Meet Pete: He pulled the ripcord and retired at 30 – here's how he did it

At Livewire’s Meet The Investor, we’ve encountered several “stockheads” whose investing soared to such early heights that they managed to opt out of full-time work well before finding their first grey hair.

The latest investor to share his insights with us is literally a flyer. After catching the bug early on, he scraped together the funds (and the flying hours) and became a commercial pilot in his 20s.

Then, as Pete tells us, it all became too much.

“While I love flying, doing it professionally takes an extreme level of commitment; it is a constant learning environment where you grow and develop as an aviator, and it can be stressful at times.”

So, what else to do? Retire early, of course! Pete decided passive investing was going to provide his exit from the ranks of full-time workers and his entry to the FIRE (financial independence, retire early) brigade.

His main goal was to grow his wealth using a portfolio of index fund ETFs and LICs, with some added diversification from real estate developments, rental properties, web portfolios and online businesses.

“I wanted to reach my ‘Single’ FI goal of between $25,000 and $32,000 a year in passive income, and eventually my ‘Family’ FI goal of about $70,000 a year in passive income,” Pete says.

With the ultimate aim of carving out his own piece of farmland paradise in the Adelaide hills, strap in to find out about Pete’s journey, how he got there, and five lessons he’s learned along the way.

Livewire investor profile

• Name: Pete aka Captain FI
• Age: 32
• Employment status: Semi-retired (retired from full-time flying, now runs an online business)
• Years investing: 16
• Investment goals: Financial Independence - build a stream of passive income to fund my lifestyle
• Products used: Broad market index-tracking ETFs, investment property, superannuation (including index funds).
• Biggest portfolio holding: Vanguard US Total Market Shares Index (ASX: VTS)

How old are you and how long have you been investing?

I am currently 32 years old, I technically began investing when I got my first job stacking supermarket shelves at 15 and has a superannuation account opened in trust for me.

It was not till I was 20 that I started investing outside super, firstly in term deposits and shares through managed investment funds. I began trading individual shares a few years later, and when I was 25, I began investing in LICs and ETFs. From age 27, I began switching to a predominantly index-only investing strategy through ETFs, commenced a small residential property development, and began investing in websites and online businesses.

What is your investment objective?

I want to build a stream of passive income to cover the cost of living for myself and my family. My long-term investment objective is to purchase a small hobby farm in either the Adelaide Hills or the Sunshine Coast hinterland and to be able to produce a passive income of approximately $7,000 a month after tax.

Between Shares, property and my online business, I have been able to exceed the passive income goal, but the hobby farm would cost between $1 million and $1.5 million, so I will be using a mortgage and debt recycling strategy to pay down this non-tax-deductible principle-place-of-residence mortgage debt.

What products do you use to execute your strategy?

My investments are primarily in market-cap-weighted index Exchange Traded Funds focused on Australia, the USA, and world ex-US funds.

• Betashares Australia 200 ETF (ASX: A200)
• Vanguard US Total Market Shares Index (ASX: VTS)
• Vanguard All-World Ex-US Shares INDEX ETF (ASX: VEU)
• Investment Property (residential duplex)
• Superannuation

In addition to these, I have a small proportion invested in direct shares - with a focus on angel investing. I also have a small amount invested in cryptocurrencies Bitcoin and Ethereum.

How would you describe your strategy?

Boring, passive, low-cost, diversified.

What are your top five stock holdings (in percentage terms) and some insights on why you hold each of them?

1. Vanguard US Total Market Shares Index (ASX: VTS) - 49%

I hold VTS for diversification into the USA share market, the largest market in the world. VTS is an Australian cross-listing of the US Vanguard VTI fund, which is a US total market index fund, weighted by market cap. It has very low management fees, and has been my best performer.

2. Vanguard All-World Ex-US Shares INDEX ETF (ASX: VEU) - 24%

I hold VEU which is total world ex-US, in order to get diversification to markets such as Japan, China, Taiwan, Europe, and companies such as TenCent, Taiwan Semiconductor Manufacturing Co. Ltd. Nestle, Samsung, Shell and other household names for things I use daily.

3. Betashares Australia 200 ETF (ASX: A200) - 24%

I initially invested 100% in Australian shares through A200 due to its low cost and very similar performance to an ASX 300 fund (I also used Vanguard VAS and have since consolidated all into A200 due to the lower management fee). 

I initially targeted a baseline level of passive income from Australian shares as they tend to pay a high dividend and the majority are fully franked, which was a tax-effective income stream to cover my baseline living expenses. After growing my portfolio, I then began to diversify overseas using the VEU and VTS funds.

4. Angel investments - 2.5%

I took a small chance with a couple of Angel investments into companies I worked with and loved, which have actually been performing very well and based on valuations for future rounds of capital raising have been my best-performing investments to date

5. Crypto - 0.5%

I purchased Bitcoin and Ethereum due to FOMO when they kept going up, up, up, and currently on a -12% Annualised return after the crypto crash.

6. Cash position (Two-plus years' living expenses: Approx AUD $100,000)

I did not hold a large cash position whilst working, but now owning investment properties, running my own small business and no longer commanding a high income as a pilot, for peace of mind I keep a large cash buffer.

What was your worst investment? What did you learn from this?

My worst investment was an egg company called Farm Pride. I only bought it because I was following the Barefoot Investor Scott Pape's Blueprint stock tipping newsletter, and it was listed as a 'BUY'. I can't actually remember if he published a 'SELL' signal for it, or if I just cut my losses as it crashed, but I ended up with egg on my face with a 50% loss. I learned that you should not just blindly follow investment advice and stock tipping newsletters, stocks don't 'always go up' and you really need to do your own research and invest according to your personal investing strategy and risk tolerance.

Do you have a favourite contributor you recommend other investors follow?

Here are three I love from Australia and overseas:

Australian

• Dave Gow - Strong Money Australia
• Canna Campbell - Sugar Mamma
• Aussie Firebug

International

• JL Collins - Simple path to wealth
• Pete Adeney - Mr Money Moustache
• Brandon Ganch - Mad Fientist

Is there a lesson you’ve learned as an investor that could potentially help others?

My top 5 lessons:

1. Start with why – First, understand why you want to invest and what you want to achieve. Understand your motivations, because you might find you aren't doing it for the right reasons, or potentially there are other actions you can take (for example, if you want to invest in shares to reach FIRE because you hate your job, maybe unpacking the why could lead you to a decision to potentially make a career switch or reduce your working hours, with a subsequent huge improvement in your quality of life). If you know your "why" you can then progress onto the 'how' (for example, exploring building streams of passive income from shares versus property versus business ownership versus annuities), and finally the  "what" (the "nitty gritty" part of the plan). Simon Sineks book Start with Why is a fantastic resource for this

2. Track your expenses – I naturally dislike budgeting, and while it works for some, most people probably agree it can feel restrictive and you can waste time. Instead, I suggest you switch to using a debit card for all your transactions, and after a few months go through the bank statements with a pen, highlighter and a ruler and track where and why you have spent your money, and then using good old pen and paper tally up all your spending. This action alone is super powerful to help you understand your spending, and then you can begin to mindfully (and gradually) begin to shift your spending in the areas you wish to change. Tracking your expenses and mindfully spending will naturally lead to a surplus (income - expenses) and if you can maximise the difference, increases your 'investing shovel'

3. Just start. Start small. Take the leap – Getting some skin in the game is a brilliant educational experience, and it's the best way to learn. You will never be the 'best' investor, so starting small allows you to make mistakes early on, and then test and adjust. This is why I love micro-investing and micro-investing platforms as an educational tool. You can always progress to lower-cost and more efficient systems later

4. You can't consistently beat the market – According to data from the S&P 2022 SPIVA report, More than 92% of USA-based active investment funds underperformed the market.

Over the long term (30+ years) this figure grows to over 99% of active investors who underperform the market. It seems that low-cost, index-based investing is the most reliable way to build wealth. 

Of course, there are outliers who outperform, but it is very difficult to consistently outperform the market year after year - even Warren Buffet who is universally agreed to be the world's best investor, has still had some shocking years - and while his 55-year average performance of 20% annual return is approximately double the long term market rate of return of 10%, according to the Motley Fool over the past 10 years his Berkshire Hathaway fund has underperformed a basic S&P500 index (126% gain vs 201% gain for the index) - famously even saying when he passes, his family trust will be purely invested into an S&P500 index fund.

"A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts". Burton Malkiel, A Random Walk Down Wall Street

5. Automate – This is something I learned about human behaviour and aviation safety through my career as a pilot. Flying long haul routes, and shift work at the back of the clock, automation drastically improves safety and helps prevent human error. The same thing works for investing. 

In addition to the low information diet and an indexing approach to investing, I automate my investments in order to stop inadvertently sabotaging myself. 

Even though I considered myself a disciplined investor who would dutifully dollar cost average into the market during my accumulation phase, when I looked back through my 'Buy' orders, I actually underperformed the market (even when buying index funds!) because I had hesitated at times and delayed my purchases. 

By setting up a regular auto-invest, I was able to ensure I wasn't 'getting inside my own head' and could focus on other things than investing. This helped reduce decision fatigue, reduced my investment anxiety, and ensured I was investing according to my risk tolerance and investing plan – freeing me up to focus on living my best life, and on earning more income!

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