Every percentage point of NAV erosion compounds against your FI timeline. A $200K position eroding 8% annually doesn't just cost you $16,000 — it costs you the compounding that $16,000 would have generated. This guide quantifies the timeline impact and gives you the forensics methodology to catch it before it matters.
A holding generating 12% distributions while eroding 8% NAV looks like success until you calculate total return. FIRE math requires tracking both numbers.
If your FI number assumes a stable portfolio value, systematic NAV erosion raises that number every year. Most FIRE investors never calculate the timeline impact.
A fund covering only 85% of its distributions from earnings is burning principal. That principal was part of your FI calculation. Now it isn't.
Chapters marked Most Relevant are specifically applicable to your situation.
Why NAV declines while distributions are paid, and when it's acceptable vs. destructive.
Coverage ratios, earnings vs. distributions, the compounding destruction formula.
How to tell the difference on your 1099-DIV and why it matters.
How to read coverage ratios and what thresholds trigger concern.
From most stable to most erosive: the definitive ranking with 3-year data.
One real ETF's journey from $25 NAV to $11 over 36 months.
At what coverage ratio and NAV decline rate does a fund become uninvestable.
How to generate 8%+ yield with provably stable NAV across market cycles.
3.2 Working Years
An 8% NAV erosion rate on a $200K holding costs the same as 3.2 additional working years — most FIRE investors have never calculated this.
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