Reaping The Benefits of Investing: 17.9% YOY Gains Edition
As I take advantage of a 2 day stretch without rain by doing some squats in my rack outside in my backyard, I ponder what article I should be writing for my financial site FJJ. This type of thought usually leads to me having an internal discussion as to what our readers are probably the least aware of. Perhaps I should write something about the benefit of saving a bunch so you can retire early? Nah, that has been done a billion times by me and everybody else under the sun. Even though it is of paramount importance, it seems we at FJJ should try to be more engaging as a general rule and there are much better ways of doing that than sounding like a broken record. Now after my working set, I attempt and miss a 315 lift on a low box squat. How sad. I really am out of shape. This outside gym thing has plenty of perks but I didn't appreciate the crushing reality of working out in the rain and the effect it has on the psyche and motivation. As such I have been lifting less than usual. I tell myself "sure I could probably hit that 315 right now without the box," because I would be utilizing the stretch effect that the box eliminates. But what good would that do? I have already finished my working set and my ego will probably still be intact tomorrow, so the hell with it. And as usual I do not decide on what article to write because I got distracted.
The next day it begins to rain. I sure am glad I got those squats out of the way! I am out the door at about 4:30am and at work within the hour drinking coffee as fast as it will cool down. Amazing how many emails a person can get in a 12 hour period isn't it? Oh right, the article. Well what if in order to be engaging we showed people the benefit of investing? The stock market has been doing incredibly good lately, and I bet normies can't really put the rubber to the road in terms of what that means. Of course I am a proponent of stealth wealth, but percentages are about as stealth as it gets. Maybe I could just share the y-o-y tax coordinated portfolio gains in my betterment account that I opened a little over a year ago. Last time I checked it was doing pretty good let me see here.....
17.9% Year Over Year Return!
Now as you gaze upon my bulk and the gains of the stock market, hopefully this awakens some deep desire in you to get in on the action. The tax-coordinated Portfolio is simply a 401k (rolled over from a previous company) and a separate personal investment account where I invest like a normal person. You do not need both of these to invest at Betterment, but if you have them and you are not planning a withdrawal anytime soon, you can set it up. Keep in mind you can always withdraw money from your normal account at any time, but you will likely be subject to capitol gains (or losses) depending on the performance.
I'm sure a lot of you are already nay-saying these numbers pointing out that I must be running a very high risk portfolio to come up with this. I can assure you these numbers are a product of nothing so extreme.
I mean let's be realistic, the market averages about 7% return annually, so this year is 2.5 times that much. A good year? Yes undoubtedly so. But guess what - I'll take it. And if you had been investing in a reasonable fashion, you would be reaping benefits similar to these already. What if instead of paying down your mortgage with an extra 10,000$, you had invested it instead? With returns like this, you would have made $1,790 over the course of the year while your mortgage was only costing you about 500$ (5% at 10k) in interest (which is a write-off) to hold that 10k. You would have come out way ahead.
Another benefit of holding stocks/bonds is that, if at any time you had unforeseen expenses during the year, you could liquidate your holdings as needed to pay the expenses. Not so with a mortgage account - once you put money in there it ain't comin' back!
Naturally, in come the nay-sayers again. It is a good thing to have a take-it-with-a-grain-of-salt attitude about most financial advice. However, since you need to invest somewhere to get ahead in life and the options are limited, you need to figure out how and where and why to invest. The discussion you should be having right now with yourself can be revolving around the following general topics:
- What is your risk tolerance?
- What is your desired liquidity level?
- Any expenses or risk for expenses coming up?
- Why do I just leave my savings in the back of XYZ making .02% every year even when I don't touch it? Is this money properly utilized?
- Am I advanced enough to incorporate dollar cost averaging to try to 'beat' the market a little?
- Can I even save enough? What if I just put 50$ in every month would that be worth it?
These are the things you need to consider on a personal level, as everybodys tolerance for risk is different. The purpose of this article was to get your internal mechanism of thought primed for a jog with a "carrot" of stock market returns. Admittedly not all times are good times in the market, but would you forfeit the good to avoid the bad? That would be unwise due to the 7% yearly average gain mentioned earlier. All I'm saying is at some point in your life you need to begin this process of introspection, otherwise you won't be able to succeed like you really want to.
And maybe if it stops raining in California every day then I can get huge again.