March Performance Update (Day 1915): Pulling Back The Bowstring

My main goal* was to build an investment and cash portfolio of $1,120,000* in 1500 days**, starting from 1/1/2013 and ending in February of 2017. I achieved 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.

My portfolio is down about $80,000 from its all-time high set just a couple of months ago. It’s also negative for the year:

I used to freak out when I lost $50 in a day. Now, the $80,000 loss doesn’t bother me a bit. Today, I’ll tell you how I set my mind right.

Pulling Back The Bowstring

Everyone knows how a bow and arrow works. You load an arrow and pull the bowstring back to launch it. The farther you pull the string back, the faster the arrow (or Nerf projectile) launches:

When the stock market has a drop, I think of it as pulling the string back. If it’s a big drop, I’m pulling the string back a lot more. Sometimes, recessions come around and then the string goes back really far. Kinetic energy becomes potential energy.

I don’t let drops bother me because I know that when the market recovers, it usually recovers strong. And the farther the string was pulled back, the more fiercely it recovers. In the meantime, I’m continuing to contribute to my investments, so when it recovers, I’m investing with more ammunition.

According to Ben Carlson from the excellent Wealth of Common Sense blog and Animal Spirits podcast:

Three years out from a recession the annual returns showed an average annual gain of 11.9%. Five years out the average annual gain was 12.3%.

Losses are short term. So is volatility. For the long-term investor (and this is what you should be), monthly, weekly or even yearly fluctuations are just distractions.

Big growth is a long-term phenomenon caused by productivity gains (humans will figure out ways to become more efficient) and population growth. Both of these factors cause economic expansion. Expansion results in new stock market highs continually and over the long term. As long as you believe in this, everything will be OK.

The next time the stock market takes a big hit, just think about how much farther the arrow will sail once the rebound happens. For more reading on the topic, see Jim Collins’ Stock Series and his book.

Performance Update: March

It’s already May! I’m completely behind on my performance updates. Better late than never?

Our net worth went from $2,090,431 to $2,037,865 for a decrease of $52,566:

2018 (as of 4/1/2018)

• Days elapsed: 91
• Investment portfolio gains: –$4,836 (including 401(k) contributions**** of $10,296)
• Net worth gains: $45,164 (investment portfolio loss of $4,836 + home appreciation of $50,000)

Portfolio Breakdown

Our real estate investments are still ramping up. The trailer park has generated $0 so far and the syndication deals take a long time to ramp up. However, I expected all of this. The trailer park needs a lot of work to stabilize (more on this soon) and most of the money from syndication deals comes at the end, so I’m not losing sleep. Despite the  real estate investments’ slow start, they are outperforming the stock market part of my portfolio:

• Stock market: $778,224
  • Monthly gain: –$37,190
  • 2018 gain: -11,562
• Real estate: $724,641
  • Monthly gain: $4,625
  • 2018 gain: $6,726
• Cash reserve: $20,000

Since the start (1/1/2013)

• Days elapsed: 1915
• Investment portfolio and cash: $1,522,865
• Gains since 1/1/2013: $989,388
• Needed to quit work ($1,120,000 in investments): Mission accomplished!

Net worth: $2,037,865. This includes:

• Investment portfolio and cash: $1,522,865
• Home equity: $450,000
• Silly toy car: $45,000
• Other cars, bikes, dinosaurs: $20,000

Woodstock Of Capitalism

Friday

*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. So, if I were to quit my job now, I could spend about $60,000 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. My compromise is to have enough money put away to cover the mortgage at the time of retirement. So, to retire today, I would need about $1,120,000.

***This is an affiliate link. If you sign up, the blog (me) makes some cold, hard, beautiful, cash. Personal Capital is a totally free and awesome way to keep watch over your investments. It’s worth it for the fee analyzer alone. I would never recommend anything that I don’t personally use and completely believe in, so give it a try. If you’ve already signed up through the link, please know that you are a fine person of above-average intelligence.

****My 401(k) contributions include my own, Mrs. 15oo’s, and the contributions from my corporation. Self-employment with a solo 401(k) is a very powerful savings tool. I should have done this years ago.