I wish I knew the origin of this quote in the title – I heard it from someone the other day and couldn’t find the source but I think it pretty much sums up my investing philosophy right now.
I have not changed anything other than maybe scrounging up any extra cash I come across to stick into the market. So far if you look at my results you would say I am a complete failure as in the short term as my retirement accounts have lost almost $30,000 (30%+) in just the last few months. In fact if you include my employers matching contributions (which I don’t for my nestegg reports or $100k by 30 goal) since I started investing in 2004 I have invested just about $100,000 and at last glance my accounts were only worth $69,000. So after 4.5 years of investing and living well below my means sometimes saving nearly half my income for retirement and giving up some of life’s luxuries I have $30,000 less than I started with. If you look at this isolated point in time you could pretty much come to the conclusion that I am a complete dumbass and better come up with something better to do with my money.
I mean it has been confirmed that the sky is falling and any money you put into the stock market is better off being put through a paper shredder, lit on fire, and used for heat. No matter how optimistic I am about the fact that the markets will recover just like they have after every other single crisis that was suppose to sink this country and the world economy in the past, certainly I would be better to stop or at least slow down my investment contributions until some sign of life or recovery poked its head through the fire and brimstone we see in the market today.
I mean I am 29 years old have/had $100,000 invested in the stock market certainly I’ve done my fair share and if I am right and the market recovers I will still be lightyears ahead of my peers. Plus I can use my frugal lifestyle to store up cash reserves, maybe stock up on canned food, guns, and buy gold to bury in my backyard to prepare for the coming Armageddon.
I’d being lying to you if I haven’t at least considered the the aforementioned idea or at least some of them. I’ve watched people like Peter Schiff and Ron Paul who have been almost prophetic in the way they have predicted the current financial crisis and their vision of the future isn’t exactly balmy even after the nearly 40% drop of the market and failure of just about every major investment brokerage or bank. To be honest I’m huge Ron Paul fan and think the best thing our country could do is to put him in charge, I also think Peter Schiff is a very smart individual and the two of them understand much of what government and wall street do not.
However I think even if they are right there is probably no better spot for my money than the stock market. Gold while a great fighter against inflation, has huge markups and transaction costs, is hard to get a hold of (especially if you want to physically own it), and cannot create wealth. The only thing gold does is prevent wealth loss due to inflation and when you pay upwards of 10-15% plus transaction costs to purchase gold or silver you are pretty much guaranteeing you are going to lose money on the deal. Plus you’ve got the scenario where if stuff does hit the fan and everyone’s investments and money are worthless then those being able to purchase or barter with you for your gold are going to be pretty slim.
If people like Ron Paul and Peter Schiff are right, which I believe they are then holding onto extra cash
is going to be a losing battle as inflation is going to eat up that money at rates we have not seen since the 70s or worse.
So other than buying real estate, which certainly has not been doing much lately you are pretty much left with consume and try to enjoy life now or put your money in the stock market and pray that this time isn’t any different.
I also have the luxury of despite me saving such a large amount of my income over the years, all this money was discretionary money. I do not need it for anything right now or anything in the immediate future. If I lost it all tomorrow, yes it would suck, but it would not affect my lifestyle one bit. If I was investing on a margin, HELOC, or with money I needed for expenses anytime in the next decade it would be an entirely different story.
The other point which I have not hit in this post is that by changing my investment philosophy I am pretty much guaranteeing failure or at the very least subpar returns. I had the unfortunate luck of starting my investment career at what right now is the absolute high of the stock market right before what is looking to be one of the worst if not the worst crash in our stock market history. So if I were to sell right now I would be locking in tremendous losses that would decimate my investment performance for probably the rest of my life. And really how much lower can things go 🙂
If I took the philosophy of lets just leave the money in there, but slow down or stop until some kind of recovery I would be weighting my portfolio towards the buy high end of the equation and it would likely take me a very long time to recoup my losses and my returns would be subpar because most of my purchases were at high point in the market. Plus I’ve already written you are an idiot if you try to time the market. This post is already getting too long, so I will defer to Five Cent Nickel who explains perfectly why you HAVE to keep investing regularly during market downturns. These times are our biggest opportunities!!! (assuming its not the of the world 🙂 )
One final point which I will quickly make. Lets say I was one of those people who had not invested any money in the stock market and instead had lived life up, bought all the toys, big house, fancy dinners, etc. What would I have to show for it today? Would I really be any happier – would my life be anymore complete because I drove a nicer car, had a bigger house, and a bunch of useless crap stuffed in the garage and basement, because I just had to have these things that seemed cool or a must have at the moment only to turn out to be something you used only a handful of times and are now worthless. I can guarantee you the people that lived this way are probably more stressed out than I am now because they likely used lots of debt to buy these things and they probably don’t have over $60,000 of liquidable assets that can increase in value
I have no regrets and feel perfectly comfortably with my decision – which in the end is the most important thing. Whether I’m right or wrong I don’t think I would have done anything differently.