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Short view – It could get lonely and frustrating, plus dangerous for your sanity and financial well-being.
Long view – First, a clarification. I am not a full-time investor i.e., I and my family are not dependent for our living on the stock market. I earn my living by teaching people how to invest sensibly in stocks and how not to blow it up as an investor, and by selling books. And I invest a large portion of my savings in stocks. But I won’t have sleepless nights if the stock market were to tank tomorrow and remain down for the next year or two, because that is not what earns me my oats and sprouts (I don’t eat “bread and butter” you see).
Anyways, the reason I am writing this post is because this is that phase in the market where I see a few questions from readers about how they could quit their jobs to become full-time investors in the stock market.
In most of my replies, I have asked people to avoid quitting their jobs to become full-time investors, and here are five reasons I have often mentioned to support my reasoning. In case you have had this question but were afraid to ask, I hope what follows below helps you take a decision.
Please do not consider my arguments as discouragement if you really want to become a full-time investor (though investing is not a full-time activity anyways). I am just sharing what I have learned and experienced over the years, and you are welcome to ask more questions and share your thoughts or counter-arguments in the Comments section of this post.
5 Reasons You Must Not Quit Your Job to Become a Full-Time Investor
1. You do not have to get rich through investing – With the last few years of reasonably good performance from the overall market, and with a lot of people flouting their multi-baggers on social media, it isn’t surprising that many people who want to quit their jobs to become full-time investors because they think they have a “knack for finding potential multi-baggers.”
But such thoughts are often masked by survivorship bias, which is a logical error of concentrating only on people or things that “survived” some process and inadvertently overlooking those that did not. So, taking inspiration from other full-time investors who have made good, quick, money from stocks and ignoring others who followed similar processes but ended up with disasters can lead you to false conclusions about your own potential as a full-time investor.
What is more, like them, you don’t need to consider investing as a way to make you rich…but a way to keep you rich i.e., help you grow your purchasing power.
Look at your work – job / profession / business – to make you rich and thus focus more energy and focus there than on the stock market. That is another reason most of us should consider owning only high-quality businesses where we don’t have to spend a lot of time answering a lot of questions.
2. Investing is not your passion – Yes, I know that the stock market gets you excited and that you think you have a passion for stocks. But if you could look deep within, you may realize that what gets you excited isn’t the idea of “investing in stocks,” but the idea of “investing in stocks that will rise and make you rich quick.” Or why else do you wait for Monday with great excitement if not for the kick that logging into your online portfolio tracker gives you? Yes, yes, I have been through that and thus could relate to it very well (now I don’t maintain an online portfolio tracker).
For a lot of people in the stock market, “I have a passion for equities” is often a result – and not a cause – of “I have made good money from stocks in the last few months/years.” Most of us fail to distinguish between luck and skill in stock investing – both for ourselves and for people who boast about their great picks on social media. And passion for equities often dies with a sliding stock market.
So please beware – know clearly what you are passionate about, and it may not have to be the stock market.
3. You have not experienced a deep/long bear market – When I say “experienced”, it’s when you had 80%+ of your savings invested in stocks that went down 50%+. As I can assess from the emails people send me asking whether they should quit their jobs to become full-time investors, most of them have been investing/speculating in stocks for less than 5-7 years. This means, they have not experienced a long/deep bear market in equities with a large part of their money invested…which means their guts haven’t been tested for staying sane in a rough market.
If this is true for you too, please don’t get down to full-time investing before you gain this experience. In fact, if you seriously want to get down to becoming a full-time investor, first learn how to do it sensibly, test your skills (by investing part of your savings in stocks) and guts for owning stocks for a minimum of five years and check how you fared in this period. Only then make your decision.
4. You may not have a solid support system – It’s easier for you to convince your family as you start full-time investing without another regular source of income. You have the savings to survive for a couple of years (that’s very important), your spouse believes in your ability to do well, and your kids would love to see you spend some more time with them.
But then, this is easier compared to what? Well, it’s easier compared to keeping yourself and your family convinced for more than 1-2 years in case your investments do not earn well enough to help you maintain your living standards. Or if you do not have an adequate amount of capital invested that brings you sufficient income as dividends.
If that happens to be the case, your support system may be at a risk of breaking down, which may ultimately lead you to take bad, hasty investment decisions. It’s could become a vicious cycle then.
So, even if you aim to become a full-time investor, ensure that you have a regular source of income – maybe through a small business or a part-time job or if your spouse is ready to take the lead earner role happily. That would give you time, confidence, and savings to work towards your aim to become a full-time investor.
5. You have not handled loneliness and boredom well in the past – Being on your own can become terribly lonely at times. Plus, if you are an investor and have no new stock idea to work on – maybe the markets become expensive across the board – it could get very boring too. If you have never experienced such emotions of loneliness and boredom in the past, be forewarned, for these can lead you take bad investment decisions just because you don’t have a habit of inaction, or sitting still, when everyone around you is acting. The pressure to “do something” is often so great, that people do the wrong thing when they’d have been better doing nothing.
Of course, you can find investing partners or groups to curb your loneliness, the silence you experience from time to time of being a full-time solo investor can be deafening.
Still Wish to Quit Your Job?
Despite my discouragement, if you still wish to quit your job to become full-time investor, or pursue some other passion, here is a checklist that may help you. These are some lessons from my experience in quitting my job, so they may guide you in some way in case you are sailing in the same boat as I was more than a decade back –
- You don’t need to quit your job if you can work on your passion for investing or something else alongside. In fact, quitting your job must be the last resort, or when you find the burden unbearable and abusive.
- Quitting a job and living a fulfilling life isn’t as easy as those who have done it would make out to be. Things get scary at times.
- Quitting you job will affect others in your life, so it’s critical that you have an honest conversation with your family first and get their buy into the decision.
- Learn an important and sellable skill before you quit your job to start on your own. You must have an alternate source of income to sustain your family, just in case the stock market doesn’t appreciate your decision and doesn’t reward you for the risk you took
- Quitting a job to live as an investor can be a path to hell. Don’t expect investing to make you rich, but to keep you rich. It’s the earning from your work, and what you do with it, that will make you rich.
- Practice minimalism and lean living at least a year or two before you plan to quit your job. Instant compromises are heart breaking!
- Save money to use as initial capital for your business, and then keep your expenses low. Don’t borrow money for your business till the time you aren’t generating cash. As an investor, you hate cash guzzling businesses, right?
- Don’t believe people who tell you – “How I quit my job, doubled my pay and cut my hours in half”…or something like this. They will not help you if you reach a point of no return.
All clear?
You have my best wishes if you still want to quit your job to become a full-time investor…or if you want to quit your job to pursue something else.
I will be happy to help, in case you have any questions that I can try and answer.
And, by the way, to answer the question of how one can prepare to become a full-time investor, here is a checklist I have drawn for people who want to ignore my warnings and get into full time investing. In this checklist, especially note the consequences of getting it wrong.
Checklists save lives, in aviation and medicine, and also in tasks that involve a lot of biases and uncertainties…like investing.
I hope this checklist helps save some (financial) lives too. 🙂
Dear Vishal
I totally agree with you . Before you get into full time investing or any enterprenuership venture one needs to understand risk involved . Though there are romatic stories how people have made it big , one has to know the success probablities are low .
Additionally in Investing circle of control is lower than other business . Hence one needs to be extra careful about the same before quitting . My advise is
1) For people > 35 years , ideally one should not quit unless dividend income is 1.5 times your salary ( fixed + variable ) or 2 times annual expenses whichever is higher
2) For people <35 years , ideally one should not quit unless dividend income is 1.5 times annual expenses
If you have not been able to reach above that means your investing abilities have not been good enough as job pays better than investment, so stick to your job
Regards
Shailesh
Thanks for sharing your thoughts, Shailesh. Regards.
On an average the dividends are around 2.5% of the investment. For a middle class person earning 1 Lakh per month if they need to earn 1.5 times annual salary as dividend which is 18 Lakhs dividend….the investment should be around 8 to 10 crores which will usually take till 50 years + average basis and anyway will retire soon. So trying to understand if im missing anything from your point? Or any good recommendation to search for dividend stocks? 🙂
yes you are right, dividends should be considered as add on bonus but I strongly agree with Vishal that one must have an alternative source of income!!
Thanks AP!
He meant Dividend income to be 1.5 times monthly “Salary” ( not annual income ) or 2 times annual expenses whichever is higher.
Awesome vishal, thank you..
Thanks Pavan!
Dear Vishal,
I bet you wont get better person who understand this more than me 🙂
I went through it and I can say “human is a clever animal, he get adopted to any such episodes of life, only he need to time to fight/learn to embrace the ambiguity”
let me put my random thoughts-
I experienced “if a person does not have one good paying regular job then he tend to take up many odd jobs under various names like passion, start-up, entrepreneur, even under names like social service, charity, NGO ect. which may provide a breakthrough or not, that depends on really how good is one at his overall abilities !!
During some process/transmission in life knowingly or unknowingly a social isolation is created, initially it look scary as you mentioned above and one start feeling like something wrong that happen, its usual, but notional.
There are many reasons for this, more importantly change in our social life style as you tend to attend different set of regularities, which may detach you from your old regular income, your old regular friends, meetings and what not.
Being still is really a challenge, It take time to soak-in the new normal,
which include forming new like minded friends circle, understanding the so called retired life, utilizing free time towards betterment of all other areas of life, In fact at one time I started thinking ” what is the meaning of SAARTHAK JEEVAN” and that was purely due to non-challenging flat time then!
Solution-
The moment I realized the isolation, I took the help of social media like whatsapp, Facebook, twitter and linked-in and worked like creating a reunion with my OLD colleague and friends and planned fresh weekends and few regular evening catch-ups with them, and also slowly I was building my new circle of people who are having same social situation like me, not necessarily that all were from my new filed of interest.
Today I am a successful day trader (for my salary), a successful swinger(for my bonus) and a successful investor (for my retirement) all these on my financial freedom and to keep me occupied till my other friends are occupied in their own respective jobs. Though I still work from my home office!!
But to keep my social life ( no one should opt social freedom) intact I involved in few small businesses in my free time like sales and real estate consulting as both are low/no investment and self sustaining models!
Bottom line is “everything has a price” even a free retired life, one shall be knowing how to pay it wisely by learning to embrace the ambiguity!!
All the best to all who read this I will be glad if my experience help someone in their own way of life !!
@adigadhatta
Thanks for sharing your experience, Dhadiga. I am sure this is going to help someone who cares to read it. Regards.
Very relevant and realistic reply. Thanks for sharing your experiences
Very nice article. Post the 2008 crash we have never had a >50% fall in the overall stock market. Every time we fell 20%, some central banker or the other has rescued us. All those who have entered the markets since 2009, and are thinking 7 years is a long track record have not lived through what a 50% crash feels like. The last 10 to 15% is the toughest, first 35% is somewhat manageable. Without one such gut wrenching event, I guess 7 years of 10 years doesn’t matter.
True Narayanan. Thanks!
Hi Vishal,
It is a nice write-up. But, in your first write up regarding quitting job, you have never mentioned that you are quitting the job to teach investing. Looks like you quit job to take up content-writing as a profession, but teaching came accidentally for you, isn’t it? Please let me know, if I am wrong.
Thanks,
Ganesri.
Thanks Ganesri! The idea was to write plus teach. I started with writing because that is what I believed would be a faster way to earn some money to run my household. Regards.
Excellent article Vishal. Allow me to make one more point (which is relevant at least in my case). In case we quit job unprepared, we might be giving up one of the most important learnings which we get free of cost – What doesn’t work or what works over a long period of time. Of course we can learn vicariously, but learning through observation and first hand experience over a period of time offers some (if not all) unique insights which vicarious learner has to take special efforts to gain. I am not underestimating vicarious learning. But I consider experiential learning equally important (esp. when my capital is not at risk). If we work in an industry for a reasonably long period of time with an inquisitive mind, it is but natural that we will get at least one insight which market wont get that easily.
That’s a very important point you’ve mentioned, Gaurav…so thanks for that. Regards.
Thanks for this article Vishal. It clarifies the risks clearly especially loneliness and boredom.
One more thing i have noticed that there is a kind of fashion these days of start ups. When i look at friend circle or hear from friends that either people are quoting examples of someone who started something and doing well or planning to start something. Some of these people have well paying jobs which they are leaving to start. I think some kind of social proof tendency is underway these days. Even family members keeps nudging to look at how so and so has started something, and so we should start our own business as well. Again, we may be looking at only success stories here and not the base rate. We need to understand that while in employment, then also we are selling our skills to the employer and that is also a business / kind of entrepreneurship. For if someone who starts successfully in employment and slowly progress in career, that is equivalent of a start up and its success.
Completely agree with you, Deepak. Quitting a job must be the last resort in most cases. Regards.
Dear Vishal,
Excellent article and well thought out points. In particular, agree with your point to treat investing like a business. Generally, expect to feed the business for at least 5 years before you expect the business to feed you.
Other thoughts for prospective full-time investors:
If after proper effort, worthwhile returns (i.e. better than index), and experience of down cycles, you still want to be a full-time investor, then wait until you pass the 4% draw-down rule: i.e. can you live off 4% of your capital as an annual draw-down? (Link). If you want to play it really safe, use 3%.
This is the same as saying your capital pot should be 25x the after tax withdrawal rate (for 4%), or 33x (for 3%). This is also where “lean living” comes into its own – giving you (i) more cash to invest, (ii) allowing you to compound the capital pot more quickly, and (iii) it leads to a lower requirement for withdrawals. Some would also say a simper, happier life 🙂
If you want to play it really, really safe, go for a 4% rate, AND have a part-time/ side income doing something you enjoy. Even a small independent income can end up drastically reducing your required withdrawal rate.
But most of all, do it because you want to achieve mastery of your (investment) craft.
These are valuable thoughts, Raman. Thank you so much for sharing them here. Regards.
Excellent Article Vishal. Another point to add is, some of us are good traders, while others are long term investors. So, people with long term bent of mind may face short term working capital issues if they go full time. I would suggest use your job for income (taking care of short term expenses) and stocks for wealth generation ( long term horizon).
Indeed, Kapil. Thanks for sharing your thoughts! Regards.
I agree with You Kapil. That’s where I feel if someone has to quit a job he needs to be in trader mind set more than investor mind set. that is where He can earn the regular income and may be able to replace a Job.
I am in a situation where I may not be able to continue with my job for longer, Rather than I deciding to learn new things and try my luck, I would prefer learning trading techniques and mindset than new job skill. Because If I keep on learning new job skill I will have to keep doing that for every few years. Moreover the industry I work at does not guarantee a job continuity even If I acquire new skills.
Once I get the skills and mindset which trader needs to generate the regular income, enough to replace the job, might switch to full time trading as a business.
There are factors like market crash and all. However in my opinion good trader is one who can make money in bullish and bearish market equally. Yes if You are just an investor You should be careful of such events.
The above mentioned are my thoughts depending on my present situation of being mid career professional struggling to continue his job and also trying to increase earning hard way.
I appreciate if One can suggest what should people like do in such cases. For now I can only think of being part time trader while there is a Job and switch to full time mode slowly.
Hi vishal,
You forgot to mention time frames like Harshad Mehta kind of scam, when small full time traders /investors had a stigma attached of being seen as gambler or crooked person in society.
You have provided a logical answer to why we should not quit our jobs to be full time investor.
The most important point being “Investing is not a way to make you Rich, but keep You rich”
Even I had asked this question to you.
Although, I have a long term aim of 5-7 years before even i think of quitting my job. I need to have enough capital.
You have already passed this path, so what you have said makes complete sense.
Thank You for providing a right advice as always.
Thanks for your kind words, Pradeep…and glad to know that you found my thoughts valuable. Regards.
Glad you found it valuable, Pradeep. Thanks!
Excellent blog post on why quitting your job to become a full-time investor is a risky proposition until and unless proper homework has been done.
Thanks!
Thank you for writing such great article. I totally agree with all the points listed by you and it gives me something to think about.
Glad to know that. Thanks!
I would suggest that one should learn the art of investing alongside his/her primary occupation. Generate enough wealth to be able to live on dividends + a part-time job. See through childrens education atleast. Can’t see it happening in most cases until early 50s.
Hoping to earn off daily trading after quitting their job is foolish to say the least.
Nice article Vishal!
Thanks Mohan!
Hey Vishal,
This one is spot on. “Short view – It could get lonely and frustrating, plus dangerous for your sanity and financial well-being.”
Good that you are putting some sanity in the minds where delusion is widespread!
Regards,
Pradeep
Hi Vishal, I read this article multiple times and I wanted to share my perspectives on this. I wrote a blog on it here.
Thanks Vikas! I get the point you have made in your post, and that gives me the idea for my next post. 🙂 Thanks again!
Interesting article. If you want to win a Olympic medal in Athletics and with Usain Bolt is your main competition, chances of winning gold is zero. If a Bowler dreads to bowl for Kohli and Sachin, there is no cricket game. But athletes and bowlers don’t give up.
The point here is even odds are against you, nothing wrong in trying and fail. Scores of sports personalities, budding artists, businessmen fail every day. It is good to have great back ups prior pursuing anything including full time investing. But in reality, no one would have that cushion. Having no cushion is blessing in disguise, drives people more determined and achieve success.
Hi Vishal,
Im from Brazil and fortunately I found your website.
Your thoughts are simple and clear. After reading this text I think differently from before. I’m a college student and I was confused about working by myself as a full-time investor or working in a company and also with stocks investments (by myself, on weekends, for example). And this text help me to think about it clearly. Thanks a lot!! Good investments for you.
Dear Vishal
Its been three months since I logged out from job, though worked almost 16 years, that’s a long time in my horizon!
I respect your views, risk appetite and personal financial planning is customised, hence everyone sees through different lens when it comes to retirement or any decision making. Few mute points from my side:
1. Passion has nothing to do with richness. If you have a passion, there is no second day to start. When actions are identified with passion wealth is outcome. Wealth is happiness!
2. Richness depends on frugal life style, required goals. Hence more modest you are more you are likely to survive.
3. The journey from 5 lacs to 50 lacs is extremely difficult but 5 lacs is 5 crore you have abundant examples. The point here is when you are backs to the wall you do really well.
4. Every risk is associated with what if scenario. If you quit a job, it doesn’t mean you can never join job! Experience doesn’t go away anywhere. You might loose position and compensation a bit but you will survive for sure.
Though 3 months is bit too early to call it out as success or failure but what I can point to interested people is :
1. Loneliness comes from remote, acquaintance and other similar reasons. If you are attached to a subject you wont get time actually, with this new information age I am feeling everyday I am short of every thing. I am able to connect with people whole heartedly at least ex office colleagues as give and take is over!
2. Initially I find missing salary on a particular day, however who decides the date for earning. I started looking this way, if my annual income is X and I get them on a day or a month how does it matter whether salary comes or not. Remember salary was to support my goals and income, if I support that by capital gains which is sporadic and uneven still I support. The real battle is whether my net worth is going down over a period of time, I am not entitled to comment at this point of time.
3. My advise or request to people would be don’t invest to become crorepati or remain the same pati at home. How does it matter if we maintain life style, same house and same aspirations. Extra wealth if it has to come it will.
Wanted to go on, may be another day. To me its simple, if you like investing there is no second moment. But you should be sure about circle of competence not influence!
Thanks
As SafalNiveshak stands for educating the investor community, I believe this is the best post every written on SN. (I don’t mean others aren’t great) 😀
This is a very powerful post. I believe the reasons you gave should work as a checklist. If anyone of them is not satisfied, we should think twice before quitting a job.
I appreciate your writeup Vishalbhai. 🙂
Thanks.
Thank you so much, Mihir. I am glad you liked the post. Regards.
quality read, I just dropped my idea to quit the job. thanks
Vishal very nice article…..it changed my mind reg retiring early which has its own problems…instead….would like your views and ideas on “How to be Financially Independent”. This will help to reduce the constant burden of financial commitments long term!
Thanks for the article Vishal – a great alternative view on how to approach your investing lifestyle.
But…If you do want become a full time investor, you can follow these ten tips.
After reading the comment in 2016, I took another three years to re-check the points you have written. In fact, this article and your graphical illustration have become the bible as I have finally taken the plunge – Yes, becoming a full-time investor. Hope to meet you at some point of time in this life.
Great post Vishal Sir. So many great comments too. I will keep this short and say this. If you have a different primary source of income, Back in your mind you will treat your 1000 Rupees as 100 and when your primary income income is very closed you will have to treat your 100 rupees as 1000. Meaning, When you will spot the great opportunity in market, you may not be able to go big in and keep playing it safe. Because subconsciously you are going to be afraid to lose it. Honestly, Keep playing it safe can be a conservative approach therefore definitely not that rewarding one. You have to keep playing safe just to stay around until you find that opportunity and then be able to go all in. So Steady cashflow will give you that power. This has worked for me so far and therefore I think the best way to make money in market is by staying away from the market. If you know, You know. (On the other hand, Trying to escape the job you hate is totally tale for another day.)