[Book Review] How to End Your Accumulation Investing: The Optimal Solution for the 'Descent' That Is Harder Than Growing Assets, and How I Changed My Portfolio Management

We learn and practice how to grow our assets with enthusiasm, and over many years, we develop robust habits for accumulation investing.
However, once we have climbed that mountain, we rarely have the opportunity to think seriously about the exit strategy of how we should 'descend'.

I first read this book, How to End Your Accumulation Investing: You'll Be Fine Even If You Live to 100! Explaining Withdrawal Methods for Investment Trusts for the Second Half of Life! four years ago, in 2022.

Please refer to this article for my thoughts from 2022 when I first started considering an exit strategy.

This book is an essential volume that serves as the 'foundation' for my thinking on asset management and is a bible-like existence that I am very fond of.
As I look toward life's turning points like retirement or FIRE, I decided to reread this masterpiece and introduce it again with my current perspective.

The author, Kang Chung-do, has been active for many years as an independent financial planner specializing in investment trusts, and currently continues to energetically share essential information on note and X.

• Author Kang Chung-do's note: Kang Chung-do | FP's Wisdom Bag

• Author Kang Chung-do's X: @4649kang

This book was exactly the one I wanted, thoroughly theorizing the 'wise way to withdraw investment trusts', which has often been treated as a taboo, for investors who practice accumulation investing with low-cost investment trusts and are about to reach retirement.

The difficulty of the 'descent' of investing that I strongly empathized with after reading this book

The question at the core of the book, 'Do you have the courage to descend the stairs?', strikes me every time I read it.

It is said that the more a person has made the mindset of steadily growing money over many years a habit (a solid, robust rule), the more likely they are to hesitate to cancel funds or be gripped by the fear of assets decreasing when they transition to the phase of selling and using assets (the descent) after the 'X-Day' of retirement.

In this book, the accumulation period and the withdrawal period are collectively defined as 'lifetime investing'.

◆ Lifetime Investing = Accumulation Period + Withdrawal Period

More than stopping accumulation or making the portfolio conservative, the most difficult thing is 'selling investment trusts' itself.
Many people are unable to shake the mindset of growing money, feeling as if they are cutting into their own flesh.
However, after retirement, value is created not by the amount of assets, but by using those assets wisely.

Also, while many people prefer 'high-dividend stocks (individual stocks or ETFs)' as an income strategy after retirement, this book clearly points out the following two weaknesses.

1. The investment target is biased (compared to index types with broad stock diversification, they are unevenly distributed in large-cap value stocks)

2. The size of the income cannot be controlled by the investor (the decision-making power for dividend amounts lies with the company or the management company, not with oneself)

That is why I was deeply convinced by the argument that slimming down risk assets to only low-cost index investment trusts and simplifying the operation of management and withdrawal as much as possible is the most important thing to suppress emotional ups and downs and maintain a healthy distance from investing.

The reason I changed my portfolio management from 'amount' to 'percentage'

It was a huge shock when I first read it in 2022, but now that I am realistically looking ahead to the full-scale withdrawal phase (post-FIRE) that is coming, I have made the decision to significantly change my approach to my own asset management.

Originally, my method for managing cash (safe assets) in my portfolio was to lock it based on a specific 'amount' of '1 to 2 years' worth of living expenses'.

However, this book recommends that the highest priority during the withdrawal phase should be to keep the 'ratio (percentage)' of safe assets to risk assets constant, calculate the total asset value at the end of the year to determine the withdrawal amount, and then 'execute the withdrawal while also rebalancing' at the beginning of the year (a fixed-rate withdrawal from total assets).

Simply using a securities company's 'investment trust periodic sale service' does not allow your safe assets (deposits, etc.) to do their own work.

Withdraw at a fixed rate from the total of all assets, and at the same time, perform rebalancing to restore the 'safe asset to risk asset ratio'.

If you thoroughly implement this, you will automatically benefit from a flexible approach where you withdraw more in good market years and less in years when risk assets decrease due to crashes, etc., which overwhelmingly increases the sustainability of your assets.
By withdrawing while restoring the ratio, funds will finally begin to swing (circulate) beautifully between deposits and investment trusts.

Reaffirming this rationality, I also changed my portfolio management from an amount-based approach to management based on 'percentage (ratio) of the total'.

The significance of practicing rebalancing from the accumulation phase

Although 'rebalancing' is for maintaining portfolio ratios during the withdrawal phase, I am already thinking about and simulating those ratio adjustments from the current accumulation phase before FIRE and retirement.

There is the heavy question of 'Can I calmly continue to sell at a fixed rate according to the rules even if I encounter a crash where fund prices drop by more than 30%?', but the resilience to risk cultivated during the accumulation phase will surely be useful during the withdrawal phase as well.

For me, thinking about asset allocation and ratio control like this is a kind of 'hobby', so it is not a burden at all.
Rather, by practicing rebalancing as a matter of course from the usual accumulation phase and embedding risk control into my body, I believe that even when the future withdrawal phase arrives, I will be able to maintain the same stance without being swayed by sudden market drops or surges.

Regarding future withdrawal ratios and simulations

In my current plan, the ratio when I enter the withdrawal phase is based on '4% per year (fixed rate)' for the time being.

However, as the book states that 'expected return of total assets > withdrawal rate' should hold true, it is essential to scrutinize whether the asset allocation that achieves a 4% return really matches my risk tolerance and whether the maximum loss ratio of all assets is kept to the 'around 25%' recommended by the author.

I am currently in the process of calculating more realistic withdrawal simulations that take into account the living expenses truly needed after FIRE, future inflation risks, and expenditure fluctuations associated with future life events.

I would like to introduce the details of this specific simulation and expenditure optimization in a future note article, as it would be too long to cover here.

Four years since I first encountered it in 2022.
Including the process of making my position more conservative as a 'preparation period' for life and investment during the last five years before retirement, I am convinced that this book is indeed a 'blueprint for life' for me.
It is a book that I would like to strongly recommend again to everyone who is entering the second half of their asset formation.

Finally, I would like to introduce two of the author's note articles that are particularly relevant to this book.
I hope everyone will take a look at them.

This is a widely read article.