5 Year Review - How to Lose a Million Bucks

[strathglass]

But seriously: would you think NOW of changing your allocation?
Some might argue that would be reactionary...closing the barn door after the horse is out.
But of late we have entered a new era, it seems, of ultra low in interest rates: those modest fixed income returns are now potentially LOSING you money if they are yielding below inflation.
Therefore the counter argument is that it is not too late now to up the equity level (only if you had been worried about low equity levels).

 

[Green Papaya]

When I started investing years ago, I made so many mistakes that I nearly lost all of DW 401k money. But I learned from mistakes and made corrections then move on. My goals are still out there (e.g. dream house and helping my kids with student loans/house down payments) so I still make decisions with AA to grow my stash but not at the expense of losing sleep over it. I do not know market future, just to apply what I currently know and accept that it's not going to match the market 100%.

 

[GravitySucks]

Think how much more you'd have if you kept working.

 

[audreyh1]

Think how much more you'd have if you kept working.

Exactly!

 

[Scrapr]

Indeed. I feel so lucky to have "enough". Wanting more is what ruins your life.

exactly. Enough. It feels good

I was 100% stocks through 2000 (dot com bust) & the 2008 recession...which in my business (SFR housing) was really a depression. Not only did the market tank but our business lost 70% of revenue. Many after dinner walks with DW as I'm trying to figure out if we even have a viable business.

When the market recovered I got more balanced. I know it was a sunk cost & I should have decided & moved more conservative right away

 

[stepford]

Think how much more you'd have if you kept working.

That was actually what was behind this post. When I was working I was the only one among my colleagues expressing a desire to ER. When they questioned the financial prudence of such a move my stock answer was, "Well, I could always use another million bucks, but do I really need it?"

This response was both flippant, because $1M seemed like an awful lot of money to bandy about so casually, and serious in that I suspected 5 years more work would have indeed increased my savings by at least that much. Needless to say to the crowd here at ER.org, I don't regret my decision to retire.

In any case, what occasioned my OP was the realization that my 5 year ER anniversary lent itself to some similarly big round numbers - $1M more than I started with, $1M less than I might have had with a more aggressive AA. I guess I may not have been clear enough in my initial post, but I don't particularly regret my AA in that I feel it was appropriate for my age and circumstances. That said, just as when I was working "I could always use another million bucks" so I'll always feel a little pang when I see the concrete result of my conservative financial policy.

Unlike picking a big winner in the stock market, asset allocation is a choice we all get to make. I just thought it worth noting how large a difference AA can make over a relatively short time.

 

[Spanky]

I ER'd just about 5 years ago, and by most standards I've done OK. Started with around $2M at the end of 2015 and now have a bit over 3. But, I've done that with a conservative AA of around 50/50. During those 5 years the equity half of that has roughly doubled (S&P 500 up 90%, some other holdings slightly better). The bond/cash half, however, has returned 10-15% in that time.

So I reach the inescapable conclusion that my conservative approach has cost me about a million dollars over those 5 years. Classic "glass half empty" view of the situation, but it still stings a bit. Granted that I probably wouldn't have slept during those 5 years if I'd gone with the 100% equity allocation that would have given me ~$4M today, but still...

coulda, woulda, shoulda.

Yes, that is now. How about back on 3/23/2020? The balance of a 100% allocation was $2,372,314 while the balance of a 50% allocation was $2,253,450. The difference was only $118,864. What if the S&P500 continued to decline, would you say that your 50% allocation was correct or prudent and pat yourself on the shoulder.

 

[donheff]

It's hard not to look at things like that. An underperforming international equities slice also makes you wonder "what if I had just been more xenophobic?" I track the YTD total return for Vanguard's target retirement 2030 fund which closely mirrors my AA as my benchmark. It is easy to look at our combined gain for the year and compare it to VTHRX instead of just the S&P or some other equity index.

 

[Andre1969]

One coulda, shoulda, woulda event I play out in my mind is this... in early 2005, I took out an HELOC. The limit they gave me was $175,000. Also, around that same time, I bought a few shares of Apple stock for something like $88.60 per share.

If I had maxed out that HELOC buying AAPL, at the time it would have gotten me about 1,975 shares. Well, soon after that, AAPL did a 2:1 split. Then in 2014 it was a 7:1, and just this year, a 4:1. So, if I had done that purchase, and left it alone, today I'd have about 110,609 shares.

As of yesterday's close, it was $115.17/sh, which would put my holdings at $12,738,894. Even at the 82 cent/share dividend it pays, that would be about $90,699 per year.

Looking back though, I don't know if I would have had the stomach to let it all ride, like that, for all those years. AAPL has had kind of a wild ride, even if the long term trend has been up.

But, while that kind of nest egg would be nice, I'm still happy where I am, financially. I mean, more is always nice, but it's not like I'm starving, in danger of losing the house, or anything like that!

 

[Midpack]

Hindsight is a wonderful thing, but it doesn’t matter much in investing your own money.

The purpose of investing is to accumulate enough to achieve financial independence, “once you’ve won the game why keep playing?” Once you reach FI, why look at “woulda, coulda, shoulda? I had a couple 10 and 15 baggers in my 30’s and 40’s, no need to keep taking those risks.

If your objective is to endlessly make highest returns possible, it’s going to be a wild ride with exhilaration and lost sleep...no thanks.

 

[audreyh1]

When the company finally went public I realized that my master’s degree - which I went part time to get - had been very expensive because I missed out on a 2nd round of lucrative stock options. Stock options were extremely limited after that.

Does it matter now? Nope! I still reached my goals.

 

[street]

I thinking just being on the plus side, worth more and just having enough is a blessing. The one comparison mentioned >> Originally Posted by GravitySucks View Post
Think how much more you'd have if you kept working.
makes me even more content with what I have gained in the last 4 to 5 years. I could of made more or done better but I have enough also.

Greed may have gotten us to where we are today and that can be a hard habit to over come.

I can say, if you aren't in the market no matter what AA you have would be very devastating to me. I would rather make a little then not be playing the game.

 

[FREE866]

Indeed. I feel so lucky to have "enough". Wanting more is what ruins your life.

Yep. That's it right there. Free from "want" is very freeing; I actually have that most of the time thankfully.

 

[Markola]

I’m certainly not immune to this kind of second guessing of my decisions. Of course I wish I’d owned more U.S. equities in recent years! I similarly recall during the early 2000s wishing I owned more international equities (especially emerging markets), then more real estate, then during the financial crisis, more bonds, all in that order, followed pretty quickly by relief that I did not own more of those specific asset classes.

I guess the feeling of missing out comes with investing. All I know to do is try to be exposed to a little bit of everything with a 50/50 AA to globally diversified index funds, keep costs and trades low, adopt a 20+ year perspective and let each class cycle as it will. Who knows anything? The outlook for bonds is awful but, OTOH, we learned this week that home prices in our neighborhood are up 8% so far this year, both situations due to extremely low interest rates.

 

[kjpliny]

It is not too late to recover your 'loss'. Start taking more risks, e.g., increased equity allocation or/and bitcoins - which is almost $20K now and estimated to be >200K by the end of 2021.

Easy way to "lose" another million. Or get fantastically rich. Nobody knows for sure.

 

[pb4uski]

I ER'd just about 5 years ago, and by most standards I've done OK. Started with around $2M at the end of 2015 and now have a bit over 3. But, I've done that with a conservative AA of around 50/50. During those 5 years the equity half of that has roughly doubled (S&P 500 up 90%, some other holdings slightly better). The bond/cash half, however, has returned 10-15% in that time.

So I reach the inescapable conclusion that my conservative approach has cost me about a million dollars over those 5 years. Classic "glass half empty" view of the situation, but it still stings a bit. Granted that I probably wouldn't have slept during those 5 years if I'd gone with the 100% equity allocation that would have given me ~$4M today, but still...

coulda, woulda, shoulda.

I'm late to the thread. But how would your life today be different if you had $4m rather than $3m?

I assume that your health is better because you are sleeping better at night.

 

[stepford]

I'm late to the thread. But how would your life today be different if you had $4m rather than $3m?

I assume that your health is better because you are sleeping better at night.

Day to day life wouldn't be different at all. I have a significant reluctance to "blowing that dough" and have been mostly living off a small pension and pulling less than 1%/yr out of the nest egg - one reason why it has grown steadily over the years. We can buy whatever we need whenever we need it.

However, one place where it could make a big difference is in the cost of our next home. I've been looking around in areas we like and the price of something decent is often in the $1M+ range. We can afford the low end of that range, but having an extra mill floating around would greatly broaden our options. I suppose I was wistfully thinking about some of those $1.5M fantasy homes when I wrote coulda, woulda, shoulda...

But, I guess I'm being silly. With no kids DW and I don't need some 3000+ sqft sprawling pile and I'm getting to the age where maintaining significant acreage would be more trouble than it's worth - so the smaller homes on the low end of our range are probably what make the most sense. An old boy can still dream though.

 

[pb4uski]

I'm definitely in the less is more camp. We've had the big 3000 sf house... it was great... especially for family gatherings but we are all spread out now. I'm quite content with the 2400 sf that we have up north and 1400 sf condo down south... might someday upgrade to the 1700 sf villas in our neighboorhood since they include a garage and a bt more space... but that would be plenty for us in retirement living.

 

[kgtest]

Choe, a graffiti artist, made over $200 million (from his options $38/share in 2012) for painting a wall at Facebook.

The legendary 200 MM miral. I hope they protected it somehow

 

[tenant13]

Would you have any use for that extra mil? I noticed that I don’t really spend more money even if I have extra cash. I’ve never been a “consumer”. The only thing I enjoy spending on is travel but not the kind that cost an arm and a leg. Not that I’m cheap, I still pay for business class, use Amex Plat and occasionally stay at Belmond but I’m really the happiest with street food, bargain accommodations and experiencing public transportation wherever I go. That extra mil wouldn’t change anything... I would just die with more money.

 

[kcowan]

You have to decide how much is enough. I have a rich friend who holds gold. I asked why and he said he never wants to end the game. I told him I was done!

 

[Murph]

Relax. You can’t take it with you. And if you went totally aggressive and the market went to hell? How would you sleep then? Btw: I have a 65-35 conservative mix, and I sleep just fine.

 

[melijov]

No one can predict the future. Stick to your planned asset allocation, be happy, enjoy life.

 

[rrs26ja]

Its easy to be a Monday morning quarterback. What if you lost 50% of that money, you would have a different frame of mind now. Greedy pigs get slaughtered. Be happy that you did well.

 

[EdL3]

Sounds like if I coulda woulda shoulda. It’s all in how you manage it.