I've been reading about different investing theories: Bogleheads, dividend investing, Permanent Portfolio (and variations), market timing (I just know I should get out while I'm ahead...in my thoughts), and finally just started to agree with Mark Cuban about not investing at all unless you have inside information. What's been frustrating me about investing (especially now with a lot of extra $) is my anger and faithlessness about market investing since losing 40-50% of my accumulation in my first solid 100% equity 401k in 2000, and currently have deed to a home bought at the bubble height -- guess what. And just today, I found out that I had lost another 40-50% in 2008 in that old 401k and didn't know it.
My "expert" investment method consisted of sticking random dollars in 401K, choosing the fund with the cheapest ER, which were always index funds (I heard Warren Buffet a few times), and highest lifetime return. Until this past month, I had very little to no knowledge about AA, IPS, equity vs. bond vs. fixed income vs. short-term, taxable and tax-advantaged accounts, tax efficiency, and the differences in retirement accounts. And I needed this knowledge to figure out what to do next with all my cash - MM?, CD?, mattress? I sure wasn't excited about investing in stocks because i was soured on it -- and scares me to death going through another 40-50% loss, only to look at the pitiful 401k's Personal Rate of Return on their website. What was I doing? This is insane! Why in the world would I think about sticking another $90K in the market at this time?
So today, I decided to REALLY figure out how much money I wasted in the market over 22 years by going back and retracing my cost basis, just to prove to myself that the market sucks, and Mark Cuban is right. Stay the hell out of the market. I began investing around 1996 with a rollover into the now old 401K account in early 2000. I didn't have all my records on my personal contributions, so the best I could do was start out with a statement that says I made 71.28% for the ending 3 years, and I hadn't made it to 5 years for a percentage yet. So from that I extrapolated what I thought to be my original, hard-earned money into the market, and continued my yearly analysis of how much money I should've just stuck in my mattress.
Looking at yearly statements, I found:
- Rollover to 401k in early 2000
- Yep, there's the horrendous drop in 2000-2001
- Oh, goody, I'm back to even 6 years later! What a waste -- I could've just kept the money under my mattress
- Yay. I've actually made a few % since I rolled over. Imagine that.
- But GD! Another 40-50% drop in 2008! (Hadn't looked at market/statement ever, so I didn't even know until today it dropped so much this time. Another point for Mark)
- And then up again, and then down again..sis boom bah. I accumulated nothing more than my original rollover. Ok, well, MAYBE 5% better than I was 11 years ago??!!! Still CDs safer (Where's the really pissed off Smilie???)
- Oh...wait... up, up, and up... hmm, let me figure this out
So what do I know now for sure about investing in the market? Still nothing. I got lucky, I hope that the market is up when I'm ready to retire and not have to worry if I can stick it out another 15-17 years to feel good if the market really tanks again, should I take the money out and put it in my mattress, should I never look at a statement again until I retire in about 17 years (doubtful), should I stop looking at SPX on Marketwatch, should I stop trying to equity invest and learn to dividend invest, or should I go all in 100% equity since I was able to make it through before -- would I be as lucky or does my new knowledge REALLY help anything? Again, I know nothing.
I wish I could say the moral of the story is that lazy investing, set-it-and-forget it, stay the course, or just plain "get your money in there!" method really works. It did in this case, and maybe some of you can use it as a data point. I can also say for sure that this 10% drop feels like nothing but a buying opportunity, and if I was sure I have the time, I probably could weather another 40-50% drop, but still don't know about lump summing it and taking that chance.
DISCLOSURE: This analysis was just one of my 401ks. I did invest $40K in the last few days -- maxed out Roth 2017/2018, put an Int'l Index fund in a new taxable account since I'm light on International, bought a REIT in my HSA, and I moved some domestic index funds to speculate on $5K worth of company stock. I'm sure I'm gonna need some help soon.