In 1999, I was still in college, but worked a part-job that paid a decent wage. I took a lot of the money I earned and plowed it into the stock market purchasing individual technology stocks. I would check the value of these stocks several times a day. When I had breaks in between classes, I would run to the computer room to check on my account. If the value dropped, it would ruin my day. If the value rose, I would be on top of the world. When it all came crashing down, it was truly depressing for me and for most of the world! Prior to the crash, most people talked about investing in almost all conversation. Magazine and newspaper articles were about investing. People started investment clubs. After the bubble burst, no one talked about investing, no one talked about the stock market for quite some time. It was one of the most emotional times in investing in my lifetime.
Continued Emotions
Over the years, I have moved my portfolio from individual stocks in 1999, to an asset based allocation in mutual funds and ETFs. The problem here is that the portfolio is tied to the market so the wild fluctuations in 2008 surely did not sit well with me. Many people were panicked during the stock market crash of 2008. My parents were calling me to ask me what they should do with their accounts (they immigrated to America, but are naive to investing).
My Current Approach
I will not retire for another 20-30 years so I can ride fluctuations in the market. I am now invested in moderately aggressive funds, but I also have a good amount of cash and a good chunk in a conservative fund. Based on my age, this may not be the best allocation according to experts, but it gives me peace of mind. With the S&P hitting 4 year highs recently, I don’t care if it drops 10%, 20%, or 30%. Sure, I’ll lose a lot of money, but I have a significant portion of my assets in cash, real estate, and conservative funds. I no longer care if the market goes up or down in a relatively short period of time. What I care most about is that I am getting good returns and that my net worth is increasing exponentially over time.
Are you still emotionally tied to your portfolio? Does a drop in the market change your attitude? Does a rise in the market make you feel good? If the market dropped 10% tomorrow, would you have a pitting feeling in your stomach?
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{ 5 comments… read them below or add one }
My mother-in-law is emotionally invested in her real estate portfolio. They’ve got a main home up north, a second home in FL, and then a rental duplex. They have no intentions of selling the rental duplex or the FL home, and they purchased them with cash, so have no mortgage obligations, yet she still gets disappointed when she sees the assessed value of the property drop on her real-estate tax bill. Every year I have to explain to her that the smaller that assessed value is, the lower her tax bill, and the more money she gets to keep! She’s not an idiot, and knows it’s true, but is still emotionally invested in the amount they purchased the properties for.
Mrs. Pop @ Planting Our Pennies recently posted..401K Teamwork
Sep 29th, 2000 the S&P500 was 1436
Dec 22nd, 2006 it was 1410
Aug 2012 (today) it is 1410
Basically 2000 – 2012 is a lost decade (of 12years?). If it wasn’t for dividends the stock market have completely lost to inflation. One must be very careful about predicting future returns as we have seen long period of negative growth.
Economic outlook seems grim. Long term real return rate seems to be maybe 5% real or 6% nominal. Good article by a
What will stocks earn in the future? by Larry Swedroe (former Vice-Chairman of Prudential Home Mortgage, former Citicorp Senior Vice-President )
http://www.cbsnews.com/8301-505123_162-57497584/what-will-stocks-earn-in-the-future/?tag=cbsnewsMainColumnArea
I really hate to be the realist around these parts but it pains me to see people living in fantasyland, driving fancy cars and having expensive mortgages and calling themselves wealthy.
I am sorry to be the one to break it but
- Unless a household is making $380,000 / year they are NOT 1%
- Because of outsized market returns 1980-2000 and massive deregulation and gambling by financial sector – we probably not even see an 8% return over the next decade or two.
So plan accordingly and get real.
You’re predicting the future and you call yourself a realist? LOL!
Regarding my income, its way above 2008 levels, way above 2009, and way above the $380k you reference, so we’ll be in the 1% of income earners for quite some time.
You are correct. You have a lot of money.
If your household income is
- [According to Yahoo! Finance] greater than $380k/yr
- [According to Wall Street Journal] greater than $506k/yr
http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/
“An annual salary above $506,000 puts you in the top 1%”
Congratulations on having “look how much money I have” blog.