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 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.
Too Many Teslas
I noticed something interesting at my children’s school last year. Someone was dropping a child off in a new Tesla:
I took notice for two reasons:
- I love cars and am obsessed with Tesla.
- This dude was parking illegally in the handicapped parking spot. SUPER NOT COOL.
I also thought it was interesting that someone was driving a $100,000 car to school. Some parts of my town are well off, but there is also a significant percentage who live in poverty. Many of the students at our school receive free meals. In any case, seeing a Tesla was a bit of surprise.
Fast forward to the current school year when another Tesla showed up:
And then I noticed other luxury cars throughout the lot:
I own a luxury car myself and know nothing about the financial situation of any of these folks, so I’m in no position to pass judgment. And I won’t. However, I wonder if something else is going on…
The Tesla In The Coal Mine
Joe Kennedy once famously said that he knew it was time to get out of the markets when the shoeshine boy offered him a stock tip. His thought was that if the shoeshine boy was giving him investment advice, the market was ‘too popular for its own good.’ While not a perfect analogy, I wonder if the abundance of Teslas is painting a similar picture?
Stock market cycles follow the same trajectory and humans usually think about them wrong:
So now, I wonder if the Teslas are a canary in coal mine, warning us of an impending crash. Perhaps the auto excess is a reflection of market exuberance:
Why am I talking about all of this? What am I going to do with this knowledge? Absolutely nothing. Zoom out and the long-term picture looks like this:
Over the long term, markets rise.
In the near term though, it’s cyclical. It always is. It has to be.
But there are lessons in this:
- Mindset: Don’t freak out when the next crash happens. Know that it will happen and get your plan in place now. The time to plan for the storm isn’t when it starts to rain, but when the sun is shining.
- Dollar cost averaging: When the crash happens, keep contributing. You’re buying the same index fund, but at a lower price.
I don’t have a clue when we’ll see a 20% downturn, but I’m 100% confident that it will happen. It may be next week or next decade. Speculation is silly for anyone and irrelevant to the long-term investor.
September Performance Update
Our net worth started at $2,195,959 and ended at $2,171,793 for a loss of $24,166:
2018 (as of 10/1/2018)
- Days elapsed: 274
- Investment portfolio gains: $129,092 (including 401(k) contributions**** of $33,650)
- Net worth gains: $179,092 (investment portfolio gain of $ + home appreciation of $50,000)
Since the start (1/1/2013)
- Days elapsed: 2098
- Investment portfolio and cash: $1,656,793
- Gains since 1/1/2013: $1,070,750
- Needed to quit work ($1,120,000 in investments): Mission accomplished!
Portfolio Breakdown
We have a diverse portfolio that includes real estate:
- mobile home park (elevated home living to the easily offended and politically ultra-correct)
- private loan (only one outstanding)
- syndication deals
And stock market holdings:
- individual stocks (old thinking)
- index funds (most money goes here now)
This is the first month that our stock and real estate portfolios both saw a decline. Regarding the latter, we have about $100,000 in the Vanguard REIT which took a hit.
- Stock market: $887,699
- Monthly gain: –$23,003
- 2018 gain: $97,913
- Real estate: $749,094
- Monthly gain: –$1,114
- 2018 gain: $31,179
- Cash reserve: $20,000
Opportunity Ahead?
Market declines are an opportunity for experienced investors. Back in 2011, I remember looking at a 12,000 square foot home that was for sale. The builder had run out of money before completing it and had filed for bankruptcy. It needed kitchen cabinets, counters and bathroom vanities. The listing said:
First person with $400,000 in cash gets it.
I nearly cried because I didn’t have $400,000.
Today, this home would sell for well over $1,000,000. While I don’t want a 12,000 square foot home, if I had the cash, I would have bought it. While I owned the McMansion, I would have pranced around in a robe (Hugh Hefner style) all day smoking cigars and wearing sunglasses at all times. Just kidding. Maybe…
When prices recovered, I would have donated the robe to Goodwill and moved on to more modest accommodations, but with a fat check in hand from the sale.
While I don’t think we’ll ever see opportunities of that magnitude again, the next time the market crashes, there will be discounts to be had. And if I see a Tesla Model 3 for half price, I’m totally going for it.
*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.
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****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.
*****Just more asterisks for the hell of it. Is anyone still reading at this point?
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Marco says
Yes its a sign. People have gone way way overboard on new cars. I see it all the time 60-70 thousand dollar cars driven by people in debt. The best are huge pickups lifted, rims and tires driven by young guys that are paying $900 or more just for the loan not including gap, insurance registration. Saw it before the last crash, everyday guys would show up at the job site with new trucks, jet skis and travel trailers. Its all borrowed money, one little slowdown and pain is real!
Mr. 1500 Days says
Out here in Colorado, the pickup and Jeep addiction is an issue too. Why do you need an F-250 to go to the grocery store? It’s ridiculous.
Joe says
I don’t think the next crash will be that bad, but who knows. The government has been propping up the market for a long time. I’m looking out for a good buying opportunity too. It’s been volatile, but the market hasn’t dropped that much yet. I’m sticking to my long term asset allocation for now.
I see quite a few Teslas at our son’s school too. Many of the parents are well off so that’s not a big surprise.
Mr. 1500 Days says
I don’t think the next downturn will be nearly as bad as the last one, but it will still be interesting to watch. We’ve been riding a strong wave for a long time. There a lot of folks out there who have never seen a downturn in their working career.
FullTimeFinance says
One could argue the number of new PF blogs is also an indicator. Maybe even more so as PF blogs indicate cognitive thought about finances by a larger percent of the population. Buying a expensive car may not. Then again, we won’t know until the recession starts.
Mr. 1500 Days says
Yep, totally! It will be fascinating to watch them all when the economy takes a big dump.
joe says
most of the cars pictured (other than the 2 teslas) are several years old.. that is probably a $8k BMW and a couple of $10k mercedes.. your Honda SUV is probably worth more!
Mr. 1500 Days says
My Honda SUV doesn’t cost me a fortune in maintenance and repair costs though.
Mr. Tako says
Yup, luxury cars are definitely a sign. Well, at least in most communities where the average person probably shouldn’t be buying one on an average salary.
Cars (of course) are a cyclical industry, and the ‘top end’ of that industry seems pretty popular right now.
Almost all of the new cars I see in my own community are some overpriced monstrosity. Lots of Tesla’s around here too.
Mr. Tako recently posted…Why I Love My Big Fat Cash Pile
Dr. Dividend says
These are alarming times. While I will agree a the downturn is upon us. I think we are merely in a correction phase. Too many people have just begun to restore their faith in the market. This will keep them pumping the prices up as more people shovel cash into stocks. Once we see a major influx of cash, then we can expect a crash. Easy money for the MM. I say bring it on. Ive been waiting for a sale to increase my forward dividend income.
Dr. Dividend recently posted…How to have The Talk
Mr. 1500 Days says
I think you’ll have your chance soon…
Seonwoo Lee says
When I saw the title I immediately thought of Joe Kennedy and the shoeshine boy.
Perhaps I’ll have to dip my toes in real estate if there’s a crash soon….
P.S. Yes Carl, I’m still reading to the end!
Mr. 1500 Days says
Whoah, someone actually reads the whole thing? Shit, now I have to make sure I don’t mess up the endings…
wendy says
I thought it was going to be a disclaimer that you’d launder the bathrobe (in your non-explosive dryer) before donating to GW…
Steven says
So you are saying I can buy a Telsa for half price in a few years……Tell me more Nostradamus;)
Our new area is filled with very large trucks, you know the $40,000-$60,000 kind, which I can only assume are for pulling boats since we are near the marina. Yep, we hit the trifecta of large houses with big trucks that can haul boats to the ocean. Either way, it’s a new interesting difference to the vast array of vehicles in our predominantly rental neighborhood in Chicago.
Mr. 1500 Days says
If the markets crash 30%, there will be a lot of Model 3s available at a discount. You heard it here first!
Cathleen says
I’ve definitely been seeing alot more new cars, luxury cars in particular, around here. where the “cost of living is high” (whiney voice inserted). Um…why are you driving a brand new BMW 535 M if you and your wife and kids live with your grandma? Even been seeing Maserati’s parked out on the street in front of some of the condos near my parent’s house. Condos that used to be for the lower middle class, and now have transformed into ( I guess) for the upper class? On a tiny island, we have 5 major shopping malls. 2 of which have ultra luxury stores (Guicci, Prada, Harry Winston, Louis Vuitton!) and they are literally within 2 miles of each other. With a luxury strip mall (with the SAME stores, minus Harry Winston) between the two! I can provide a map as evidence. I have a friend that posts on FB how she’s going to Morton’s or some other super high priced steak house 2x+ a week. Not sure what her situation is, but come on! Even the wealthiest people would find that ridiculous- she lives and works more than an hour away from any of these restaurants. And drives a Mercedes SLK. I admit, it’s a super nice car. But cars are for getting from A to B, and for your kid to spill shit on. And for birds to poop on. Not for being super nice and flash.
But, yeah- I laugh when I see the Maserati parked out on the street every day going to my mom’s house.
BTW- I definitely live in a high cost area of living (Hawaii)- but the social benefits are amazing.
Also, your graphic of the stock market made me laugh. A lot. thanks!
Cathleen recently posted…Buy anything you want
Mr. 1500 Days says
Hawaii is completely amazing and I can’t fault you one bit for living there! Come on Southwest; start flying to the islands already!!!
“But cars are for getting from A to B, and for your kid to spill shit on. And for birds to poop on. Not for being super nice and flash.”
Haha, yes. I look forward to the day when it’s cheaper to use autonomous carpools than it is to drive. It will be here sooner than most think, especially in places like Hawaii with no snow (snow is a pain for robot cars).
Cathleen says
Southwest is working on it! I’ve been flying United because they have the most convenient routes to DC (I have to travel there every month or so for work, boo). Hoping that the autonomous cars go the way that Mr. MM envisioned. I avoid going into town or Waikiki because 1.I hate driving there I always get lost, and 2. Parking is a pain. Lots of people have “beach cars” here that are trashy that they don’t mind getting dirty, sandy, or broken into (some just leave the windows down).
If you ever come to Hawaii- there’s ways to stay for practically free, if you are the camping sort (or if you are retired military, or currently employed with DOD, which I know you aren’t). To toot my own horn: I made a list of the websites and such on my (very small) blog.
Cathleen recently posted…Welcome- saving money to afford living in Hawaii
JIm Smith says
We’ve already had a 10% correction from January and the P/E ratio is still at 30. I’d say a 20% correction is a very conservative estimate at this point. It’s a good time to still be working and buying.
Mr. 1500 Days says
Yep.
Wealth Well Done says
Even I found myself googling prices on a 2015 Toyota Rav4 yesterday for a new car for myself, (Gasp!) “Be fearful when others are greedy. Be greedy when others are fearful.” Buffet. I’m a little fearful now, but still a little greedy as I’ve got some cash on hand to play with.
SC | MissFunctional Money says
I loved this post. And yes, I read every asterisk.
I think you make a pretty accurate observation — who knew that the best predictions were based off of parking lots?! For us, it’d be super convenient if a big crash could hold off for about 2 years, and then we will be ready to pounce on a house with a pile of cash. Would be great if the market could pls take my timeline into consideration. 😀
SC | MissFunctional Money recently posted…Health Savings Accounts, Part 2: How to Invest Your HSA
Mr. 1500 Days says
“I loved this post.”
Thank you!
“I read every asterisk.”
I didn’t think anyone actually read the whole thing! Thank you again!
I think you may get your wish regarding market timelines…
SixtyMonths says
Great post! I have always thought this way once I start seeing a lot of Range Rovers on the road.
Ram says
I stay at a walking distance from a Harris Teeter where there is a Tesla charging station close to the parking lot. On an average I see 2-3 cars in the charging station daily.
In the community where I stay when I go for a walk, I see on average of 10-15 Honda CRVs in each lane of the apartment complex. I own(paid off) a CRV myself.
I have a friend who bought a high end Volkswagon I believe for 70K those autobrakes, lane correction thingy just because he totalled his 40K Honda odyssey in the parking lot while reveresing. I had to compose myself when I heard the price he paid for just because he wanted that extra bit of bells and whistles to be cautious next time and he calls me stingy because I use a cheap cellphone(republic) and rent out a room in the house.
ol1970 says
Couple of questions on how you calculate your net worth. When you consider real estate gains/losses and the value of your home, do you factor in the transaction costs (cap gains potentially) if you actually sold and turned it into cash? Also why do you list your 401k contributions as investment “gains”, it sort of skews the real return? Finally I assume you are not drawing off your stash at all so there is no drag on your portfolio even though you are retired from the 9-5? Not being critical, because I do the similar stuff, just curious!
Mr. 1500 Days says
Real estate! We have a real estate license, so the main cost we’d make is to the buyer’s agent on a sale. We’d recoup this when we bought our next home when we were paid the buyer’s commission. In any case, the house estimate is rough and conservative. There would be no capital gains due to the 2/5 year rule: https://www.irs.gov/taxtopics/tc701
I’m not sure how else to do it. I could break it out separately, but then I have to somehow account for the appreciation (or depreciation) of these assets. I’m just trying to keep it simple.
And yeah, we’re not drawing anything at the moment. The Mrs. fell into a job right when I quit. Also, the blog makes some money. In many ways, I’m not the best example: https://www.1500days.com/passion-play-pay-what-you-can-and-cannot-learn-from-me/
ol1970 says
Thanks for the reply. I do pretty much the same stuff when adding up my net worth…and I would say you are a great example! I think most early retired people have other income streams that allows them not to really draw off the principle and just let things grow.
Mr. 1500 Days says
Thanks!
“I think most early retired people have other income streams that allows them not to really draw off the principle and just let things grow.”
It’s fascinating how it all worked out. I didn’t think the blog would ever be successful and Mindy never planned on going back to work, but here we are. It’s amazing how it all worked out because we’re both really happy with where we’re at. Life is pretty friggin’ great.
Freedom says
Honestly for me only two categories of car exists if you really MUST have a car (highly debatable BTW)
1) A 2K$ indestructible box with annual maintenance cost less than 400$
OR
2) A Lamborghini Aventador Coupe
Everything in the middle does not make any sense…will only make you waste tons of money getting nothing back.
If then you will be diligent enough with your finance (thus no buying per decades any car) , hard worker and successful with your investments/business you will have the money to buy 10 Lambos…
Mr. 1500 Days says
I like the way you think. I have a fancy car (my childhood dream that I bought as a happiness experiment). It’s fun, but I wouldn’t do it again. My primary driver is a 2003 Honda Element.
The only change I’d make to your comment is to substitute the new Tesla Roadster for the Lamborghini.
Rob says
That graph does a fairly good job of depicting how it feels. I confess I adjusted my portfolio to be a bit more conservative just a bit before the recent bottom. I started having 2008 flashbacks.