The 2 comma paradox

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TheTimeLord
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The 2 comma paradox

Post by TheTimeLord »

Many of us have worked very hard for a considerable amount of time to have our portfolios reach the 2 comma level. Years of finding a thousand there or a couple hundred here has helped us to accomplish this notable level. But now that we are there instead of sleeping better at night we worry more about our life's accumulation being undone. For most it was built by small amounts being invested frequently over time but now it changes daily by amounts that were at one time a year's worth of savings and while the percentage is low this still makes us uneasy because we remember how we fought to save those precious dollars to build our now impressive portfolio. Does anyone else occassionally suffer from the 2 comma paradox?
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livesoft
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Re: The 2 comma paradox

Post by livesoft »

Nope. I use the money to buy nice things like a Lexus or a college education for the kids.

http://www.bogleheads.org/forum/viewtop ... 0#p1859340

Stop worrying: http://www.bogleheads.org/forum/viewtop ... 4#p1866014
Last edited by livesoft on Sat Jun 07, 2014 10:09 am, edited 2 times in total.
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VictoriaF
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Re: The 2 comma paradox

Post by VictoriaF »

This is a manifestation of the endowment effect, you value more what you have than what you don't have. Before reaching the two-comma status, becoming a millionaire is an enticing dream. Once you become a millionaire, you are horrified of losing it.

Victoria
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acegolfer
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Re: The 2 comma paradox

Post by acegolfer »

No.

I have a long investment horizon (20+ years) and not worry about what happens to the market every day.
MP1233
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Re: The 2 comma paradox

Post by MP1233 »

This has not been an issue for my wife and me. During the 2008/9 downturn, we "lost" a lot but we still added all we could to our investments. Our problem is that our "number" keeps on going up as we hit our investment targets for retirement.
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Re: The 2 comma paradox

Post by midareff »

No... not one bit. Don't care much what equities do as I've stopped playing as Dr. Bernstein has written about. Enough in bonds to go the distance and enjoy the finer things. New Benz last year, looking for a further upscale condo..... don't worry, be HAPPY! Set your AA to your sleep comfort level and forgetaboutit.
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Re: The 2 comma paradox

Post by letsgobobby »

Irv Yalom would have a lot to say about this. This is existential psychology - Otto Rank put it, "some refuse the loan of life to avoid the debt of death."

There is also some loss aversion at stake here, making losses more or less twice as painful as a gain.

Certainly as "need" to take risk declines, one should take less risk. That decreases the odds of running out of money through market events.
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Re: The 2 comma paradox

Post by sscritic »

No. It's all money I don't need to live on. It really "belongs" to my children and grandchildren. Maybe I should worry about them more than I do, but so far I sleep well every night.

OK, I am lying again. Old man, several operations, and an old and tired bladder: who can sleep well at night under those conditions?

P.S. TIAA Traditional helps.
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Phineas J. Whoopee
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Re: The 2 comma paradox

Post by Phineas J. Whoopee »

I'm not quite to two commas in my portfolio, and I don't feel that way, but maybe it will come on all of a sudden as soon as the second comma appears?

To me it seems like a perfectly understandable fear. As long as one remains rational in action, it seems things should be OK.

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Re: The 2 comma paradox

Post by BigFoot48 »

A friend emailed me this morning:

"One of the nice things about new stock market highs reached on Friday is that it provides me with two whole days to feel rich and smug."
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Re: The 2 comma paradox

Post by Sheepdog »

I was past 10 years in my retirement before I made that list. It is only special in that it became a larger sexy looking number, but it didn't change anything. I can't go around and advertise it to my neighbors and others, after all, especially not to my in-laws and outlaws.
Last edited by Sheepdog on Sat Jun 07, 2014 10:14 am, edited 1 time in total.
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Re: The 2 comma paradox

Post by amitb00 »

Nope. Don't care about the fluctuations.
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Re: The 2 comma paradox

Post by NAVigator »

I find it helpful to keep a snapshot of the portfolio for each period that is meaningful to you; perhaps quarterly or annually. I keep annual data and look at the progress on that basis. I tune out the daily or weekly noise. When I look at the markets fluctuating, I am comforted by the somewhat steady rise in my net worth.

In retirement I think about the millions of people that are working. Many of them work for the companies whose value is reflected in my total stock and total bond funds. I know that these workers strive in their jobs to grow their companies. I find peace from this enormous effort that enhances my portfolio over time.

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Re: The 2 comma paradox

Post by sscritic »

Use a base other than 10 for your number system, and you can easily change the number of commas to suit your taste. Or, you can change where you put your commas as is sometimes done in China
thus 1,234,567,890 is regrouped here as 12,3456,7890
One wan (萬, 万) is 10,000. In speech, one million is 100 wan. With 100 wan, you only have 1 comma. You need a wan of wan to get two commas, i.e., 1,0000,0000 (100,000,000). You aren't anywhere near two commas. :)
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Re: The 2 comma paradox

Post by TheTimeLord »

VictoriaF wrote:This is a manifestation of the endowment effect, you value more what you have than what you don't have. Before reaching the two-comma status, becoming a millionaire is an enticing dream. Once you become a millionaire, you are horrified of losing it.

Victoria
Part of it maybe the fact I am resetting my goals. I am within a $100K of what has been my target number for years and could probably quit tomorrow and live at or near the lifestyle I have had during most of my accumulation phase. And it has been a nice lifestyle. But with some recent opportunities and the good fortune of the tailwinds of the markets I can envision going further to levels that frankly I had never even contemplated until the past year or so. So maybe now that I am starting to climb another mountain, a higher mountain I have just more sensitive to the possibility of losing a foothold.
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VictoriaF
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Re: The 2 comma paradox

Post by VictoriaF »

StarbuxInvestor wrote:
VictoriaF wrote:This is a manifestation of the endowment effect, you value more what you have than what you don't have. Before reaching the two-comma status, becoming a millionaire is an enticing dream. Once you become a millionaire, you are horrified of losing it.

Victoria
Part of it maybe the fact I am resetting my goals. I am within a $100K of what has been my target number for years and could probably quit tomorrow and live at or near the lifestyle I have had during most of my accumulation phase. And it has been a nice lifestyle. But with some recent opportunities and the good fortune of the tailwinds of the markets I can envision going further to levels that frankly I had never even contemplated until the past year or so. So maybe now that I am starting to climb another mountain, a higher mountain I have just more sensitive to the possibility of losing a foothold.
Yes, this is another important factor. You are changing your anchoring. I do it too. We see some numbers in our account statements and we get used to their levels. As our numbers are rising we get used to their increases; we start anchoring to the increases and not just to the absolute values.

The fear of losing a foothold is what letsgobobby referred to as "loss aversion." It becomes a balancing act between welcoming gains and avoiding losses. It takes a cool head and a fair amount to resolve to decide "I've won the game, and I am reducing my asset allocation to, say, 40/60 to preserve my gains."

Quitting the workforce on your own accord is an even more monumental decision. You are artificially terminating the portfolio progress while wondering about what you are getting in return. It takes strong outside interests to be confident that regaining your time is the right choice worthy of a significant financial hit.

Victoria
Last edited by VictoriaF on Sat Jun 07, 2014 10:40 am, edited 4 times in total.
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Re: The 2 comma paradox

Post by Call_Me_Op »

You shouldn't be worrying about market risk unless your portfolio is not balanced properly. And make sure you have proper insurance.
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Re: The 2 comma paradox

Post by TheTimeLord »

Call_Me_Op wrote:You shouldn't be worrying about market risk unless your portfolio is not balanced properly. And make sure you have proper insurance.
Okay, but I am not worried about market risk. My thought was the paradox one goes through saving a hundred here and a thousand there only to get to the point where a routine daily fluctuation could be more than they were able to save in an entire year at many points in your life, maybe more than you made in a year. I would assume this would be more pronounce for those who came from modest means and have far exceeded their parents level or their own expectations.
Last edited by TheTimeLord on Sat Jun 07, 2014 10:50 am, edited 1 time in total.
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Re: The 2 comma paradox

Post by chaz »

I don't worry. I'm happy with 2 commas.
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Re: The 2 comma paradox

Post by VictoriaF »

chaz wrote:I don't worry. I'm happy with 2 commas.
We should change the expression "my two cents" to "my two commas."

Victoria
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Re: The 2 comma paradox

Post by manwithnoname »

No. Cant remember when I passed 2 commas. Money is there to enjoy spending.

looking forward to 8 figures.

Learned a long time ago to never look back.
LeeMKE
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Re: The 2 comma paradox

Post by LeeMKE »

I've experienced what Starbuxinvestor suggested.

The first time, I was young when my portfolio crested $500k and I worried that I shouldn't be playing with that large a sum, put it with an advisor, and then came to my senses and took it back under my own management. I was lucky I didn't lose capital, just a bit in expenses, but it was a wild ride to the top of the internet bubble and then the bursting of that bubble (The manager moved me heavily into internet stock).

I'd previously ridden through the "crash" in the mid 1980's without freaking out at all, so I'm sure the dollar amount in the portfolio was the trigger for me to freak out and move under management.

The second time was close to my early retirement date and I yanked everything out in early October of 2008. Turned out to be prescient, and I amazingly moved into a CD ladder at 5.5% and rode out the worst of the recession at fixed returns that look amazing today. As the CDs matured, and interest rate bearing instruments were below 2%, I came back into the market in time to ride the rise back up.

I decided to get serious about looking for a less speculative method for investing and landed here. This approach should keep me from using anymore "gut instinct" or "magical thinking" and I'm documenting it with my husband and in writing so if I can't manage the portfolio on my own, others have specific instructions that a) can be followed and b) can't be disputed as ill advised.

I'm well aware of the fact that by age 70, our decision-making skills are deteriorated to a degree we should avoid complicated management of assets. I want to be a little ahead of that curve, and have things streamlined and easy to manage before age 70.
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Re: The 2 comma paradox

Post by livesoft »

There is also a point of enlightenment when one realizes that no matter what happens in the stock market they will still remain in the two comma club or even the multimillionaire club.

If I told you that you will be a multimillionaire for the rest of your life not matter what stock markets do, would you be as concerned or would you learn to live with it?
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Re: The 2 comma paradox

Post by chaz »

VictoriaF wrote:
chaz wrote:I don't worry. I'm happy with 2 commas.
We should change the expression "my two cents" to "my two commas."

Victoria
Victoria, you have a great sense of humor. Just my $0.02.
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Re: The 2 comma paradox

Post by sscritic »

livesoft wrote:There is also a point of enlightenment when one realizes that no matter what happens in the stock market they will still remain in the two comma club or even the multimillionaire club.

If I told you that you will be a multimillionaire for the rest of your life not matter what stock markets do, would you be as concerned or would you learn to live with it?
Note that you can also use fractional commas (this was discussed long ago). If 10^6 has 2 commas, then comma can be defined as
[log (base 10) of X] divided by 3.

Examples: 2 million has 2.1 commas, and 10 million has 2.33 commas.

So the real issue is what fraction of a comma would you have to lose to create a panic, and conversely, what fraction of an extra comma would help you sleep better at night? Is 0.1 commas enough?
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Re: The 2 comma paradox

Post by letsgobobby »

livesoft wrote:There is also a point of enlightenment when one realizes that no matter what happens in the stock market they will still remain in the two comma club or even the multimillionaire club.

If I told you that you will be a multimillionaire for the rest of your life not matter what stock markets do, would you be as concerned or would you learn to live with it?
Will you also tell me what inflation will be?
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Re: The 2 comma paradox

Post by Leeraar »

livesoft wrote:There is also a point of enlightenment when one realizes that no matter what happens in the stock market they will still remain in the two comma club or even the multimillionaire club.

If I told you that you will be a multimillionaire for the rest of your life not matter what stock markets do, would you be as concerned or would you learn to live with it?
This is more or less where we are. When I first got to the ,, club I didn't worry about it because I still had a decade to work. That was in 2000, and in a couple of years I had lost my membership. I retired early, in November 2008, back in the club and with the knowledge that, no matter what happened, we had enough.

I must admit it is fun to see the balance increasing these past few years in spite of the withdrawals we are taking.

L.
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Re: The 2 comma paradox

Post by Chan_va »

I too worry about this. My other worries include:
- will daily fluctuations in the voltage supply to my freezer warehouse ruin my 5 tons of beluga caviar.
- will sea level rise cause me to move my fleet of yahcts from my private island to my other private island.

C'mon guys. Perspective.
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Re: The 2 comma paradox

Post by VictoriaF »

Chan_va wrote:I too worry about this. My other worries include:
- will daily fluctuations in the voltage supply to my freezer warehouse ruin my 5 tons of beluga caviar.
- will sea level rise cause me to move my fleet of yahcts from my private island to my other private island.

C'mon guys. Perspective.
The rising sea levels will increase your supply of beluga caviar.

Victoria
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Re: The 2 comma paradox

Post by fposte »

Interesting. I'm definitely on the anxious overthinker side, but I don't really worry about this. Two comma is fun in an odometer kind of way, but my goal is to have enough to live off of the way I want to rather than a number. I actually worry a lot less about downward fluctuations in value now, though I still appreciate the days where I on paper made more with my investments than I did at my job.
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Re: The 2 comma paradox

Post by TheTimeLord »

Image
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Re: The 2 comma paradox

Post by sscritic »

StarbuxInvestor wrote:Image
I think you need 2, one per comma.
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Re: The 2 comma paradox

Post by Jack FFR1846 »

I have fun with it. I'll look at the gains for the day in my IRA, where 3/4 of my portfolio resides and show it to my wife and say "look, we made more today in the market than I'll make in 2 weeks of working".

I just don't bother looking on down days. No, really. It give me optomism about the market all the time.
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Re: The 2 comma paradox

Post by HardKnocker »

No matter how much you have, you always want more.

My personal fear is alien invasion and the use of humans as food.

Image
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Re: The 2 comma paradox

Post by jebmke »

StarbuxInvestor wrote:Image
Not to worry, when the S&P drops back to 1,000 you won't be alone.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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Re: The 2 comma paradox

Post by Toons »

No not at all,Life is just too short.Enjoy your hard earned savings and build memories by spending time with family :happy with family :happy
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Re: The 2 comma paradox

Post by inbox788 »

Chan_va wrote:I too worry about this. My other worries include:
- will daily fluctuations in the voltage supply to my freezer warehouse ruin my 5 tons of beluga caviar.
- will sea level rise cause me to move my fleet of yahcts from my private island to my other private island.

C'mon guys. Perspective.
I worry about whether the yacht movers will put a scratch on my 2 comma yacht...

https://www.youtube.com/watch?v=lEBJjsdTyWY#t=2m50s
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Re: The 2 comma paradox

Post by TheTimeLord »

Image
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sscritic
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Re: The 2 comma paradox

Post by sscritic »

I like your new avatar, the all black one. How long do you plan on keeping it?
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Re: The 2 comma paradox

Post by ArthurO »

sscritic wrote:No. It's all money I don't need to live on. It really "belongs" to my children and grandchildren. Maybe I should worry about them more than I do, but so far I sleep well every night.

OK, I am lying again. Old man, several operations, and an old and tired bladder: who can sleep well at night under those conditions?

P.S. TIAA Traditional helps.
my number is 5,000,000.00. If I ever reach it (which is very unlikely) I will take 80% and put it in TIAA Traditional, and only leave 1,000,000.00 on the table.
WHY PLAY THE GAME IF YOU ALREADY WON???

If your number is 1,000,000.00 which I assume is a two comma number then take if off the table and don't be greedy, if your number is higher, just tune out the noise of the market and ride it out, there is no free lunch, sure you can loose some, but you have to be prepared to loose some in order to win some...

I would be happy to see my portfolio loose 50K in a day, I would love to have capital to see that happen, right now I am happy to report I am making more monthly then I put in, for the 1st time in my life I can actually see my money grow and compound interest to take it's course.
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Re: The 2 comma paradox

Post by jasonv »

sscritic wrote:Use a base other than 10 for your number system, and you can easily change the number of commas to suit your taste. Or, you can change where you put your commas as is sometimes done in China
thus 1,234,567,890 is regrouped here as 12,3456,7890
One wan (萬, 万) is 10,000. In speech, one million is 100 wan. With 100 wan, you only have 1 comma. You need a wan of wan to get two commas, i.e., 1,0000,0000 (100,000,000). You aren't anywhere near two commas. :)
Reaching the two comma level is easier if one simply uses the lakh (1,00,000), particularly if held in rupees.

On a more serious note, if someone is risk averse why not buy TIPS?
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Re: The 2 comma paradox

Post by Call_Me_Op »

StarbuxInvestor wrote:
Call_Me_Op wrote:You shouldn't be worrying about market risk unless your portfolio is not balanced properly. And make sure you have proper insurance.
Okay, but I am not worried about market risk. My thought was the paradox one goes through saving a hundred here and a thousand there only to get to the point where a routine daily fluctuation could be more than they were able to save in an entire year at many points in your life, maybe more than you made in a year. I would assume this would be more pronounce for those who came from modest means and have far exceeded their parents level or their own expectations.
Few here came from more modest means than I. For many years, my total income for the year was 10 bucks. I wore clothes littered with holes (still do sometimes :)) and shared one bathroom with 7 other people. Used to sleep in the entry-way of a rented apartment and snow would blow onto my bed when the door was opened.

I think you need to step back and look at the big picture. Try to think in percentage terms rather than absolute. And don't forget reversion to the mean. The market fluctuates but has always recovered its losses to move still higher. And by golly, hold enough high quality bonds to allow you to sleep at night.
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Re: The 2 comma paradox

Post by wilked »

StarbuxInvestor wrote:Many of us have worked very hard for a considerable amount of time to have our portfolios reach the 2 comma level. But now that we are there instead of sleeping better at night we worry more about our life's accumulation being undone.
Speak for yourself...

Being fortunate financially has quite the opposite effect. I sleep like a baby
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Re: The 2 comma paradox

Post by KlangFool »

TS,

1) 10+ years ago, I lost half of my life savings to stock trading. It was bad but I survived. Then, I adopted Bogleheads philosophy. I slept through 2008/2009 crash. In any case, I will survive one way or another.

2) I am too busy doing interesting stuff to worry about my commas.

KlangFool
richyg12
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Re: The 2 comma paradox

Post by richyg12 »

Call_Me_OP,

Fascinating thread but your post stuck about above the rest. Lots of people who are clearly very comfortably off in the 2 CC and still have lots of modesty.

Also a few with a bit of a "whiff" of self satisfaction - again ok - but your story is the one that I think would make a great post.

R.
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Re: The 2 comma paradox

Post by NAVigator »

Achieved 2 commas mostly through hard work, living below my means, and Boglehead investing.

Retired.

Now striving to do it again with NO work, living below my means, and Boglehead investing.

Jerry
"I was born with nothing and I have most of it left."
Clumsum
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Re: The 2 comma paradox

Post by Clumsum »

I do not worry too much about market fluctuations even though a lot more money is on the table. Percentage wise it is the same. After investing over 30 years I realize the market fluctuates. I am 70/30 down from 80/20 a couple of years ago.

My one regret on the 2 comma club is that I did not share the information with my father. Shortly before he died 4 years ago he was discussing a friend and said that he was rich. He was a millionaire. I had become a member of the two comma club. If I had told him though, everyone he came in contact with would have known.

My parents died 4 months apart. When my siblings and I helped them downsize their house which they had lived in 40 years, they owed more on the loan than what it was worth. I helped them financially but had no idea of the credit card debt they carried.

I got there like many Bogleheads. Started Saving at a young age and continued to save.
EnjoyIt
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Re: The 2 comma paradox

Post by EnjoyIt »

Your portfolio is only worth what you sell it for. The stock market can drop 50% at any time. Therefor your real value is anywhere between what you see today and (portfolio-fixed income)/2 + bonds. Tomorrow that number will change for better or worse. You must be comfortable with that information. If not then you might need to re-evaluate your AA.

BTW, Congrats on the 2 comma club.

I will admit that seeing compounding interest take effect is indeed exhilarating. I don't know how long this particular gravy train will last, but I hope you and I are prepared for the reversion to the mean.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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mickeyd
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Re: The 2 comma paradox

Post by mickeyd »

I have no idea when I entered the two comma club but my plans are to continue membership until I am living in a dirt house. 8-)
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
555
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Joined: Thu Dec 24, 2009 7:21 am

Re: The 2 comma paradox

Post by 555 »

chaz wrote:
VictoriaF wrote:
chaz wrote:I don't worry. I'm happy with 2 commas.
We should change the expression "my two cents" to "my two commas."
Victoria
Victoria, you have a great sense of humor. Just my $0.02.
You can have both. Just my $0,000,000.02.
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