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 as well as my goal for the end of 2015. Time to look back on the month of August.
My portfolio continued its upward trajectory in August. I started the month at $924,818 and ended at $967,743. Much of my run-up was due to the Apple stock** that I bet big on over 7 years ago and have clung to ever since.
While I’m thrilled at my performance, I admit that I’m uneasy holding such large quantities of single stocks. When my tax situation gets better (retirement!), I’ll unload most of it. Anyway, here are the numbers as of 8/31/2014:
2014
- Days elapsed: 242
- Days remaining: 123
- 2014 gains: $98,108
- Left to go (2014): Goal accomplished!
Since the start (1/1/2013)
- Days elapsed: 607
- Days remaining: 893
- Gains since 1/1/2013: $381,700
- Needed for $1,000,000: $32,257
- Net worth***: $1,167,743
Remodeling and Returns
While I’m thrilled with my incredible returns over the past 20 months, they would have been much better had we not decided to remodel our home. In the last year, I’ve depleted my savings by $40,000. I’ve also spent a large percentage of paychecks on tile, wood, light fixtures, drywall and all kinds of other crap. Had I not been in remodeling mode, I would have passed the hallowed $1,000,000 already. In the long term, I’ll come out ahead since downsizing reduced my mortgage from $2500 to $1100. I’ve also made my house much more valuable should we decide to sell. In the short term though, it’s painful.
On the other hand, we investors have had the pleasure of very strong tailwinds for a while. Recent market returns have been outstanding. Twenty months is a very short period of time though. As I always say, play the long game. I could just as easily sink to $900,000 or $800,000 before I hit the magic million. If you’re in it for the long game and believe the trajectory is up, it just doesn’t matter. Save, save, save and then save some more.
*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.
**Lawyer/legal bleating: I’m not a financial adviser and this shouldn’t be looked upon as advice. Do your own research! My big stock portfolio is a relic of an earlier time. Indexing is the right solution and the one I’ll be moving too after I’m retired and don’t have to pay capital gains.
***The numbers on the right side of the page only reflect my investments and cash. Net worth includes, but is not limited to:
- home equity
- cars
- extensive houseplant collection
- missing asthma inhalers in couch cushions, under bed and in cars (why do I lose these thing constantly?!?). Also, asthma sucks, because my lungs don’t.
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Great stuff, really impressive!
How much do you think the $40,000 plus your labor has added to the value of the house?
Brad @ RichmondSavers.com recently posted…Beginner’s Guide: Best Hotel Loyalty Programs Part Two
Hey Brad!
We bought the home for 176K. When complete, we’ll have around 250K into it. If I were to sell it today in the finished state, we’d be able to get around 325K.
We got the home for a good price. The market was near the bottom. Despite a really hot market, no one wanted it. It was very ugly and had been somewhat looted (no appliances), but it was obvious to me that it had potential.
Is it perfect? Nope. However, the cost of perfection is very high. Some compromises like a small yard were worth it.
*cough* Start selling some covered calls or scheduling some sales now *cough*
Waiting until retirement is sound for tax strategy, but as you said, gains can be fleeting. Would you rather pay 15% of some solid gains now, or 15% of not so solid gains later? Unless you envision being in the 0% range in retirement, trying to time down the road might be a losing proposition. Back when I prepared taxes for a living, I heard one of the partners say the following, and it has stuck ever since:
“Always take taxes into consideration when making decisions, but never make decisions purely based on taxes. For example, charitable contributions are great, but ultimately you only get a 30-40 cent return on the dollar.”
Either way, keep on trucking. Saving and investing early will almost assuredly work out in the end, and individual selections or not, you are proof of this strategy!
writing2reality recently posted…Rapid Fire Passive Income Monthly Updates: May, June, and July 2014
LOL! W2R, I have a feeling you are trying to tell me something. I’m not quite sure what it is. Hmmmmmm.
Ha! Yeah, I’m going to do some stop losses. I’m especially terrified of Apple. They had massive first mover advantages with iPhone and iPad, but now, they don’t seem to be first mover on anything. The hare doesn’t always win the race, but it sure doesn’t hurt to have a 2 year head start.
I would be in the 0% capital gains territory. As you alluded too, this doesn’t matter if the stock drops 30% before I have a chance to sell.
Thanks for the encouragement!
Encouragement… drop kick in the pants… it’s all the same really. 🙂
Stop losses are a good idea, but aren’t a guaranteed sale. Considering the size of your positions, ensuring you are actually reducing your holdings is important, not just maximizing a fractional gain from missing a stop loss sale.
writing2reality recently posted…Rapid Fire Passive Income Monthly Updates: May, June, and July 2014
“Stop losses are a good idea, but aren’t a guaranteed sale.”
Hmmm, maybe I’m not following you here. A trailing stop loss seems like a great idea to me because I continue to hold the stock as long it goes up or stays at the same price. However, if it drops below the threshold that I set, it gets sold. Is there something that could happen that would allow the stock to drop below the threshold and not get sold?
“Awesome August” are absolutely right words. Are you going to change your investments after you retired? I know that you’re heavily invested in micro lending now. I like your diversification(stocks + micro lending). I wonder, what your future portfolio looks like. Do you have any ideas on that now?
Yeah, I would like to get into more income producing stuff like property rental, REITs and maybe some nice dividend stocks.
Uh, oh..AAPL investors got spooked on Wed…
Sure did! If Timmy doesn’t impress on the 9th, AAPL will fall again, but probably a bit worse.
I see you mentioned setting some stop-losses above, that seems prudent :-).
Per usual, you are grounded in the reality that we could see a pullback at any time. Mental conditioning FTW!
I don’t know if you read/watch Game of Thrones, but I sort of feel like the market is in the “Long Summer” stage. I see some younger investors talking about gains and patting themselves on the back and I just want to tell them:
“Oh, my sweet summer child,” Old Nan said quietly, “what do you know of fear?
Fear is for the winter, my little lord, when the snows fall a hundred feet
deep and the ice wind comes howling out of the north. Fear is for the long
night, when the sun hides its face for years at a time, and little children
are born and live and die all in darkness while the direwolves grow gaunt and
hungry, and the white walkers move through the woods”
Winter is coming! (someday) (and everyone should stay invested) (and I may like GoT a bit too much)
Mr. Frugalwoods recently posted…Frugal Hound Sniffs: Financially Blonde
Oh man, I’m dying to see Game of Thrones! Just haven’t had time to catch any TV lately. I’d really like to read the books first though. That is a good idea, right?
In any case, that is an awesome quote! Now, I want to get into it even more.
Another quote that applies is “a rising tide lifts all ships.” If you’re in the markets now and not doing well, there is something really wrong.
As you say, a pullback will come. Could start tomorrow or in 5 years, but it’s the cycle of things and perfectly healthy and natural. I’d like to go through a pullback before I pull the cord on full-time work actually. I really like the idea of bailing out in the middle of a downturn.
One last thought: Seems like everyone is talking like the downturn is right around the corner. However, it seems like the economy is only now really starting to show signs of vibrancy very recently. I could see years of continued growth. In any case, it doesn’t matter.
Phew, longest reply ever.
I was waiting to read the books (like i normally do) but i broke down after all my friends heckled me long enough. Let’s just say i watched all 4 seasons in about 2 weeks. They are *that* good. It starts out a little slow because its a bunch of disjoint stories at first. But i like that because it sets the stage for deep character dev and plot. And that guy is a master at “WTF!!! Did that really just happen!? OMG i have to watch the next episode” moments.
Yeah, I honestly think this market could have a couple more years of gains. I’m not a downer 🙂
GoT is great. The show is very entertaining, but the books are even better. If you like high fantasy, the books are about as good as it gets.
I’d recommend reading the books first if only because there are so many plot lines and characters that the show can be a little confusing without context. But I have a lot of friends who watched before reading and they all eventually figured it out.
Mr. Frugalwoods recently posted…Frugal Hound Sniffs: Financially Blonde
“Yeah, I honestly think this market could have a couple more years of gains.”
I would not complain at all if the S&P 500 creeped up another 10% or so…
“I’d recommend reading the books first if only because there are so many plot lines and characters that the show can be a little confusing without context. But I have a lot of friends who watched before reading and they all eventually figured it out.”
I’ve heard this from other as well. I’m headed to the library tonight to pick up the first book.
Sidenote: Reading is one of the greatest joys of life. When I bail out of the work world, I’ll probably up my reading to 6 or 7 hours/day from the 2 I squeeze in now.
Oh man, completely agree. I could read all day and be a happy dude. In fact, this is often what I do on vacation 🙂
Mr. Frugalwoods recently posted…Frugal Hound Sniffs: Financially Blonde
WINTER IS COMING!!!!!
Looks like things are going well Mr 1500! Also good to keep things in perspective that the stock market can change dramatically in short time frames. Long term FTW!
Kipp recently posted…Net Worth Update – August
You got nerves of steel! I would have pulled the trigger on Apple a long time ago.
just to keep the GoT momentum going here:
“The things we love destroy us every time, lad. Remember that.”
Financial Red Devil recently posted…Some stuff I learned from playing Age Of Empires
Oh man, that is an awesome quote. Got to start reading/watching GoT! Damn, I need more time!
Apple does freak me out. The stop losses will alleviate my fear though.
All apples eventually fall from the tree 🙂
good tactic with the stop loss though
Since I am new to this, and still in savings & cutting expenses mode, I am curious – at what point do you pull the trigger and retire? I mean, we all have our ‘number’, do you retire when you hit that number? Do you keep working in case a downturn comes soon? I realize we all have personal factors going into it – I am just curious what other people’s plans are… we haven’t gotten close enough yet to figure out our exit strategy…
Mrs. SSC recently posted…Bad Decisions Part 2: Easy credit, hard payments
Figure out how much money you need to live annually and multiply it by 25 (4% rule). It’s as simple as that!
New to your blog, so haven’t read enough to understand you situation completely. It seems that everyone thinks you should sell apple. How much of your portfolio do you have in it? Just wondering. They pay a really good dividend why not just keep it?
I’m not really sure I understand the whole early retirement thing for a few reasons:
1- it seems everyone who blogs about it is significantly weighted in stocks. If you are approaching retirement you should have a significant portion of your portfolio in bonds, regardless of your age, correct? I know people always use the age thing to determine their % but when your young you have earned income which kind of acts as replacement for bonds. If you don’t have an earned income it seems pretty risky to be heavily weighted towards stocks.
2- it seems that most goals(assets) will only produce a moderate, highly volatile, amount of income. If you want say $50k a year to cover your expenses wouldn’t you want a much more stable source of income? kind of back to point one.
3-lastly is it really a good idea retire once you reach your goals in a high/overpriced? market? Maybe this isn’t your intention but by having a number with very little wiggle room wouldn’t make me sleep well.
I don’t mean to come across as a pessimist or skeptic but I would just like to hear your opinion.
These are all very good questions and I’ll address each point:
1) Yes, traditional retirement advice is to move towards safer havens as retirement approaches. I have plans to do the same. For example, I’d like to pick up a couple rentals for more dependable income. With that said, I’ll probably always have a bit more in stocks than an advisor would like to see. I’ll still have a nice cushion and if things got really bad, I can just work again.
2) I rely on the 4% rule. I’ll need about 40K/year, so according to that, I could retire at $1,000,000. However, I’ll buffer it a bit with an additional 100K. I’ll also keep at least 50K in cash. If the markets are flying like they are now, I’ll trade holdings for cash and live off that. If things are in the dump, I’ll use cash and keep my stock holdings intact.
3) Yeah, this is something I think about every day. I’d much rather retire in a recession than when the markets are flying. I still have a way to go, so I wouldn’t be surprised if we see a pullback long before I hit my 1.1 mark.
With all of that said though, the 4% rule accounts for bad scenarios. Even if you retire at a terrible time (now?), the 4% rule tells us that overwhelmingly, we’ll be OK. Also, the 4% rule assumes no future income. I expect social security to still be around when I retire, perhaps in diminished form, but it will still help.
One day we will have these numbers!!! 🙂
When are you going to pull the trigger?
SavvyFinancialLatina recently posted…Buying Contacts & Paint like A Pro
I’ll bet you will and sooner than me as well.
Pulling the trigger is a difficult question. Not for a while though.
You’re getting so close! Definitely not 1500 days anymore… =)
Mrs. Pop @ Planting Our Pennies recently posted…PoP Balance Sheet – August 2014
Ha, don’t count your dollars before they compound. If Apple releases stinker products on Tuesday, that will torpedo me for a while…
Call me an Apple optimist, but I think Apple is gearing up for another homerun hit on September 9. Continuing the GoT references and the current AAPL dip – “every flight begins with a fall.”
Also, congrats! So close to your goals. Damn house renos 😛
Steve recently posted…Dumb Money Decisions: The Lottery
I too think Apple will be strong for the short term. I’ve seen some of the smart watches out now and they look like you’re wearing a brick on your wrist. I’ll bet that Apple gets it right.
I’m worried about the long term Apple though. Tech is so fickle and Google is so strong. If I can’t be pretty sure where a stock is going to be in 5 or 10 years, I have to jump ship.
Well, I personally was a little “meh” about the Apple Watch, but I think this unfolding year will show that Apple will sell yet again a record number of iPhones and I’m sure the Apple Watch will sell like hotcakes.
I think you’re bang on about Apple being alright in the short term. I think they will roll in the revenue at record numbers again, at least for 2015.
Steve recently posted…The Money Book Giveaway 2
Wow very impressive! AAPL have done you well for the past 7 years. I think AAPL will continue going up but there are a bit of risks associated with the stock.
Tawcan recently posted…Getting married 3 times for cheap – Part 1