What if Your Play Money Blows Up?

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Hustlinghustling
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What if Your Play Money Blows Up?

Post by Hustlinghustling » Mon Jan 29, 2018 2:06 am

I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!

itstoomuch
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Re: What if Your Play Money Blows Up?

Post by itstoomuch » Mon Jan 29, 2018 2:20 am

It's late. Go to bed.
It's not play money. It's Discretionary. It's <10% of retirement assets. Most of retirement assets are in GLWB annuities and Income rentals with low levereage.

Very doubtful that our Discretionary will "blow up." I much too conservative to get that close. We can have the Discretionary go to Zero, and wouldn't feel it.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

Hustlinghustling
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Re: What if Your Play Money Blows Up?

Post by Hustlinghustling » Mon Jan 29, 2018 2:35 am

We're not all in good ol' US of A. A very sunny afternoon where I'm at.
To be clear, I don't intend this to be a discussion on whether or not to have a play money allocation. Obviously, a diehard Bogle wouldn't.

That said, many here do have a small allocation with an amount they are fine with if it went to zero. I'm curious what parameters those people set in the event of considerable upside occurring.

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in_reality
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Re: What if Your Play Money Blows Up?

Post by in_reality » Mon Jan 29, 2018 2:36 am

Rebalance out and keep track. If it goes below 5% you can go back in but if your original principal gets to zero, your play money is gone and stop.

itstoomuch
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Re: What if Your Play Money Blows Up?

Post by itstoomuch » Mon Jan 29, 2018 2:44 am

oh, you mean blow up in a good way. :oops:
Extra wealth just stays in the Discretionary until I find the want. We still have untapped IRA's and we are too old to put money into more deferred retirement vehicles. I am mulling whether we should fund a 529 for future grandchildren (We get a deduction on contributions to our state's 529).
Last edited by itstoomuch on Mon Jan 29, 2018 3:03 am, edited 1 time in total.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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GerryL
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Re: What if Your Play Money Blows Up?

Post by GerryL » Mon Jan 29, 2018 3:02 am

If I were to set aside 5% to play with, I would play with that 5% unless and until it disappeared. If it grew beyond 5%, I would still play with just the 5%. In other words, I would take my winnings off the table. "Off the table" could mean folding into the investment portfolio or using the cash for a splurge or .... And yes, I realize that if the portfolio grows thanks to winnings being rolled in, then the amount of play money that 5% represents would also grow.

Hustlinghustling
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Re: What if Your Play Money Blows Up?

Post by Hustlinghustling » Mon Jan 29, 2018 3:13 am

Thanks for the suggestions. It's in line with my personal thought that should it grow to 10% of portfolio, it's reached a critical mass that no longer qualifies as "play" and I'd rebalance back to 5%.

CurlyDave
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Re: What if Your Play Money Blows Up?

Post by CurlyDave » Mon Jan 29, 2018 3:25 am

I let mine ride.

I now have a fair amount of AAPL with a cost basis of $4.50.

Gave some to my step son last summer for a down payment on a house. He sold the appreciated shares. We will see what his taxes are -- I am hoping that it will all slide in with no capital gains tax.

Dividends alone have returned more than the original investment.

If it is "fun money" it stays fun money.

retiredjg
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Re: What if Your Play Money Blows Up?

Post by retiredjg » Mon Jan 29, 2018 8:10 am

The concept of play money is not unbogleheadish at all. Even Jack Bogle has suggested it is OK to play with 5%.

If it is play money, it is by definition not something you want 20% of your portfolio in. I'd give it a haircut periodically to keep it near 5% (or maybe 10% if you actually happen to stumble on something like Apple).

stan1
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Re: What if Your Play Money Blows Up?

Post by stan1 » Mon Jan 29, 2018 8:31 am

If it is crypto probably should have already sold.

I'd treat anything coming back from a play money account as a windfall. Might mean owing tax but its money I otherwise wouldn't expect to have.

Valuethinker
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Re: What if Your Play Money Blows Up?

Post by Valuethinker » Tue Jan 30, 2018 8:36 am

Hustlinghustling wrote:
Mon Jan 29, 2018 2:06 am
I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!
"Aye, therein lies the rub."

If you lose the 5% do you ante up to stay in the game? Or do you forswear "play money" ever again? Do you keep buying lottery tickets?

Most of us, with our "Play money" do not entertain the possibility that we could lose most, or even all, of it.

smitcat
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Re: What if Your Play Money Blows Up?

Post by smitcat » Tue Jan 30, 2018 8:47 am

When we did our IP wife still wanted to play with individual stocks. We carved out a fixed amount of funds and called it 'play money'.
That was all we were ever going to dedicate to 'play' and we were never going to use it in our retirement plans - we would also let it ride if it rose.
Since I was the one worried about continuing to trade in individual stocks I am a bit embarrassed by what it is worth today vs the initial stake - but she is very happy utilizing those funds trading from time to time.

Nowizard
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Re: What if Your Play Money Blows Up?

Post by Nowizard » Tue Jan 30, 2018 8:51 am

We would never use 5% of our portfolio as play money and would consider that to be more significant than "play." For us, "play" is something such as spending a significantly greater than normal sum on a meal, hotel or short vacation or purchasing a small amount of stock in hopes of eventually getting a "five bagger." Other than that, it is discretionary spending as someone else mentioned.

Tim

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JonnyDVM
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Re: What if Your Play Money Blows Up?

Post by JonnyDVM » Tue Jan 30, 2018 9:39 am

Play money is play money. Do whatever you want with it. There are no rules. Sell some. Let it ride. Take your original investment out and let the rest ride. Whatever. Last time I decide to sell something from my play money allocation I just used the funds to buy TSM. I'll hold it there until something else catches my fancy.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

MotoTrojan
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Re: What if Your Play Money Blows Up?

Post by MotoTrojan » Tue Jan 30, 2018 9:46 am

Valuethinker wrote:
Tue Jan 30, 2018 8:36 am
Hustlinghustling wrote:
Mon Jan 29, 2018 2:06 am
I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!
"Aye, therein lies the rub."

If you lose the 5% do you ante up to stay in the game? Or do you forswear "play money" ever again? Do you keep buying lottery tickets?

Most of us, with our "Play money" do not entertain the possibility that we could lose most, or even all, of it.
I don’t implant play money right now, but I’d likely make it a fixed % of contributions rather than portfolio, to account for drastic losses which normally would allow a “refill” and thus more than 5% of portfolio being at risk.

Snowjob
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Re: What if Your Play Money Blows Up?

Post by Snowjob » Tue Jan 30, 2018 10:14 am

Taxes aside, I would move at least that original 5% into the main portfolio so you are guaranteed to have never lost anything then do whatever you want with the remaining.

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fishandgolf
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Re: What if Your Play Money Blows Up?

Post by fishandgolf » Tue Jan 30, 2018 10:19 am

itstoomuch wrote:
Mon Jan 29, 2018 2:20 am
It's late. Go to bed.
+1..........agree....

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camillus
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Re: What if Your Play Money Blows Up?

Post by camillus » Tue Jan 30, 2018 10:41 am

I don't think I'd measure play money as a percentage, like 5%. That would get me thinking about rebalancing in and out of play money - making it no longer play money.

Instead, you could decide to set aside $100 a month or a one-time lump sum of $20k or something - just as was said above, it's discretionary money. Then you could let it ride regardless of its size. If you wanted, you could sell it as a windfall.

Personally, once play money became "material" my responsible side would look greedily at it and I would sell a portion to fund life goals. You could even write a rule: "Once play money exceeds $XXk, sell 1/2 and add to boring portfolio."

It's up to you.

quantAndHold
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Re: What if Your Play Money Blows Up?

Post by quantAndHold » Tue Jan 30, 2018 10:59 am

When I sell the discretionary investment, I rebalance back to my normal asset allocation, regardless of whether it goes up or goes to zero.

Nate79
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Re: What if Your Play Money Blows Up?

Post by Nate79 » Tue Jan 30, 2018 11:02 am

It probably doesn't matter as long as you set the rules from the beginning. If you don't set the rules and follow them then you have a problem.

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Pajamas
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Re: What if Your Play Money Blows Up?

Post by Pajamas » Tue Jan 30, 2018 11:10 am

Hustlinghustling wrote:
Mon Jan 29, 2018 2:06 am
I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!
If it is play money then it doesn't really matter, does it?

However, the reality is that when play money blows up and becomes, say, 25% or more of your portfolio, the tendency is towards not thinking of it as play money any longer. Money is fungible and it is difficult to to feel differently about that one particular number on the screen.

This happened to me and I eventually sold enough shares to lock in a very good profit on the entire position and then let the rest of the shares ride. The stock has continued to do well and now I am in the same situation again with a single stock that is much too large of a position in my portfolio but so far I have felt comfortable enough not to sell any more shares, although it is something that I continue to consider on a regular basis.

On rare occasion I wish I hadn't sold any shares but then remind myself that I made a very well-considered decision. The small amount of regret is quickly outweighed by thoughts of the potential regret that I might have been saddled with if I hadn't sold any shares and the stock had done poorly instead of well. It never hurts to take a little off the table and it does feel different gambling with the house's money rather than earnings from your labor, however irrational that may be.

gotester2000
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Re: What if Your Play Money Blows Up?

Post by gotester2000 » Tue Jan 30, 2018 1:31 pm

Money is money - play or not. I would always try to manage risk with return. 5% goes to 20% and losing it means losing 20% and not 5% as you will try to convince yourself. So adjust the risk and rebalance periodically - keep a strategy and stick to it without greed or fear.

an_asker
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Re: What if Your Play Money Blows Up?

Post by an_asker » Tue Jan 30, 2018 1:53 pm

Hustlinghustling wrote:
Mon Jan 29, 2018 2:06 am
I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!
It depends on you of course.

Some aggressive folks, who don't mind their portfolio going to 75% (or less) its current value overnight, will move 5% (or more) of their portfolio to the "play money."
Moderate folks will let it ride - they don't mind their portfolio going to 80% its current value overnight.
Conservative folks will rebalance to 5% play money.
Super conservative will convert all play money to cash ;-)

BigMoneyNoWhammies
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Re: What if Your Play Money Blows Up?

Post by BigMoneyNoWhammies » Tue Jan 30, 2018 2:36 pm

Hustlinghustling wrote:
Mon Jan 29, 2018 2:06 am
I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!
If the 5% or so of my discretionary money made a big splash and suddenly jumped a significant %, what I did with it would likely depend on if I had any near or intermediate term expenses coming up. If I had expenses coming up that I had otherwise been saving for but had not yet reached my savings goal, at the very least I'd sell out enough to completely reach the savings goal. Would also consider replenishing my emergency fund if that had any expenditures recently. Otherwise I'd probably do some technical analysis of the stock (which hopefully you did some research on ahead of time to begin with) and try to get an idea of where it's going. If it looked like it had hit near its peak, I'd sell out altogether and find my next "play" pick. My "play" money tends to be in assets that aren't meant to be held for the long term (otherwise why not just throw this money into your other long term investing?); they're equities I've done some research on that I think have a reasonable chance of short term growth beyond the average after expenses market annual return of ~7%.

Also I would be cognizant of not letting this big gain influence you into decreasing your other retirement savings efforts. It's just a cherry on top and shouldn't be a substitute for maxing out 401k/403b, IRA, 529, HSA, etc.

bltn
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Re: What if Your Play Money Blows Up?

Post by bltn » Tue Jan 30, 2018 4:28 pm

Take some profits and trim it back to 5%. As you get closer to retirement , 5% will seem like big chunk to be playing with. Unless you re really wealthy relative to your needs. I used to play with 7-8% of my savings. It grew to over !0%. Pure luck. Eventually changed my mind about security and sold out.

PVW
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Re: What if Your Play Money Blows Up?

Post by PVW » Tue Jan 30, 2018 4:46 pm

“I spent half my money on gambling, alcohol and wild women. The other half I wasted.” W.C Fields.

My suggestion is don't waste your play money.

TonyDAntonio
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Re: What if Your Play Money Blows Up?

Post by TonyDAntonio » Tue Jan 30, 2018 5:03 pm

Lately I've been buying ibonds with my play money. God I'm old.

KlangFool
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Re: What if Your Play Money Blows Up?

Post by KlangFool » Tue Jan 30, 2018 5:17 pm

Hustlinghustling wrote:
Mon Jan 29, 2018 2:06 am
I know a "play money" allocation is very non-Boglehead. With that out of the way, I'm curious what those who reserve say a 5% allocation to play money do when the punt ends up quite lucrative and significantly exceeds the original 5% allocation? Do you "rebalance"/sell back to 5% or since it was a smallish investment to begin with, do you proceed without regard to the fact it has ballooned to now 20% of your portfolio?

Interested to hear people's take on this!
Hustlinghustling,

I only gamble my "play money" on the stock that may return 10X to 30X. My trading rule is when my stock triple (3X), I sell 50% of my holding. Then, I do not need to worry about whatever happened to the rest.

KlangFool

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whodidntante
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Re: What if Your Play Money Blows Up?

Post by whodidntante » Tue Jan 30, 2018 8:49 pm

If you lose your last guy, put another quarter in.

Sorry, recovering arcade addict.

youngin87
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Re: What if Your Play Money Blows Up?

Post by youngin87 » Tue Jan 30, 2018 10:15 pm

I was in a similar situation as OP with my crypto a month ago. I ended up withdrawing the principal and I'm letting the profits ride for now.

folkher0
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Re: What if Your Play Money Blows Up?

Post by folkher0 » Wed Jan 31, 2018 1:22 pm

If it is "play" money, you presumably don't have it allocated to any other goals that you have funded (retirement, home purchase, etc). As soon as you start making plans for the "play" account, it ceases to be monopoly money and becomes real, I would probably make room for it in your asset allocation accordingly according to your time frame and risk tolerance.

Its probably worth a few lines of planning in your IPS if you have a "play" fund.

...Not somethingI have experienced, unfortunately...

retiredjg
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Re: What if Your Play Money Blows Up?

Post by retiredjg » Wed Jan 31, 2018 1:31 pm

folkher0 wrote:
Wed Jan 31, 2018 1:22 pm
As soon as you start making plans for the "play" account, it ceases to be monopoly money and becomes real....
I like this way of looking at it. And at that point, I think most of it should be sold and the money moved into your ordinary asset allocation so that you have a better chance the money will be available when your plans require it.

I see no problem with letting some ride as long as it is a small percentage of your portfolio.

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