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Posted by on Apr 10, 2014 in ETF Strategist

Tiny Houses Can Help Grow a Huge Portfolio

Tiny Houses Can Help Grow a Huge Portfolio

by Roger Nusbaum AdvisorShares ETF Strategist

For many years on the Random Roger blog we have talked about simplifying all facets of life including of course financial simplicity. “Financial simplicity” has implications both in financial planning as well portfolio construction.

The financial planning implication considers that a simpler lifestyle will in most instances be a less expensive lifestyle and of course a less expensive lifestyle becomes much easier to plan for. For purposes of this post we’ll assume Social Security will be able to pay out as people hope for; how much needs to be saved for a $3000/month lifestyle (including Social Security) compared to a $10,000/monthly lifestyle? Instead of worrying about a 4% withdrawal rate, it can be possible to combine Social Security with a 2% withdrawal rate.

One way to simplify is with a smaller house or more specifically a Tiny House. Tiny Houses are essentially little houses on wheels (along the lines of an Airstream) that are very cheap due not only to their size but also because they are not covered by building codes. Being trailer-sized they tend to be 100-200 square feet but many of them can accommodate an upstairs sleeping loft which obviously increases the square footage a little.

By some estimates, Tiny Houses cost 1/10th of what an averaged regular sized house costs. The economics of this combined with the Great Recession’s impact on the social fabric has created a Tiny House movement that also includes life simplicity, self-sufficiency (growing some or all of your own food) and social consciousness.

Also included on the list is financial simplicity. This of course includes living below ones means, not incurring excessive debt and simplified investing (for people who choose not to make a full time vocation out of their portfolio).

While the idea of living in 200 square foot house growing your own kale may not resonate as a desired lifestyle most people can find ways to cut back and many legendary investors extoll the virtues of keeping investments simple and obviously ETFs play a huge role in a simplified investment portfolio.

I recently had very similar conversations with two friends both in their early 50’s who are starting to think about what their retirements might be and while both know they need to have their savings last they do not want to spend a lot of time on their investments.

A simple ETF portfolio diversified across the major asset classes can get the job done in terms of sustaining a long retirement, all the easier when the retiree has simplified their financial life and financial needs.