Saturday, November 7, 2020

Over 600K invested

This morning when I logged into, I was surprised to see that our investment accounts have now hit another financial milestone: surpassing $600,000 in value!  

Our investment accounts include money in our 401Ks, Roth IRAs, taxable accounts, HSA and 529.  Index fund investing allows us to diversify our portfolio and keep our costs very low.  This does not include money in our checking accounts, savings accounts, home equity or rental property equity.

The stock market has been on a wild ride this year, triggered by uncertainty with the coronavirus and an unexpected oil crisis.  We had one of the steepest stock market drops ever: a ~34% drop from February 19th to March 23rd.  It was scary watching the stock market take a nosedive.  We lost over $50,000 in our portfolio within 2 weeks!  This type of drop was more than I could stomach.  This pullback tested our chosen asset allocation and made me realize that a 90% stock to 10% bond allocation was too aggressive.  I couldn’t stop thinking about losing money.

I’ll admit it.  I panicked.  I panic sold.  

When our portfolio was smaller, I never used to get worried about little drops in the market.  Once our portfolio surpassed 500K, I was more focused on wealth preservation than aggressively growing our balance.  On March 5th, when our portfolio was down about ~8%, I “cut my losses” and exchanged over $300,000 worth of stock index funds into a stable value bond fund yielding a guaranteed 2.5%.  Stable value funds are accessible in some workplace 401Ks and can offer a much better place to store money in the short term than a bond fund or cash.  This put our portfolio into a much more conservative asset allocation of 60% stocks and 40% bonds.  At the time all I could think about was how hard I had worked to save and invest only to be faced with an imminent stock market collapse.  I told myself that if nothing else, I could at least hold onto a quarter of a million dollars worth of cash in an ultra safe fund.    

As the stock market continued to drop by another 25% after I had panic sold, I felt great about my decision.  I gave myself a pat on the back, thankful that I had sold and “got out” just before the bear market.  I seemingly got one part of market timing correct.  By March 23rd, the stock market had hit the lowest point in the drop.

Then things started turning around.  Stocks started to rapidly recover.  The stock market has been on an unstoppable tear upwards since March 24th, resulting in the shortest bear market ever (33 days)!  My 401K plan requires a 30 day hold on selling and buying into the same fund to prevent excessive trading.  I was looking forward to April 5th to move money back into my stock index funds.  The stock market was continuing to surge at this point and (in hindsight) this would have been a great time to get back into a 90/10 portfolio.  

When April 5th came, I chickened out.  I kept thinking that there would be another stock market pullback; it was only a matter of time.  I knew this to be true!  Research tells us that losses generally feel about two times as bad as wins feel good.  Instead of moving all $300,000 over into stocks, I only moved a few thousand over.  Over the next few weeks, I continued to nibble at the market, reluctant to move anything more than a few thousand dollars at a time.  I kept telling myself that the stock market could still drop and that I would regret moving all my money from a stable and safe investment into a potentially volatile one.  

To properly time the market, one needs to make 2 correct decisions.  First, one needs to know when to sell.  Second, one needs to know when to buy back in.  I sold some stocks early to avoid the pain of the stock market crash.  But I missed out on capturing all the gains of the stock market recovery.  Very few investors have been able to properly time the stock market.  I’m not embarrassed to admit that I failed at my personal market-timing attempt.  My hesitation with fully investing back into the stock market will probably be the biggest investing mistake of my career.  As the stock market has come roaring back, I’ve been missing out on huge gains.  

Over the last few months, I am continuing to increase my investments into stock index funds regardless of which way the market is heading.  I've learned my lesson on market timing - IT DOES NOT WORK.  I didn't do too poorly, as I didn't sell everything.  I was also able to move much of my funds back into the market as it was rising.  Our portfolio is now sitting at about 65% stocks and 35% bonds.  Long term, I will be aiming for 70% stocks and 30% bonds.  This is a more conservative (less greedy) holding that I will be comfortable with long term.  I hope to be more calm in the face of uncertainty the next time we have another stock market pullback.

Here is a look back at the timeline of our previous investment milestones:

June 2, 2014: 100K 

March 12, 2016: 200K 

June 5, 2017: 300K 

July 15, 2018: 400K 

April 16, 2019: 450K 

November 5, 2019: 500K 

January 18, 2020: 550K 

November 6, 2020: 600K

In the long term, I expect that our investment account balances will continue to hit new highs - which I will share with you all. 

I have to keep reminding myself that stock market volatility is normal.  Repeat after me: “stock market volatility is normal!”  Time in the market surpasses trying to time the market.  We will continue to stay this new course with our investments on our way towards financial freedom. 

How did you feel during the recent stock market dip?

How are your investments doing?  Have you learned anything about your behavior during a stock market crash and stock market bull run?  Have you made any changes to your asset allocation?

Sunday, November 1, 2020

Side hustles October 2020

The great thing about doing side hustles to generate extra income is that you can hustle on your own terms.  The more hard work, time, and creative effort you put in, the more extra money you can make.  You can hustle as little or as much as you want, whenever you want.  It’s your extra money, and you can choose how you want to spend it.  Instead of focusing on what ideas don’t apply to you, try focusing on different side hustle ideas that you can implement to work for your situation. 

Once a month (usually on the 1st), I like to post a short summary of our personal and financial situation for the previous month.  While I don’t often post articles, I am committed to documenting all of my side hustle income.  Here I’ll share some of what’s been going on with our lives and our side hustles.  

Welcome to November! Did you have a good October?  The big scare of our month was that there have been some big fires in Southern California.  At one point, our home was less than 5 miles from the evacuation zone and we were packed up and ready to go.  This has led to some very bad air quality with smoke and haze in the air.  Usually our kids love going outside to play – but they’ve been stuck indoors for the last few weeks.  
Due to the pandemic, trick or treating has been cancelled this year.  Our son was really bummed about that.  We got him a Captain America costume so he could still dress up and pretend to be a super hero.  A friend gave me a strawberry costume for our daughter to wear – but she wasn’t too excited about it.    
With interest rates continuing to drop, we finally decided to refinance to better rates!  We have refinanced our home mortgage from 3.125% to a 2.375% 15-year fixed.  Even though our home mortgage has been extended from 10 to 15 years, we have the flexibility to make more payments to reduce the length of our loan.      

We have also refinanced our rental property mortgage from 4.00% to a 2.99% 30-year fixed.  Rental properties usually have higher interest rates than primary residence rates so were excited to find that we could save over 1.00% in interest.  This refinance will improve our monthly rental income by about $190! 

Here’s our monthly summary of side income that we have generated in the previous month of October.

Cash Back 
On 10.21, I received a $1.27 statement credit on my SimplyCash AMEX business card.

Rental Income
On 10.5, we received a net profit of $550 from our rental property. 

Survey Income
On 10.6, I received a $20 Amazon gift card from MNOW for completing a medical survey.  
On 10.21, I received a $30 check from My Impact Network for completing a medical survey.
On 10.26, I received a $15 check from E-Rewards Medical for completing a medical survey.

Work Income
On 10.30 I received a direct deposit of $489.49 for picking up extra hours of work with my employer.  They needed extra coverage and I was happy to take it.  

Sales Income
On 10.10, I received a net profit of $216.97 (after shipping expenses) for selling an old TAG Heuer watch online via the Reddit subreddit WatchExchange.
On 10.13, I received a net profit of $111.70 for selling an old Apple Watch online via WatchExchange.
On 10.15, my wife received $15 cash for selling some old Halloween costumes on Facebook Marketplace.
We are slowly organizing our home by donating or selling used items.

Monthly Totals:
I earned $1.27 from cash back income
We earned $550 from rental income
I earned $65 for completing online surveys
I earned $489.49 for extra employment income 
We earned $343.67 from selling used items online 

All of this totals $1,449.43 from our side hustles for the month of October!  Refinancing our home and rental property mortgages will save us several hundred dollars each month and increase our cash flow.  We will still be able to pay off our home relatively quickly.  The extra cash flow will be used towards some home remodeling projects as well as investments towards financial freedom.  The recently stock market volatility has allowed us to pick up more shares for less money.  Keep hustling! 
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