My main goal* was to build an investment and cash portfolio of $1,120,000* ($1,000,000 to retire on and $120,000 to pay off the house) in 1500 days**, starting from 1/1/2013 and ending in February of 2017. I made my goal in 2016, my 1500 Days are over, and I’ve left my job. In the interest of openness, I’ll continue to share my numbers.
What a funny year this has been. COVID has continued its warpath. The United States feels divided. Not good. But our home prices have gone crazy and so has the stock market:
It seems like everything is inflated (except for interest rates). For proof, have a look at the Shiller PE ratio which currently sits at about 37, but has a mean of about 17. Oof.
Some talking heads are screaming that a crash is imminent:
But, what these talking heads don’t tell you is that they’ve been saying the same thing for years.
One day, they will actually be right and when they are, the media will publish articles like this:
STOCK MARKET GURU SUCCESSFULLY PREDICTS CRASH!!!
Of course, they’ll conveniently forget the 124 other times the talking head predicted the crash that never happened.
But, the question you should be asking yourself isn’t”
When will the crash occur?
It’s:
What am I going to do when the crash happens?
Because I have two facts to remind you of:
Fact #1: A crash will happen. The market will correct down more than 30%. It will probably happen many times in your life. The cause could be:
- the COVID Omega variant
- a robotrader has a byte fart
- Jurassic Park turns out to be true and the T-rex makes a comeback
If I had to guess, it will be none of those things. And, it could be nothing at all. Sometimes, it all goes south and there are no fingers to point. There doesn’t have to be a reason.
Fact #2: You have no idea when the crash will happen. I remember when I started this blog way back in 2013, there were folks back then talking about ‘staying in cash because markets were going to crash.’ It seemed like a safe bet since the markets had more than doubled since cratering in March of 2009:
But look what happened between 2013 and now:
VTSAX is 3x what it was at the start of 2013. If you were on the sidelines this whole time, you’ve missed out on an incredible bull-run.
You have no idea when the crash will happen because it’s impossible to predict future events and furthermore, it’s impossible to predict how these events will affect the markets. Would you have predicted that a pandemic would have caused the current runups in the market? Me either.
Again, the question is:
What will you do when the crash happens?
The time to plan for the flood isn’t when it’s raining and your basement had 3″ of water in it. The time to plan for a divorce isn’t when you hate your spouse and emotions are out of control. You plan for the flood when the weather is beautiful and you plan for separation before you even get married. The same goes for money.
Consider right now what you’d do if your portfolio lost 30% or more of its value. Hopefully, you wouldn’t do much of anything, but now is the time to consider the scenario and get your emotions in order.
Write down your plan.
When the dinosaurs return and your portfolio drops by 50%, first take cover so you don’t get eaten. Then, break out your plan to remind yourself of what you planned to do.
August 2021
August was yet another great month for the old Net-Worth-O-Meter. We started the month at $4,174,920 and ended at $4,344,210 for a gain of $169,290:
2021 (as of 8/31/2021)
- Days elapsed: 243
- Net worth gains: $814,464
Since the Start (1/1/2013)
- Days elapsed: 3164
- Net worth gains: $3,608,421
I have no idea what the markets will do for the rest of the year, but there are three developments that should positively affect our finances:
Syndications: Two of our syndication deals will probably close before the end of the year. These syndications are modeled in such a way that we make most of our profit at the time of sale. I have soured on syndications as I’ve seen returns on new deals trend lower as syndicators fight over the scraps of the real estate market. Our profits will go into VTSAX and not new syndications.
House refi: Leveraging debt (AKA having a mortgage) isn’t for everyone, but it is for us. We paid cash for our home and then signed on for a mortgage via a cash-out refi in April of 2020 (3.50%/ 30 years). We invested the proceeds and it’s worked out very well. Now, our home’s value is up and rates are down, so it’s time to refi again. I’ve always used an official appraisal to value our home on this blog, so we’ll see a bump up from that soon.
Tesla: Tesla stock had a stellar 2020, but has lagged in 2021. However, there are lots of positive business developments including the opening of two new factories at the end of this year or early 2022. This news may give the stock a boost as Tesla will be able to greatly expand its production capacity. In the case of the Brandenberg factory, Tesla will also be able to avoid import taxes and decrease shipping costs as well. Perhaps we’ll see Tesla stock pop a bit?
With that said, Tesla is still valued richly for its current business. Also consider that the Cybertruck, Project Dojo, Hardware 4.0, and the 4680 batteries are all behind schedule. Some of this is due to supply-chain issues, but Musk also has a habit of silly exuberance. Musk usually delivers, but not often on time.
Onward, Upward, And To The Right
Humans that are crazy optimists are sometimes laughed at or at least regarded with suspicion. On the other hand, Doom-and-gloom Talkers appeal to our innate negativity bias, so humans who preach bad scenarios sound smarter. However, crazy optimism is a better place to be for your mental health and for the stock market. So the next time the dinosaurs show up and the stock market gets a 50% haircut, remember:
- Humans will be able to deal with the T-rex. We have bazookas and they don’t. And even if they did, the T-rex probably couldn’t operate the bazooka with those useless arms. And hopefully, we can get some of them into a zoo so we can at least have a look. And if we can’t contain them, getting eaten by a tyrannosaur is better than dying of dementia.
- The markets will recover: I can’t guarantee a quick, V-shaped COVID recovery. Even scarier (but not as scary as dinosaurs), we could experience an extended period of pain. (In your plan, include what you’d do if we had a decade-long downturn) But, stay the course long enough, and the days will get brighter.
Onward, upward, and to the right!
More 1500 Days!!!
You can also find me (and the dinosaurs) at:
Mile High FI podcast:
Also here:
- EconoMe: Hey look, I’m speaking at EconoMe later this year!
- Facebook: Facebook group and page
- YouTube: My channel is mostly devoted to home improvement, but I have some other material coming up soon too.
- Instagram: Pretty pictures of dinosaurs, sunsets, and nail guns!
- Twitter: Spontaneous, often insane, ramblings
- Coworking space: On the surface, MMM HQ is a coworking space. Look a little deeper and you’ll see that we’re really building community. The members of MMM HQ are some of the finest people I know.
Other resources I like:
- Camp FIs are amazingly fun! I hope to attend Rocky Mountain and Joshua Tree this year. See you there?
- Need to learn how to invest? The Simple Path to Wealth is all you need.
- New to FIRE? Need some FIREy guidance? Check out Fiology and the accompanying workbook!
*My goal wasn’t to have $1,120,000 at the end of 1500 days, but at any time before the day count was up. Why? It all goes back to the 4% Rule. Remember that our little friend, Mr. 4%, is nothing more than the most conservative safe withdrawal rate. Since my investment portfolio now sits at $1,550,000, I can spend about $62,000 in my first year of retirement.
**My original goal was $1,000,000 and no debt, I later raised the goal by $120,000 to $1,120,000 because I will have debt in the form of a mortgage and I firmly believe in not paying it off (LOOK at the MONEY I’m MAKING!). My compromise was to have enough money put away to cover the mortgage at the time of retirement.
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Came for the dinosaurs, stayed for the intelligent commentary! Well said Mr. 1500!
People really need to be ready for that 50% haircut. Real bond rates are negative, CAPE ratios are near all-time highs, and the fed is now hinting at rate increases.
It does not bode well for stocks in the near-term. Long-term I’m an optimist however, CAPE median here we come!
Mr. Tako recently posted…Is Retiring In 2021 A Truly Terrible Idea?
That is so true. The media will ALWAYS leave out details like the other 124 times that Robert predicted a crash. I remember when he talked bad things about you as well, ha.
I would like to believe that buy and hold will take care of us forever, but I am so concerned with the high PE ratio. I still haven’t done anything and I don’t think I will do anything. I’m still so lazy to figure out how to sell stocks from my brokerage that I use. That simple roadblock is enough for me to never sell my stocks, ever.
David @ Filled With Money recently posted…6 Reasons Why Quitting is Not an Option
“I’m still so lazy to figure out how to sell stocks from my brokerage that I use.”
This is the one time in life when being lazy will reward you!
I don’t have a written down plan for when the markets drop 50% or when the dinos return. The CAPE number and talk about a decade long down turn are scary. I will stick to holding my index funds long term and try not to look at the markets when they are down.
P.S. I crunched my numbers for September and it was the first month my stache had dropped in a while so if you don’t want to see that just skip doing a September update. It was just a ~4% drop so nothing close to a T-Rex attack….
“The CAPE number and talk about a decade long down turn are scary.” A little, but the market has paid it ahead over the past decade. And if nothing else, you’ll still be getting dividends even if Mr. Market sh*ts the bed!
A T-rex attack would be much worse than a 4% drop!
Glad there’s someone else who is crazy enough (or is sane enough) to cash out refi and reinvest the proceeds into VSTAX 🙂 Home valuation means we got an extra 100K out which is now working the market. Combined with a lower rate and some short term debt pay off, our cash flow is actually less than before the refi. Financial Alchemy.
Crazy indeed!
Leverage isn’t for everyone, but I think this strategy is another form of delaying gratification. Would you rather have the comfort of being debt-free now or have loads more money later. It always seemed like a no-brainer to me.
Hi Mr 1500days,
I’m from the UK and new to the blog, and have a slightly different challenge and questions please.
What do you do if you have money tied-up in an expensive family home, are going to downsize when the kids fly off to university (shortly), and you want to put that money to work to give you compound interest and capital growth to help us FIRE. Let’s assume the amount is £500,000 ($685,000).
We are torn between investing in a combination of things such as real estate (buy-to-let) and Vanguard index funds/ETFs. If we were to invest some/all in Vanguard index funds/ETFs, it’s probably prudent to spread over a number of months or 1-2 years, although would be interested to know your thoughts on this please, particularly as there are reports of a T-Rex or financial Armageddon just around the corner. I joke but it could be a risk to put large amounts in to Vanguard at the top of the market.
Thank you, and look forward to any feedback you have.
Great blog and really useful information, much appreciated for sharing it with the world!
All the best, Ian
Hey Ian!
I go where the opportunity is. Here in the states, real estate is super-pricey, so I’m not keen on it.
Stocks are also high, but if your time horizon is long (10 years or longer), any big correction will be a minor blip eventually.
Regarding investment timing, I’m a big fan of front-loading. I’d dump it all in immediately. Here is a pretty good article: https://www.madfientist.com/front-loading/
Keep in mind that I am not an advisor or anything like that! I appreciate you asking me for my opinion, but please do your own research and do what makes you able to sleep soundly at night. 🙂