Gearing, Risk, and ‘Enough’ After Reaching Financial Independence

The recent article on my new geared super strategy created some interesting discussion.

Some thought it made sense and found it interesting. Others thought it was a bit too risky.  A small handful even went as far as to say I only did it for the sake of making content, or because of Pearler, and I was being wildly irresponsible for “encouraging people to leverage their retirement savings.”

Safe to say, it turned out to be a surprisingly controversial and emotional topic.

So let’s run through the main questions and pushback to provide greater clarity for those who are genuinely curious on my motivations and the strategy itself.

Quick note before we get into it: as always, none of this is personal advice.  I’m just sharing how I’m thinking about my own super in my specific situation.

If you didn’t see my super article, read it here.  In there, I also link to 3 other places I’ve discussed geared ETFs in the past – so there’s no shortage of further reading/listening if you want to dig deeper into the idea.

Let’s start with why I did it, and then we’ll unpack some interesting questions and philosophical points that were raised before diving deeper into the details behind the strategy.

Why I switched to Geared ETFs in Super

The original post has the full breakdown and my rationale, including the numbers behind it.  But here’s an oversimplified recap of why I’ve added gearing to the mix – in no particular order:

1- The strategy (specifically using the newer geared ETFs) makes sense to me
2- A negative outcome wouldn’t affect my freedom
3- It’s a fun long-term experiment
4- There’s an expected seven-figure benefit
5- I can’t touch the money for several decades (natural buy-and-hold)
6- I can improve the outcome by adding regularly (DCA + volatility benefit)
7- Super remains simple and automated (no real hassle)
8- Having more resources means greater future optionality
9- This is ‘bonus money’ (beyond what we need for FI) and a small portion of our wealth
10- I can stomach the volatility due to point 2 + 9 (no real stress)

Onto the questions…

“Would you do this in your 50s if you were going to use super as part of your retirement strategy?”

Probably not.

If I was in my 50s, my appetite for (and the likelihood of) earning personal income and work in general would be less (it’s already pretty low lol).  In practice, that means one less backup plan to make things work if it turned to shit.

Having said that, if it was a small part of my wealth, and I could reduce expenses, had some cash, and could avoid selling at the worst times, then maybe.  But honestly, I’d probably just prefer regular index funds – the extra risk and stress probably wouldn’t seem worth it.

“Would you do this with your FI portfolio?”

Again, probably not.

If I was fully reliant on this portion of my wealth, I would be WAY less comfortable taking the extra risk of geared funds.

If I was starting out, I’d love the idea of faster accumulation.  But these funds will be riskier when living off the portfolio.  If a normal portfolio falls 40%, the geared portfolio will fall 50-60%.  All else equal, that means if you’re pulling money out, your portfolio could start depleting quickly (not great!).

While you could make it work via the backup plans I just mentioned, I would probably just find it too stressful if it was a large chunk of my wealth.  And the idea of being forced to work to make up the shortfall is unappealing to me.

That said, there is a chance I end up adding a sliver of geared ETFs to the personal portfolio over time.  But only with ‘bonus money’.   No plans yet, but I can see it as a possibility.

Which then leads into the more philosophical questions that popped up.

“Why do this if you don’t need the money? How will it improve your life?”

The idea here behind this question is that if you don’t need extra returns, why bother?

But you could equally argue, if it doesn’t matter either way, why not do it?  How will it actually detriment my life?  As the question implies, I don’t need the money.  Which means it’s far less likely to be stressful (which would be the strongest argument to not do it).

Some people are thinking about this in binary terms.  You build wealth until you can be free.  Then you enjoy life and stop building wealth.  And if you make decisions after FI that are likely to result in more money, it must come from an unquenchable thirst for cash, driven by a psychological hangup of some sort.

In essence, I simply see the risk reward tradeoff points to a favourable outcome.  I expect it to make a difference of more than a million dollars for literally the clicking of a few buttons (numbers in the original article).  Now that the buttons have been clicked, I now either do nothing, or add money to it just like my regular brokerage account, and just like I would with a regular super fund.

Let’s look at it another way.

It’s kinda like switching from a ‘balanced’ super fund to ‘100% Shares’ or ‘High Growth’ when there’s a 40 year timeframe involved.  Most people agree with me that’s generally a sensible idea.  Interestingly enough, doing that also results in a seven-figure expected benefit as explored here.

Well, this is exactly the same principle – dialing up the risk slightly for a large expected benefit.  It’s just one step further along the spectrum…

30% bonds > no bonds > 30% debt

Regardless, I see this as a genuinely interesting multi-decade experiment.  So it satisfies some curiosity, learning, and investing ‘fun’ you could say.

How I think about ‘bonus money’

I’ll probably do a separate article on this topic.  But when you have what I call ‘bonus money’ – wealth/income beyond what you need for FI – you have lots of options.

You can spend more, give more, and invest more.  When investing, you then have three options:

Option 1:  Take less risk.  This could mean piling up cash or bonds and diversifying with lower-returning assets.

Option 2: Take the same risk. This means sticking with your current strategy, likely shares and paid-off rental property (in the case of retirees).

Option 3: Take more risk. That could mean geared ETFs, stock picking (or trading), buying private businesses, venture capital, leveraged property (or development), crypto, etc.

All three options are valid.  Depending on the person and their wealth level, they’ll find each option the most appealing.  Personally, I find Option 1 incredibly boring, and Option 3 the most interesting.

But here’s the thing.  Would I do this if it risked my retirement or freedom or became a genuine source of stress?  Fuck no.  That would be silly and make it immediately unappealing.

What this all means: it’s a combination of risk appetite, context, and personality (for lack of a better word).

“Isn’t this just chasing more money? You encourage people to identify when they’ve reached ‘enough'”

‘Chase’ implies I’m constantly spending time, energy and focus on this strategy.

This takes no more effort than a lower risk strategy – it’s automated.

What will I do with the money?  I’m not sure.  I expect to donate increasing sums to charity over my life, so I’d guess a good chunk will go to that.  Either way, it’s nice to have greater resources to decide what to do with.

On the ‘enough’ point – there’s a fundamental misunderstanding here, so let me be very clear:

When I tell people to know when they’ve reached ‘enough’, it’s in the context of stepping off the hamster wheel and embracing a freedom-based lifestyle.

This is the richest form of living as a human.  Where you’re completely free and everything you choose to do is a conscious decision.  You’re building from the ground up in a self-directed and unfettered way.

People that have done it tell me as much, and we agree that there’s an indescribable quality about living with freedom.

My focus is to get people to stop delaying a meaningful life outside the 9-5, to break the umbilical cord of an unsatisfying job that they cling to out of fear, and the endless ‘what ifs’ the human brain comes up with.  To begin living with more freedom when they can afford to.  That’s literally what the whole second book is about (my attempt at curing One More Year Syndrome).

Then, once you’ve created your freedom, you can do whatever the hell you like!  You can rest, work, explore, play, in whatever quantities you desire.  You can also do anything you want with your portfolio and wealth.  I’m not here to say there’s a right and wrong.  I’m here to point out there’s an unlimited number of variations and flavours of life we get to choose from.

Some of your freedom activities will create money, and many won’t.  One guy I know is constantly travelling with his wife.  The other is mostly a stay-at-home Dad and tinkers with his investments (he’s pretty good at it too).  Many others work part-time even though they don’t have to, for the mental and social engagement, to feel productive, and so on.  With the extra cash they typically spend a bit more, invest, and otherwise use it on things they care about.

How I think about ‘enough’

Enough doesn’t mean rejecting more money.  Enough means you no longer sacrifice your time, energy, and focus for the sole purpose of getting more money.

The FI people I know in real life simply see wealth as future optionality.  I never get the impression they’re driven by some uncontrollable hunger for more.  Money isn’t used as a desperate ego-pumping scoreboard.  Instead, it’s a by-product of doing things they enjoy, following their interests, and continued sensible decision-making.

For some reason, a few folks struggle to see things through any lens other than that of money/wealth.  Like when I got the Tesla, at least two people said, “But how will that actually save you money?” – as if that must be the only motivation I have 🙃

I’m not really sure what’s going on – perhaps it’s projection?  As the quote goes, “You don’t see the world as it is, but as you are.”

And it’s easy to see why.  When you’re in accumulation mode and working full-time, that becomes the dominant lens you use.  But the reality is, even when money is involved, there can be a multitude of other reasons why you might do something once you’ve reached FI.

As long as you’re operating from a clear-headed position of deliberate choice based on your values and how you can most meaningfully spend your time, rather than fear or compulsion, then that’s what matters.

You can earn money and build wealth out of fear and compulsion, or from a place of genuine interest in what you’re doing.  It might look the same from the outside, but the individual knows within their heart and soul which one applies.

So, then it’s up to the each person’s interpretation.  You either think I’m operating my life under compulsion and an unquenchable thirst for riches… or you think it’s out of genuine and relaxed interest in the things I’m doing.

Alright, enough of the philosophy.  Let’s address the tactical side of the gearing ETF strategy.

“Doesn’t rebalancing and market downturns eat into the expected benefit of geared ETFs?”

Potentially.  But the newer geared ETFs are a bit different to the horror stories people might have in mind.

In terms of rebalancing being a problem, the jargony term for this is volatility decay.  Where the fund has to continually sell when the market falls to maintain the same leverage, crystallising losses, making the returns worse than you would hope for.

In addition, you have interest costs creating a double-whammy of crappy returns.  So, how do I deal with that, and doesn’t it just ruin the benefit?

Firstly, the newer geared ETFs I’m invested in have been designed to reduce the rebalancing issues.  They’re different than the US ones, where most of the commentary on geared ETFs come from.

US geared ETFs are often rebalanced daily to reset the gearing level.  These funds are not.  Instead, they’re managed within LVR bands and also at lower levels of gearing than previous funds in Australia and especially the US (30-40%, or 1.5x leverage).  US geared funds are often 2x-3x leverage.

ETF manager Betashares explained how the mechanics work using examples here and why this was a deliberate part of the design.

This means far fewer times where the fund will need to rebalance.  For example, even though the market has gone down 10-20% since these funds launched, there was no selling needed to rebalance.  As money enters (or leaves) the funds, they’re able to adjust the LVR without rebalancing.

As for returns – because of interest costs and magnified losses, there will be long periods where geared ETFs underperform.  However, what nobody seems to consider is that this means you can accumulate more during downturns than you could with a regular index fund.  This means dollar cost averaging will have a magnified benefit.

If the market is down 20%, and the geared ETF is down 25-30%, that’s obviously a better long term buying opportunity.  Importantly, you can ONLY benefit from this opportunity if you’re able to add more during those periods – which I can.

I expect all these factors combined will go a long way to dampening the negative impacts of rebalancing and drawdown periods.  I’m not saying the funds won’t go down a lot or have terrible (and long) periods where they lag the market.  I’m saying it’s not as negative as people assume, and the downside risk also comes with opportunity, just like ungeared funds.

Now let’s look at a more entertaining objection that came up.

“This is just pure gambling”

Any time there’s debt involved, someone feels obliged to say this.  Doubly so when that debt is involved with the share market (which as we know is often referred to as a Wild West Casino by the broke and uninformed).

Let me get this right.  Using a small portion of your money to invest in a diverse group of over 1,000 major companies with operations all over the world – using 35% debt that you have no personal liability for… is gambling.

But buying a single property in one specific location, using most of your net worth, and adding 80% debt that you are completely liable for… is perfectly safe.  In fact, it’s wise and highly recommended.

Just like some people believe the sharemarket is a casino, some slightly more educated folks still believe that using debt for shares is gambling.

Now sure, there’s a manager involved and lending facilities that you can’t control.  But within the context of everything else I’ve said, that’s a pretty weak argument for this strategy being immensely risky or akin to gambling.

That said, let’s get a bit doomsday for a minute.  In a truly devastating scenario like a market collapse of 70% or more, anything is possible.  But due to rebalancing, the funds would not be wiped out.

They could, however, struggle to refinance credit.  There are usually backup lenders in place (which may or may not work in such a scenario).   The fund may be also wound up if it shrunk in size to a point where it wasn’t worth them running anymore.  So, several risks could play out, and for that reason I wouldn’t bet my FI portfolio on it.

It’s worth remembering that such a doomsday event would also be problematic for margin loans and mortgage holders, given the likelihood of mass bankruptcies due to job losses.  So it’s not like everyone else would be skipping along in the sunshine.

If people actually thought about the context of my situation when I wrote the first post – which I explicitly laid out – they wouldn’t have made knee-jerk emotional reactions.  But thinking is hard, and reacting is easy.

As a side note, for this reason I’m finding the internet increasingly tiresome.  Pretty sure I’m not the only one.

Final thoughts

Hopefully that clarified a few things for those who were wondering.

You should now have a better understanding of:

— Where and when I think geared ETFs make sense
— My personal views on risk after FI and investing ‘bonus money’
— How I think about the concept of ‘enough’ and whether someone is living freely or influenced by compulsion

There’s a ton of concepts I want to write about in 2026, so I look forward to sharing them with you.  I really want to elevate the conversation and discuss a few more advanced stage topics that I’ve been thinking about lately, along with more reader stories and new mental frameworks.

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Thanks for following along in 2025.  I hope you all have a fantastic Christmas and holiday period and I’ll see you in the new year!

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