My main goal is to build a portfolio of $1,000,000 in 1500 days with no debt*, starting from 1/1/2013. Every month, I provide an update on my status. My goal for 2014 is to get my portfolio up to $768,536. Because we saw exceptional returns in 2013, I have accomplished this goal. Time to look back on the month of January.
Forget about my little performance update for a moment; a much better one came out this past Saturday. If you haven’t yet, check out Warren Buffett’s annual letter. It is a must read. I print it out every year (who prints stuff anymore?) and read and reread this thing meticulously. You should too as there are lots of lessons in those pages.
So far, I’ve only skimmed the surface of it, but this quote on page 19 really stuck out:
A climate of fear is your friend when investing; a euphoric world is your enemy.
I’ll get back to this quote in a moment.
Me
February was a spectacular month; one of my best ever. My portfolio started the month at $858,561 and ended the month at $909,688. The investment portion (non-cash) started at $818,214 and ended at $869,360 for an increase of 6.2%. Most of these gains were due to some stocks I hold**. Overhyped SolarCity and Tesla (thank you Elon Musk) propelled me to new highs. Crazy enough, I’ve made my end of 2015 goal already:
Here are the numbers as of 2/28/2014:
2014
- Days elapsed: 60
- Days remaining: 305
- 2014 gains: $40,053
- Left to go (2014): Goal accomplished!
Since the start (1/1/2013)
- Days elapsed: 423
- Days remaining 1077
- Gains since 1/1/2013 gains: $323,645 (including my contributions)
- Left to go: $90,312
This is all great, but I’m not that excited about it. During the past year, we’ve seen a spectacular stock market run. However, it’s only one brief moment in time. Remember Buffett told us that a ‘euphoric world is your enemy’ and that’s how it seems to me lately. For example, the fact that Tesla is worth about half as much as GM and Ford is a bit ridiculous. Also, if you haven’t, check out the S&P 500 PE. It’s at almost 20 while the historical mean in closer to 15. So, while I’m a long term optimist, I’m a short term pessimist. I wouldn’t be at all be surprised if my portfolio goes down to 850K before it sees 950K.
What is the appropriate action to take?
Stay the course. If (when?) the markets take a huge hit, the last thing that you should do is freak out and sell:
- Downturns are just opportunities to buy what you’ve been buying all along at a discounted price.
- Downturns are healthy. Just like everything else in life, the stock market is cyclical. Periods of incredible growth will be followed by corrections. It’s just the way of things.
- The long term trajectory of the markets is up. As long as you believe this, you’ll be alright.
I couldn’t end without a shout out to Mr. Collins who explains the stock market much more eloquently and thoughtfully than I ever could. His stock series is all you need to know about investing.
Also, don’t forget to pay Mr. Buffett a visit as well. If you’re a Berkshire shareholder, perhaps you’ll be visiting the Oracle of Omaha in person this May. I wouldn’t miss it for the world.
*I still owe something like $120,000 on my mortgage. Because I have a low rate, I firmly believe in not paying it off. My compromise is to have enough money put away to pay off the mortgage at time of retirement. So, to retire today, I would need about $1,120,000.
**I do not recommend buying these stocks or any stocks really. My stock holdings are mostly a relic of an investing philosophy that I no longer believe in. Over time, I’ll be selling my individual stocks and moving to index funds and real estate.
Join the 10s who have signed up already!
Subscribing will improve your life in incredible ways*.
*Only if your life is pretty bad to begin with.
Obviously things are still moving in the right direction, but given the tremendous success you’ve alluded to with Telsa, etc., at what point are you planning on selling? With Tesla reaching incredibly (crazy) high valuations, do you pull the trigger?
For any investor who must sell, the hardest decision is to determine when.
As an aside, big news in the P2P space today, check out the site later today for the details! 🙂
writing2reality recently posted…Simple Filters for Investing in Lending Club and Prosper
“With Tesla reaching incredibly (crazy) high valuations, do you pull the trigger?”
I don’t know, but I don’t think it’s an issue either. While the stock is crazy high now, I strongly believe in their long term prospects. The question I ask myself is this: “Do you see this company around in 10 years and in a stronger position than now?”
With Tesla, as long as Musk it at the helm, my answer is a resounding “yes”.
I’ll more closely echo writing2reality’s position. I agree, I think Tesla’s an awesome company and will likely be around and kicking some butt in 10 years as you ask, but the question I have is how long will the company take to reach the built-in expectations given this stock price. I’m all for long term investing and horizons, but personally I’d walk away from the table with a giant smile if I owned Tesla right now. Given the market cap of half GM/Ford versus the reality of sales numbers (Tesla sells what, like 1-2% the vehicles that GM and Ford do individually?) I just think that barring some miraculous growth the stock will likely move sideways once it gets big enough and everyone comes to their senses about the company. Until then, the price is very much over hyped like a tech stock more than a car company.
Chris @ Big Day Coming recently posted…Net Worth: February 2014 Progress
I think Chris articulated exactly what I was thinking when I asked the question. I agree Tesla is without a mover and a shaker in the auto industry, but to what point do they justify the valuation?
writing2reality recently posted…Truly Passive Investing in P2P Lending: Lend Academy Investments
Comparing Tesla to GM or Ford isn’t as simple as it seems. Tesla’s profit margin is much higher than either of those two.
However, I begrudgingly agree with you both. It would take years of growth for their stock price to justify itself.
One thing I didn’t mention is that I already sold enough shares a couple months ago to recoup my initial investment.
I’m not sure what I’ll do now…
“Stay the course”- I see you are a fellow “Boglehead” I’m a big believer in that philosophy. I only have a small portion in individual stocks…it’s tempting to invest in them sometimes (like you mentioned with Tesla). But I’ve had more stocks crash than I have stocks that did really well. I’ll keep a small portfolio to play around with but low-cost index funds are my bread and butter.
Andrew@LivingRichCheaply recently posted…Are We Overworked?
Oh man, Bogle is my hero. That guy is awesome.
You know, I’ve been really lucky with stocks. Most of my bad decisions have involved selling. For example, I sold Las Vegas Sands and Sina. Both would have been 10 baggers.
I agree that it is very tempting to throw money at stocks. I’ll probably always have some money in them, but I hope it to bring it down to under 20% of my portfolio. Right now, I probably have at least 40% in them.
I make an exception for Berkshire Hathaway though. I strongly believe in the long term prospects of Buffett’s little project.
Mr. 1500… you made me laugh out loud with the “Buffett’s little project”. Little indeed! 🙂
writing2reality recently posted…Truly Passive Investing in P2P Lending: Lend Academy Investments
Ha, thanks! Berkshire isn’t sexy, but its a money machine!
That’s really awesome! 🙂 Great progress. It’s easier for it to snowball into bigger earnings, right?
SavvyFinancialLatina recently posted…What is Your Next Career Move?
Yes, the bigger the snowball gets, the bigger the snowball gets!
You are absolutely crushing your goals! Congratulations! I know there are ups and downs, but have you registered 1000days.com just in case?
Dave @ The New York Budget recently posted…If You Can’t Give Money, Give Time
Ha, I’m not going to jinx myself, so I’ll just say, no comment sir! 🙂
999 days. 🙂
Her Every Cent Counts recently posted…Pretzels and Aging, and Money and Roller Coasters
Congratulations!!! When are you changing to anydaynow.com??? :0))
Kemkem recently posted…Malta Carnival 2014
Ha ha, not yet. I never count my dollars before they compound. 🙂
Holy crap? !
I’m mentioned in the same breath as buffett??
It leaves me, well, breathless.
Thanks!
Ha, the number 1 question I get is about investing. I’m so glad that I have you to explain it for me!
With the way things have been going, we’re looking at retirement at age 49! I know we’ll be brought back down to reality eventually, but it’s still amazing to see what a little bit of saving can do (and I’m planning to save a LOT more soon). I never would have thought we’d be able to retire early at all, but now I believe it’s a real possibility, even if we’re only shaving a few years off. In the past when times were tough, we thought about cashing out my old 401k, or stopping my husband’s deferrals. I’m so glad we never did.
Jen @ Jen Spends recently posted…Friday Funny: Happy in Syracuse
Once that snowball starts growing, it’s pretty incredible to watch. I’m still taken aback when I look at my portfolio. At heart, I still feel like the super poor college student I was 15 years ago.
This sounds strange, but the pile of money makes me a bit uncomfortable. I can’t relate to myself. I never envisioned this kind of success and it doesn’t sit quite right. I feel like such a jerk for even typing this. People are hungry and I whine about being uncomfortable with money.
I feel the same way about success sometimes! I’m my own worst enemy.
Very impressive once again sir!
I know you don’t endorse it any more but it would be interesting to read about your old investment philosophy, and the ups and downs in all that entailed.
Yeah, I need to do a post on that. Basically, I bought individual stocks when I felt good about a company’s potential. For example, I bought Apple in 2007 when the iPhone was announced because I suspected it would be a hit.
I also like throwing money behind visionary people. I think Elon Musk is one of the greatest minds alive today. I also think solar energy and electric cars both have bring futures, so SolarCity and Tesla were easy gambles for me.
I bought facebook because I could see the potential it had. Everyone was down on it, but they didn’t see what I saw. That is large, gigantic, huge potential for monetization. Zuckerberg admitted many times that pre IPO, their focus was not making money. So my thought was always this; he’d have to be an idiot not to be able to figure out how to make money from 800 million active daily users.
I also bought Google at IPO. I fully admit that one was dumb luck.
Anyway, more to come later.
You have quite the knack for picking stocks in the tech sector. Sadly, I had the same intuitions about Google and Apple in the same time frames, but never pulled the trigger because I had read many times over not to pick individual stocks. I still believe in index investing, but man does it pain me to think “would could have been” if I stuck to my guns in tech and gambled a little. I think perhaps it can make a little sense to have some “gambling” money to pick stocks in a sector you understand very well, which you’ve done. As a fellow software engineer, I should have had the guts to do so myself.
Chris @ Big Day Coming recently posted…Net Worth: February 2014 Progress
Hmmm, don’t live in the past.
I don’t think there is anything wrong with having a little money in pure stocks, as long as its a small part. Personally, I love the game. A bit ironic because I HATE gambling. I consider stock picking educated gambling.
I love to read. I could do it all day. Wall Street Journal, local newspaper, Google News, Business Week, The Economist, you name it. It’s rare, but sometimes all of this reading gives me investment ideas. These ideas are very few and far between and I think very long (sometimes years) and very hard before buying a stock, but its worked for me.
February was a short but great month. Overall, the stock market has been great. Investing in the market rather than individual stocks is the way to go for long term investors, especially when saving for retirement. We also had an ok February month, mostly due to dividend payouts though. As we are still in the stage of building up our portfolios, we will continue to invest more in index funds and exploring other options.
Mrs Y recently posted…Net Worth Update February 2014
Sounds like you’re doing the right thing. Just stick with it and in a decade or so, you’ll be sitting pretty.
I’m always for everyone doing great and reaching FI so I applaud getting closer. I’m curious though, so what happens if the market turns and you go down to 700K, does this mean you did not reach your goal? Just curious your thoughts on that part of it. Thanks.
Steven recently posted…Fitness Goals-100 Days at a Time
I read your question and thought about it all day long. The answer is this:
I wouldn’t be comfortable retiring if I had 1.1 million and the S&P 500 PE is 25. However, I would feel comfortable retiring if I had a million and the S&P 500 PE is 15. In other words, the money I have saved has to be weighed against the current market. I’d much rather retire in a downmarket (lots of upside potential) than one like we’re in now (lots of downside potential).
It’s an interesting * next to the 1 million dollar goal. I am still 6 years away from my goal and I catch myself thinking all the time about my 2 rental incomes being enough to be my version of FI, would I still work another year to have X amount in my emergency fund, should I work Y more years to build up my HSA, 401k, etc. Sounds like we both have a * built into to our goal to make sure FI is real. Thanks for the answer, maybe i’ll stop thinking about my FI on the last day and keep working towards it each day instead.
Steven recently posted…Fitness Goals-100 Days at a Time
I love this!:
“Sounds like we both have a * built into to our goal to make sure FI is real.”
It is completely true. Retiring/FI scares the crap out of me. The thought of leaving my job doesn’t sit well at all. I’m just expecting that I come to terms with it in the next couple of years.
Also, I’d love to 2 rental incomes. Our real estate market is so hot, this is going to be hard for us to pull though.
I was wondering how TSLA’s movement would affect your portfolio, and there you have it! =). Are you going to have a big taxable event when you sell it or are those shares in an IRA or 401K?
We are definitely looking forward to the BRK meeting, too!
Mrs PoP @ Planting Our Pennies recently posted…PoP Income Statement – February 2014
Yes, I will have a big tax hit. Bleh! That is actually one of the reasons I’m scared to sell it. My purchase prices was $28, so it’s almost a 10 bagger for me.
The Berkshire meeting will be awesome!
Be careful what you aim for…you just might hit it! 🙂 I love your level-headed approach to what’s going on currently. I feel a bit uneasy about this incredible bull run we’re having. It will taper off and go down at some point. Having “survived” a couple of bear markets in my investing career….staying the course is essential.
Thanks Jon!
I’ve only been through 1 bad time since I’ve had a large nest egg. I won’t say I’m looking forward to the next one, but I will say that it doesn’t scare me.
Seems too good to be true when everyone seems to be getting rich, but it’s hard to predict when it might turn. Staying the course is even harder for me when I’m ahead of my target, but I try to balance transferring some exposure away from equities (to muni/TIPS bonds and cash (Norwegian Savings bank acct paying 3%)) with the fact that I’m always automatically buying more equities in my really long term retirement accounts. Always hoping that the market just stays flat while earnings increase to bring p/e back in line with historic range.
EscapeVelocity2020 recently posted…Making the Jump
“Always hoping that the market just stays flat while earnings increase to bring p/e back in line with historic range.”
Wow, this is the exact same thought I’ve had. A couple years of 3% gains would be easier to stomach than a 20% downturn.
Impressive as always, Mr. 1500, especially with already hitting your 2015 goal! B and I have been working on our investing strategies lately, and it will be interesting to see where this goes in the long run!
anna recently posted…Wedding Highlights and Teachable Moments
“…it will be interesting to see where this goes in the long run!”
It will only go up! Well, long term anyway. Remember to keep it simple and you’ll be good.
Impressive gains. I love the idea of Tesla, but am a little too cautious to buy their stock right now. I read Buffett’s letter (*raising my hand in response to the question of who prints things out). Loved his analogy of all the stock market pundits (and TV talking heads) being compared to a neighbor screaming out different values of his farm each day. It doesn’t matter what the “market” claims it is worth, just keep on planting that corn. That is the real value.
Green Money Stream recently posted…What Are Investment Fees Really Costing You?
Aren’t Buffett’s letters awesome? I wish I would have been reading them 20 years ago instead of whatever the hell I was actually reading.
Tesla at these prices is risky business! I bought in at $28 a couple years ago and thought that was risky. I do think the company will be OK long term, but they have to sell a lot of cars to catch up to that stock price.
That portfolio amount is awesome!!
I have started last year – and have only 22 TEUR in my portfolio!
Yesterday I have bought 20 shares from Philip Morris – 1,200 EUR more in the portfolio…
But 1,000,000 USD?
I can´t belive that – what a lot of shares …
Best whishes!
D-S
Dividenden-Sammler recently posted…Kauf von Philip Morris
Thanks DS! What is a TEUR by the way?
My guess is thousand euros.
Congrats on passing 2015’s end of year goal already, even if it’s likely to come down in the future. Just out of curiosity, say you reach that $1.12M mark before 1500 days, calling it quits then? Or keep on and build some more cushion?
JC @ Passive-Income-Pursuit recently posted…Dividend Update – February 2014
Dunno. I’m definitely not emotionally ready now. I really don’t even want to think about it either. I’m expecting a big correction before I make my goal.
I’m expecting the same thing too but given your progress I was curious if you’d thought about the end game yet. I’m still years away from contemplating ER but I can still dream about it right?
JC @ Passive-Income-Pursuit recently posted…Income Update – February 2014
I get the same feeling about the markets, but it’s folly to really do anything but stay the course, as you noted. In fact, we’ve come into a little extra income lately and just dumped it into the markets according to our AA in February, scary as that was. There is always a little voice telling me to wait for a dip…
Done by Forty recently posted…Relative Costs
You have the right idea my friend!
Great article! I loved that line along with his scrutiny of GAAP. My job was to compile and attest to GAAP financial statements so I have a huge place in my heart for anyone who calls out that nonsense and tells other to embrace “reality” or using “common sense” while evaluating companies/opportunities. If we embraced that more, I think we’d have better informed shareholders and more people investing.
So far my favorite line is the quote from Woody Allen but that’s just for funsies!
Refinerr recently posted…Credit Card Churn – LA to Honolulu
Stay the course, this is why you’re over 900K. It’s amazing when I read bloggers with a few thousand invested making market calls on how they’re waiting for a correction or the market is too rich to invest in. Most of those calls were made in 2012, still haven’t seen them go all in yet. Are you really going to end this blog when you hit a million?
charles@gettingarichlife recently posted…Why Do You Allow Others To Keep You Poor
It is interesting to see how you don’t recommend individual stock picking or investing in any stock when it is major impetus to your over all success
Seems backwards to me
Hmmm, I wouldn’t say most of my success is due to stocks. My largest accounts are 401ks where I hold mutual funds.
I do admit that my stocks have outperformed the mutual funds. The thing is though that the period of time is short. I’ve only been working/investing for 15 years. I’ve owned all stocks for 10 years or less. So, the question you have to ask is this: “Will my individual stocks outperform the markets over the next 25 of 50 years?” Dunno, but the odds are against me. Nothing lasts forever. Google will go away at some point. Apple will probably go away even sooner. 10,000 car companies have existed. How many are still around today?
You do realize that your mutual funds are comprised of various Stocks?
The same Stocks you could be individually picking and not paying a commission for?
Not to mention if you did your own individual Stock picking, you could weed out certain holdings you don’t like that may be included in certain mutual funds.
Google is not going anywhere in 10 years and neither is Apple
With the midset of “will my individual stocks outperform the market in 25-50 years” clearly tells me you weren’t picking High Quality companies for the long haul like JnJ, Coke, BNS when you decided to invest.
You should look up “Value investing” *pages Warren Buffett*
“You do realize that your mutual funds are comprised of various Stocks?”
Yep, but at least they are diversified. If one company goes belly up, the hit won’t be so bad.
“Google is not going anywhere in 10 years and neither is Apple.”
Would you have said the same thing about BlackBerry 5 years ago?
“With the midset of “will my individual stocks outperform the market in 25-50 years” clearly tells me you weren’t picking High Quality companies for the long haul like JnJ, Coke, BNS when you decided to invest.”
It’s funny that you mention Coke and Warren Buffett because one of my single biggest non mutual fund holdings is Berkshire Hathaway. I like Buffett and Munger so much that I go the the annual meeting every May. Even as I lessen my stock holdings, I’ll keep Berkshire for the reasons you’ve mentioned.
On another note, it seems like you’re a stock picker. Since most fund manager with fancy degrees can’t beat the indices, what makes you think you can? http://money.usnews.com/money/personal-finance/mutual-funds/articles/2012/10/12/study-active-funds-consistently-fail-to-beat-benchmarks
Please allow me to suggest a book for you now: http://www.amazon.com/Little-Book-Common-Sense-Investing/dp/0470102101
You have a great blog but I always wondered why you dont have
many postings about stocks or the market in general aand now I know why.
You have much to learn about the Market. I would recommend you checking out
Dividend Mantras Blog, some great articles that may help you out.
And to answer your question as to why the average investor can match or beat the market when most mutual fund managers with “fancy degrees” cant. The DIY investor has Many advantages over Mutual Fund Managers regardless of “Fancy Degrees”, this is yet another case where your due diligence comes into play.
So those $1,000,000+/year fund managers aren’t doing their diligence? What do you know that they don’t?
Ill give you a Hint
*It isn’t what you know that Fund Managers don’t, its what you can do that Fund Managers can’t*
*Paging Peter Lynch*
Found your blog through Rockstar Finance. Nice work! Tesla or not, your progress is amazing. Keep it up! Curious though, if your plan is to eventually move into index funds and real estate, why not slowly do it now while markets are riding high? Might be a good way to soften any fall if (when?) the market corrects.
Wish you continued success in your journey to $1 million! AFFJ
A Frugal Family’s Journey recently posted…2-YEAR Collection of Stock Analyses!
“Curious though, if your plan is to eventually move into index funds and real estate, why not slowly do it now while markets are riding high?”
Ha, I struggle with this every day! My 2 biggest holdings that I need to pare down are Apple and facebook. However, I believe that both will be particularly strong in the short term. So, I’ll hold on to them at least through 2014.
The other issue is that our local housing market (Norther Colorado) is on fire. The numbers just haven’t made sense on any of the properties we’ve looked at. Some day though, the pendulum may swing back in the other direction and when it does, we’ll be ready to pounce.