The S &P 500 closed down 20% from its peak of 4800+ over the past 5 months. Financial headlines trumpet words like “crash” “bear market”, “extreme fear”, and “volatility“. Red is the predominant color on financial news service websites. Is it time to panic sell all your equities? Should you go all in on the US Stock market?
First: Don’t Panic
OK, take a deep breath. Don’t panic. 20% drops actually happen rather regularly. The current drop happened over a period of about six months. `Here’s an image showing the distribution of S & P 500 price changes for 6 month intervals.
Histogram of 6 month market returns
The light red dashed line is at -10% or “correction” territory. The dark red dotted line represents -20% or the threshold for a “bear market.” Look how much of the distribution remains to the left of both of these lines. Neither event is uncommon. In the histogram, I also highlighted the 0% line in solid blue. Take heart doom and gloom fans: most of the distribution is to the right of that solid blue line. That means that most of the time, the market has a positive return.
Let’s look at the same data differently so we can more easily quantify how often to expect a -10% correction and a -20% bear to occur within a 6 month window. Corrections happen about 10% of the time. That 20% bear market line happens about 3% of the time. There’s a reason why people smarter than me have said that over time, “it always goes up .”
Cumulative distribution of 6 month market returns
Second: The Market Isn’t That Cheap Yet
Believe it or not, we’re not at bargain basement prices yet either based on two widely accepted measures of aggregate market value.
1) the “Buffet indicator“, which looks at a country’s total stock market’s price relative to the economic output of that country. Economic output is usually measured as Gross Domestic Product. Here’s a detailed discussion if you want some real gory stuff. While the current market conditions have improved from late 2021/ early 2022, valuations are still relatively high.
2) the Cyclically Adjusted Price to Earnings ratio (CAPE) or Shiller PE is another measure of long term value. It too is still high by historical standards despite recent sell-off. As of this writing, the Shiller PE is above 30 against a long term average of about 17.
Of course, I don’t have a crystal ball that sees into the future. However, based on measurements like these that show some good predictive power with long term stock market returns, it might make sense to make a measured response.
How to Respond to a Market Downturn
With a 20% drop, your asset allocation is likely out of balance. you can think of the market on sale and consider this an opportunity to re-balance. Sell some bonds and buy some stocks to bring your asset allocation ratio back to your goal.
Continue investing regularly or dollar cost averaging. Stay the course and try to avoid any drastic action. You’re investing for the long haul. As we’ve seen above, dips happen regularly.
If you have low enough expenses, consider investing some extra funds while prices have reduced. I would be cautious of going all in at this time though.
Stay diversified. It’s tempting to think we’re able to pick individual winners. For most investors who aren’t spending their free time reading prospectuses our scouring the headlines for information about a company, buy the entire market (or at least a big chunk of it) and ride the tide.
Disclaimer: While we have a passion for providing entertaining, informational, and possibly useful articles about personal finance, we’re just random people on the internet with no formal credentials or expertise. Talk to a licensed professional advisor if you need advice.
We’re kicking off a new, multi-part series here. We’re going to be looking at several different investment strategies using Monte Carlo Simulation techniques. Our goals with this series are to:
Demystify the Monte Carlo simulation technique.
Objectively evaluate the performance of different strategies against each other.
Learn.
I’m going to drop in our disclaimer right here just to make sure there is no confusion:
Disclaimer: While we have a passion for providing entertaining, informational, and possibly useful articles about personal finance, we’re just random people on the internet with no formal credentials or expertise. Talk to a licensed professional advisor if you need advice.
What Is A Monte Carlo Simulation?
Monte Carlo simulations attempt to show how a system responds through the use of repeated, random sampling of a model of that system. In observing how the system responds to a range of inputs, we can make better decisions in real life. We would like to see if we can learn about how well different investment strategies performed so we can make decisions about what to do in the future. Check out wikipedia and investopedia for some more detail on Monte Carlo Simulations.
While this post/series is not a comprehensive overview of the topic, a brief introduction is useful. Remember the “Normal” distribution from your first statistics class? If not that’s OK. My first statistics class was traumatic too. It represents a range of values/probabilities that we’re likely to see in many systems. Here is a distribution that represents the US Stock Market’s annual returns:
1000 samples of annual US stock market returns from a distribution with mean of TBD and standard deviation of TBD.
For Monte Carlo Simulation, the distribution is at the heart of everything. It is our representation of the system. The underlying distribution tells us how often we expect to see a given result. Finally, it is also fundamentally based on assuming that the general shape of the past can give us clues to how the future will look. How?
We iteratively and randomly sample points from the distribution. In our case, this provides a hypothetical sequence of returns for that asset class. If we’re simulating a 30 year retirement, we need 30 points from each asset. We’re using a distribution rather than actual historical sequences like cFireSIM. Therefore, we can simulate an infinite number of sequences. Let me be clear: that’s not a knock against cFireSIM. It’s actually one of my favorite tools and an inspiration for a lot of our work here.
What does a Monte Carlo Simulation Look Like?
Next, let’s look deeper at the first 5 points sampled from this type of distribution. We will illustrate how we can start to build up a sequence of returns. Remember, these 5 points are randomly drawn from the same distribution. Think of them as the first 5 years of a single “run” representing one potential retirement reality. Below, each panel shows a new point being randomly generated from the underlying distribution and added to the prior sequence.
Five successively chosen points from an underlying distribution.
Next, we can extend the sequence to 30 points (or any number) to represent a single retirement “run.” The next plot shows three such runs. Remember, we drew 3 sequences of 40 points from the same underlying distribution. And, the underlying distribution represents the annual performance of the US stock market. Therefore, you can think of this as three potential retirement experiences.
Three simulated “runs” of randomly generated sequences of returns.
When you make thousands of such multi-decade “runs”, you start to see the range of potential outcomes from this portfolio over time. And, that’s the foundation of our Monte Carlo simulation. We iteratively sample from the historical return data. We then simulate thousands of 20 year, 30 year, or 40 year (or more for those in the FIRE community) return sequences. Finally, let’s put the whole thing together and illustrate our 3 runs from above against a fuller population of simulation data.
In this plot, we simulated 1000 runs and then took the 10th to 90th percentile of those runs within a given year. We’re essentially eliminating some of the less likely returns from the summary. This reduced population forms the grey band in the graph. Overlaid on top of that are the three runs from above. Notice how many individual points are well outside of the grey bands. That’s important: any individual run can have some pretty extreme values (March of 2020, anyone?), but when you look at expected values they’re frequently less extreme. Are those extremes possible? Yes! But, they’re also less likely to occur.
Three 30 year simulated runs highlighted against the 10th -90th percentiles (grey band) of a 1000 run Monte Carlo Simulation
If you had two distributions, one that represents the annual performance of the US stock market, and another that represents the annual performance of the US bond market, you could start to build a model of their respective performance over time. From there, we can start to compare how well different portfolios perform…but we’ll dig into that another time. For now, let’s look at one caveat of many simulations: the shape of the underlying distribution(s).
Pitfalls of the Normal Distribution
In many systems, the normal distribution is a good fit for the underlying data. Stock market performance is not one of them. Here’s a great discussion on the topic. The key phrase is, “fat tails”. Over time, people observed that the stock market sees big movements more frequently than the normal distribution would suggest. This results in errors: differences in the model relative to historical performance. We would like our models to be as right as possible. I need to pause for the obligatory quote from legendary statistician and 20th century Renaissance Man, George Box:
“Essentially all models are wrong, but some are useful.”
George Box
Of course, we would like the models to be as right as possible, especially if we’re going to use them.
Metalogs – An Answer to the Normality Problem
Meta what?
“Metalogs”
They’re flexible distributions that more accurately reflect the underlying data than many of the classic distributions we’re used to (e.g., the Normal). Check them out here. They were invented by Tom Keelin who could be the 21st century’s Renaissance Man. By making distributions that can generate continuous samples from the underlying source data, Tom enabled us to reduce the bias in our original models. He helped us to fatten up our models’ tails when working with stock market return data (and his invention can be useful for modelling in any discipline. Have I sung his praises enough yet?).
Here’s a picture to help illustrate the differences between the actual data and two simulations. We can make 1802 annual return data points from Dr. Shiller’s dataset, called “Actuals” going forward. First, I calculated the mean/standard deviation of the Actuals and used those statistics to generate 1802 simulated returns using the Normal distribution. Then, I fit a Metalog to the original data (a 13-term metalog had the lowest standard error) and simulated 1802 more annual returns using a Metalog based on the actual data. Here’s a Box Plot (yes, the same George Box) showing how the three distributions compare.
Visually, you can see the Actual Returns and Metalog Simulation both have longer whiskers and more outliers than the Normal Simulation.
Wrap Up
That will do it for this first introduction to the topic of portfolio evaluation. It’s a fascinating problem. Inevitably, we will make mistakes along the way. I’m excited to dig into this topic and learn more about it. Hopefully, you have a better understanding of how we’re approaching this idea of portfolio evaluation. In subsequent posts, I will lay out some sample scenarios and start simulating!
Disclaimer: While we have a passion for providing entertaining, informational, and possibly useful articles about personal finance, we’re just random people on the internet with no formal credentials or expertise. Talk to a licensed professional advisor if you need advice.
My girls will have awesome 21st birthday parties if they want them. Or, they will have startup capital, weddings, house down payments, or gap years. How, you ask? Some modest investments, time, and dependent capital gains harvesting.
Investing In Your Child’s Financial Future
When my oldest daughter was born, her uncle Dan gave her a gift of $100 with the following instructions:
New Baby-
Tell your Dad to open an investment account for you (if he hasn’t already) and put this cash into the account. When you turn 21, you can have a big party with all your friends!
Uncle Dan
Any time she received money from other family members, we bought more of Vanguard’s total stock index ETF, VTI. Turns out infants don’t really need much more than diapers and onesies. So, we asked family members for any gifts during her first few years to be cash too. I also split up my 529 contributions so that every paycheck I put a bit more into this account instead of the 529.
Over time, we just kept adding more shares. Once her account crossed $3,000, we converted it to Vanguard’s total stock index fund, VTSAX and set it to auto purchase a little bit each pay check.
It has been a very positive 5 years during her investment career. I looked at my records and plotted the historical growth of her UTMA account. Being a nerd, I also extrapolated 3 scenarios into the future:
At the low end, we’re just contributing $300/yr and the account grows at a rather paltry 3%.
The nominal scenario has us contributing about $850/yr with the account growing at 5%.
In the high scenario, we’re adding $1700/yr and it all grows at 7%.
Three potential growth scenarios for a child investor
It’s a proud papa moment when my almost 6 year old is able to peer into her young adult years and have between 25-95k in capital at her disposal. Thank you, Uncle Dan!
Now for the fun part: Dependent Capital Gains Harvesting
As the market moves up and to the right, I periodically sell VTSAX and buy something similar like Vanguard’s S&P500 index fund, VFIAX. This is a taxable event. We sold shares for a profit, and my daughter, our dependent, owes capital gains taxes on her earnings from the sale. Note: to keep things simple, I’m assuming no other types of income (no dividends, no interest, no earned income).
For minors in 2023, the IRS taxes capital gains on up to $2200 of unearned income per year at 0%. My oldest daughter is almost 6. This is her only source of income. While she is our dependent, as long as she doesn’t profit more than $2200/yr, she owes nothing on the gains for that year.
Once she is no longer our dependent, she will be eligible to pay “filing single” capital gains taxes. Let’s pretend that we’ll flip that switch when she turns 18. That may not reflect reality, but it’s an example. In 2023, for individuals filing singly, the IRS capital gains tax rate on up to $40,400 of taxable income is 0%. Let’s take the low balance scenario and see what her cost basis looks like at 21. Remember, we’re making some assumptions here:
Selling enough shares each year until she turns 18 to lock in $2200 of capital gains with 0$ of taxes owed
After she turns 18, selling enough shares each year until she turns 18 to lock in $40,400 of capital gains with 0$ of taxes owed. OK, this may not be as realistic, but it should illustrate the point
A Deeper Look At The Scenarios
Using capital gains harvesting for a dependent while she has $0 of other income, by the time she reaches 21, the entire balance of her after tax account will already have had the capital gains taxes paid…at 0%!
Low balance scenario where we contribution ~$300/yr & it grows at 3%. See how quickly the basis catches up to the balance (the purple line is right at the orange line by the time she is 7). That’s the power of harvesting capital gains for your dependents.
By making these taxable transactions periodically and harvesting her capital gains, she will incrementally increase the cost basis of her investments. As her new cost basis increases, she has a lower potential tax burden in the future. The next two scenarios are a little more aggressive, but also show the power of this approach. Here’s the nominal scenario (contribute about $850/yr; grow at 7%/yr) resulting in around $50,000 of investments with little to no tax obligation at age 21:
In this scenario, the growth is high enough that she needs one year of filing single to fully catch back up. The net result is that by 21, she has a big asset with little to no tax obligation.
Finally, the high growth scenario is truly exciting. Yes, we’re contributing $1700/yr, which could be a pretty high burden for some folks. And, the funds are growing at 9% year after year. That’s high, but not unreasonable, I hope.
There it is: nearly $100,000 of assets with ~$0 of tax obligations against them. How cool is that?
By age 21, she has nearly $100,000 of investments, again with nearly $0 in tax obligation. Have a crazy cool 21st birthday? OK! Pay off a big chunk of student loans? OK! Down payment for a house? OK! Seed capital for a business? OK! It’s enough that she can do almost anything…but she cannot do nothing.
Disclaimer: While we have a passion for providing entertaining, informational, and possibly useful articles about personal finance, we’re just random people on the internet with no formal credentials or expertise. Talk to a licensed professional advisor if you need advice.
A 50% decline is bigger than a 50% gain if it happens first. Let’s take a quick look at Sequence of Returns risk.
Your investment portfolio is represented by a pie, raspberry if you like.
Yes, that is a full pie.
Pretend that you have worked hard for 15 years, saving 54% of your income and are ready to embrace your financial independence. The day after you step into your new life, the market crashes 50%, wiping out half of your portfolio’s value. Think of your portfolio looking like half a pie now. Ouch.
One half of the pie. It was either “lost” due to declining portfolio value or after eating.
In our simple example, it is a volatile market. The very next day, the market soars 50%!
You’re back to where you started, right?
Nope.
You’re only at 75% of your original balance. A 50% gain after a 50% loss is only a 25% gain on the original amount.
Take away half the pie and then add half back. You don’t get the full pie.
If you needed to buy groceries or pay your mortgage (or make any withdrawal from your portfolio) while the market was down, you have even less left.
This simple example illustrates sequence of return risk where a decline in the portfolio happens shortly after someone starts to draw from it (e.g., in early retirement or FI years).
How to mitigate sequence of return risk:
Manage your asset allocation. Keep some bonds, cash, & stocks in your portfolio, especially if you’re planning to draw from it soon. In this way, you won’t have to sell stocks when they’re down in order to eat.
Continue to generate some income so required portfolio withdrawals can be reduced. If you keep working or pick up some extra work, that income can be used for living expenses instead of selling assets at a loss during an early down turn.
It’s now a tradition for bloggers to do year end write-ups and forward looks. This post certainly aims to pull together threads of a 2020 review and a 2021 look ahead. I’m also introducing a demonstration of exponential growth and a trade-off between two different modelling approaches. Let’s begin. while my general sentiment is to say, “Good riddance” to 2020, we’re super privileged to have escaped mostly intact (knocks on wood)…
Let’s start with what matters most:
Health
We’re healthy, all of us. We took as many precautions as we could to minimize our Covid19 risk throughout last year. We’re patiently waiting for our turn to get vaccinations and look forward to some semblance of normalcy. Our hearts go out to the millions of families who have lost loved ones and to the millions more whose lives have been upended.
We survived the in-hospital birth of our second child. We now have two healthy girls! After a significant scare with my wife’s health post-delivery, I have a healthy partner again. I am so grateful to have healthy girls in the house.
Next, as this is a website about the journey to financial independence, let’s talk money.
Wealth
I actually wasn’t planning to write a 2020 review/2021 forward look. But, then I stumbled onto a thread at boggleheads about the shape of folk’s net worth curves. I think this is a fascinating topic and worthy of exploration. As we’re still starting out the 2021 calendar year, I was inspired to reflect on several lessons from 2020 and look forward to 2021 and beyond.
Exponential Growth Is Real
The path for financial independence feels like a marathon. But, unlike a marathon, the first miles on your journey to financial independence are the hardest. We scrimped and saved to pack pennies into our accounts only to see minor or maybe modest gains year over year. It felt like financial independence was totally out of reach. But, through the steady inspiration and encouragement of the online personal finance community, we kept at it. We’re not there yet, but that exponential growth curve makes me do a double take every time I see it.
Here’s a plot of our net worth since I started tracking it in 2009.
Exponential fit of our net worth growing over time. How cool is that!?
While it doesn’t feel life altering yet (in part because we cannot touch most of our net worth), it sure looks like we’re on an exponential growth curve, even with our conservative asset allocation. Why do I think this: a little statistical concept called standard error.
Standard Error
I’m not going to delve deeply into stats here, but this concept is useful here and will be again in many of the other topics discussed. Standard Error is a measure of spread. It tells is how much distance is between a group of data and some statistic. In this case, we’re looking at how far the points are from the fitted line. When comparing different models, smaller standard error (less distance) means the fitted line is likely a better fit for this data.
Let’s try it. We see the fit and standard error for the exponential growth model. Here’s the same data with a linear fit. Just eyeballing it, you can see this line doesn’t match the data as well. Standard error calculates the distance from the fit line to each point. Models (lines) with better fit have smaller standard error.
Linear regression model fitted to our net worth growth over time. Not such a good model, but in this case, I’m OK with that.
Take a look at the exponential model again, especially at the most recent months. The most recent points are consistently above the fitted line. You could attribute this to our investing genius. Or, maybe irrational exuberance round 2. This model is not perfect either. We need to be very careful not to extrapolate too far into the future lest the difference between the model and reality becomes too big. I don’t think we’ll be 401(k) billionaires in 20 years!
Between the two models, it’s obvious that exponential growth is a better fit, both visually and using math. Now that we can measure our net worth growth and fit a decent model to it, let’s dig into why the shape of the curve looks the way it does. We’ll also discuss what we could be doing differently to change the shape.
Analysis: Why Our Net Worth Is At An All Time High Despite The Pandemic
Despite the worst health crisis in a century, our net worth is at a record high. Why?
We kept our jobs
We benefit from the booming equity market
We benefit from the booming real estate market
Our rental business has lower but still positive cash flow
We Kept Our Jobs
Let’s take each in turn, starting with our jobs. Like it or not, our jobs provide 90+% of the income into our lives. Therefore, as much as I grump about being a W-2 employee, these revenue streams are important! We both work hard to contribute as much value as possible to our employers in the hope that they will continue to provide gross income in exchange.
Call it fate or luck, both of us have continued to be gainfully employed throughout the pandemic (knock on wood!). This means our ability to save/invest/grow net worth continued throughout the pandemic. One of my favorite pod-casters has a whole series on why the number one task of any employee is: “Don’t lose your job.” Obviously, that can be easier said than done depending on the industry and ones’ specific circumstances. Regardless, the number one priority for each of us is to maintain our respective revenue streams.
We Benefit From The Booming Equity Market
While we’re not 401(k) millionaires (nor “Teslanaires”), we have consistently invested in a broad mix of index funds for the past ~20 years. (OK, OK, we do have some “dumpster fire money” in individual stocks). That said, we’ve largely maintained an asset ratio of 60% stocks and 40% bonds over this period. We re-balance when things get too far from that mix. I know: it’s boring. No options trading. No short selling. I couldn’t even tell you what a put or a take is. And, I don’t really care. What I do care about is the overall growth of the equities market, namely the S and P 500 and the total market indices. Their values have exploded relative to the values of our other asset classes (e.g., bonds, cash, and real estate).
If I am honest, over the past several years, stocks have been the main engine of our net worth’s exponential growth. We keep these other asset classes around for when the market inevitably turns. But, just like JL Collins says, “Toughen Up Cupcake.” Embrace the volatility that comes with exponential growth via the stock market.
We Benefit From The Booming Real Estate Market
Speaking of other asset types, real estate remains my favorite. I love the tangibility of it. I love the chance to provide meaningful value directly to other people. I love the way the government treats it when tax time rolls around. Thus far, we only have one rental unit, a nice 2 bed, 2 bath condo. We took this plunge back in 2015. While we’ve had one challenging tenant, for the most part, it’s been an awesome investment. We negotiated with our current tenant at the start of the pandemic: lower rent in exchange for an 18 month lease. It was a relief not worrying about filling an empty unit during the lockdown. Most importantly: we’ve been able to maintain positive cash flow throughout these crazy times.
And, guess what, due to the booming real estate market, the theoretical value of the property rose too. Of course, we’re not interested in selling any time soon. But, we do track the market value of the property as part of our net worth (discounted to an investor friendly price). Lately, our real estate has grown, maybe not with the same exponential growth that equities have, but I believe real estate will be a lot less volatile whenever the next downturn comes.
Our other real estate, our primary residence, also shows a decent lift in the market value. Again, we’re not planning to sell any time soon, but these increases do contribute to net worth growth. They also buffer our net worth during down turns. While real estate may not be negatively correlated with stocks, it tends to be less volatile. Unfortunately, our house (like everyone’s) is not really an asset. It consumes cash rather than contributes it.
Our Rental Business Has Lower But Still Positive Cash Flow
You cannot eat net worth.
This is an interesting realization. So many of us are taught to invest in stocks and bonds so that we can take advantage of their long term appreciation. The plan is to sell some of these appreciated assets during our retirement years. The hope is that we draw down our pile slowly enough to die before we run out of money. As long as you stick to certain assumptions, this works pretty well.
Let’s talk about tax deferred retirement accounts for a minute. If you want to draw from your retirement pile before retirement age, the government charges a fee of 10% Further, because you put tax advantaged dollars in, you will pay income taxes on the dollars you take out. No opportunity to pay the potentially lower taxes on dividends or capital gains.
The cash that a rental property generates (assuming it is not held in a tax advantaged account) is available for use immediately. And you don’t have to sell a bathroom from your rental property to get the income. (This is unlike stocks where, unless you are only spending the dividends, you have to sell part of your base.) That’s what rent is for. I can feed my family today using the positive cash flow from our rental. Or, I can reinvest it for the future. This flexibility is awesome.
When the pandemic hit, our tenant reached out to us looking to renew his lease with us. In exchange for an 18 month agreement, he asked for a 20% discount. He’s a great tenant, and there was a pandemic just starting! We wanted to keep him We did a little math and offered a 15% discount. We agreed and signed the new lease. I’ve never been happier to give a discount! So, while our business income is down, we avoided (for at least a while longer) a dreaded vacancy.
Resiliency
To me, all these things add up to the beginning of a resilient lifestyle. If one part of the system fails, the rest of the system can absorb the shock and we can continue onward. It helps that we have a pretty big gap between our total income and our total expenses, again part of a resilient system is avoiding overloads. For example, if I lose my job, between my wife’s job and our other income sources, we could continue to maintain a substantial portion of our current lifestyle. If we have a vacancy in our rental property, we can afford to cover the expenses using cash reserves and surplus income until we can get a new tenant. We have tried to set up our affairs such that some part (or parts) are always able to perform.
To see a master of multiple income streams and truly resilient financial setup, check out John C over at actionecon.
There will be ups and downs; there will be bumps in the road. The hope is that through good times and bad, we continue to stay the course: keep earning, saving, investing, and growing. When the pandemic hit and now, as things recover, our assets continue to grow… hopefully for decades to come.
Actions to Take in 2021
No one has a functional crystal ball, so I’m always leery of forecasting economic or market movements. Regardless of your circumstances, I think there are some fundamental ways to approach finances in 2021.
Grow your gap either by increasing your income or decreasing your expenses. This is a good action to take in almost any set of economic circumstances, market conditions or time of your life. Today is no different. The job market may be terrible or amazing; reducing expenses gives you more financial runway in case of a change in your employment. The market may be high or low. Having a bigger gap gives you the ability to invest that cash directly or save it for another opportunity.
Adjust your asset allocation. Whether 2020 was financially kind or terrible for you, it’s a good time to review your specific situation and adjust your mix for the coming year(s).
By some measures, the US stock markets are significantly over-valued. If your asset allocation percentage is out of balance, this might be a good time to rebalance. You can lock in your gains from the past 10 months of ear-popping highs. Be sure to balance prudence with the fear of missing out. No one knows how high (or how low) an asset class will go tomorrow.
Age adjustments. We turn 40 this year. We have 2 kids. Our risk profile looks way different now than it did 15 years ago. Back them, we could say go all-in on the stock market. Now, our asset base has grown, and our appetite for full risk has perhaps decreased a bit…or not. I’ll save a discussion of how we approach risk/allocation for another time. Regardless of what our asset allocation was for the past 10 years, we may need to have a different ratio for the next 10 years simply because our runway to needing to use our assets is a lot shorter. And, the same may be true for you. Think carefully about how much risk you are really willing to accept. My heart goes out to the family of this young investor who took his own life after (mistakenly) thinking he lost almost $750,000. I know our allocation is pretty conservative, but I sleep well at night. I hope you do too.
Pay down debt. For us, this would most likely be early payments on the note at our rental/primary residences. We’re not rolling the dice with Bitcoin. Instead, every extra dollar we pay towards our mortgages, comes with a guaranteed interest cost that we avoid paying. It’s like our own bond fund.
Keep plugging away; exponential growth is alive and well. With that, we wish you and your loved ones a prosperous 2021 and beyond.
