,000)
2. "Sailing" = double of yearly expenses is covered ($100,000)
3. "Motor boating" = anything over $500,000
4. "Cruise ship Capitan" = $1,000,000 and above (yes, as long I am dreaming why not?) 


It might not be a very wise decision to do more then just indexing. So many people support it and warn against individual stocks. 
I will carefully select stocks and keep them in a separate account where I will do no indexing. I will do that for a few years and compare the returns to the SPY. If I will not be able to beat the index within 5 years, I will just go back to indexing only.