Back during the market highs, spouse and I talked vaguely about what to do [-]if[/-] when the party abruptly ended. We considered hunkering down, cutting back, and otherwise conserving cash.
But somewhat to our surprise, that's not what we've been doing.
No worries. No changes. When the markets got stupid high last fall, by last February we rebalanced a little of our Berkshire Hathaway-- from 36% of our ER portfolio to 23%. Even that cap gain was more than offset by subsequent tax-loss harvesting. So the biggest change of the last year is that we've rebalanced yet our tax bill has gone way down.
When our portfolio was hitting all-time highs in 2007, we didn't take anything off the table and buy a Tesla. Maybe we should have, but instead of basking in the warm glow of successful market timing I'd be concerned about insurance & theft. We could've taken a blowout vacation with our profits, but we were busy with other projects and our family college trip was more than enough stimulation. The size of our portfolio wasn't relevant to our lifestyle.
Instead we just kept living our lives. Our spending didn't have to change because we keep enough in cash to be independent of market performance for at least a couple years. At our portfolio's peak, it didn't feel like "real money". At the market's lows, we still have enough. I can recognize that stocks are on sale today but I don't feel compelled to tap our home equity, claw back the kid's college fund, go on margin, and buy options.
We have engaged in one form of dirty market timing. Now when we're contemplating a home-improvement purchase, we spend a few weeks watching Craigslist. Even more desperate consumers are selling their Home Depot/Lowes gift cards for at least 20% discounts, and then we're using those during store sales. We also found a couple nice office/desk chairs, a great EnergyStar dishwasher for a friend's kitchen, and some lovely old rosewood furniture. I can only imagine what's going on [-]Wii Fit[/-] Craigslist sale when the post-holiday credit-card bills come rolling in.
We may change one type of investor behavior-- taking the ER portfolio's dividends in cash instead of automatically reinvesting them. I see the money piling up until an asset gets outside of our target allocation, then making a lump-sum purchase of the laggard. Spouse sees the money piling up until she decides to "take some off the table", maybe into a seven-year CD ladder, but I suspect that if I can show an asset is on sale then we'll decide to break a CD and put it back into the market. It isn't as if we needed the excess profits to support our immediate lifestyle needs.
No losers in this discussion. We have enough. Life is good!
, but not drawing on it.
Due to the size of my net worth, I actually can have a SWR that is much higher than any annual salary I ever had---but I had to save and invest to have this money and if it goes, it goes---not guaranteed for the rest of my life, unless I get an annuity and the insurance company is still around and able to honor their commitment.
