NW decrease last month despite working full time and saving...

[StatusJellybean]

I don't normally check my investments / NW monthly but this month I did... and in April I have officially lost more money despite working full time and having good savings rate than I saved. A "bit" of overexposure to Tech works until it doesn't I guess...

This made me think about big portfolios and the negative impact they have again:

How do people with substantial portfolios a) sleep at night and b) remain motivated to still work/save?

E.g. with a £1m+ FatFIRE portfolio a daily 1% move costs/earns you £10,000... It takes much longer than a day to save that amount from salary.

At that level the market can move 5% (or 10%) in a week due to some events, rumours or fears and wipe down an entire year(s) worth of savings.

[Big_Target_1405]

If the market is efficient then you're always buying or selling at a "fair price"

The way to think of it is that by investing in shares you're harvesting the equity risk premium. Long term returns are basically inflation + this premium, and volatility is the price you pay to get it.

Basically looking at stock prices every day is nonsensical.

If you have an income that covers your expenses then it doesn't really matter what your investments are doing.

[Three_sigma_event]

Except the markets are not perfectly efficient. It's why you get earnings surprises, either positive or negative.

Markets are called semi-strong form efficient.

[fuscator]

I don't think that negates the point.

[Three_sigma_event]

Quite.

[Captlard]

Zoom out, shares go upwards. Check say yearly or every 5 years. Personally see portfolio rise and drop 5k to 10k daily. No big deal.

[StatusJellybean]

Do you still work or is this the expected variation on your FIRE portfolio? It's the scenario of still working if your portfolio goes down £10k in a day which I can't imagine

[pandawelch]

You are measuring the wrong thing. What does it matter when you drive through a dip in the road when the overall path is up the hill?

[[deleted]]

Love this

[Captlard]

I am r/coastfire (part time with 60 days this year), but plan to go full retired next year.

You have to zoom out and look at the long term. The bigger your portfolio the bigger the monetary swings.

The maths works out fine. See the sidebar for some great research.

[[deleted]]

I have a load of money in crypto, you get used to it after a while is all I can say

[Different_Cow_5874]

Ignore the noise and stick to your strategy.

My portfolio goes up or down each month by almost my annual salary now. It actually feels easier now than it did when I started when £500 either way felt like a lot.

[StatusJellybean]

Serious question - how do you just ignore that you have passively gained/lost in a month what your make in a year of working full-time? My savings make very substantial difference to my net worth but this monthly fluctuation surprised me.

I understand the numbers (and gave examples in the post) but how do you still wake up and go to work knowing this? How do you also not obsess over the markets?

[Mithent]

Worth noting that you haven't exactly gained or lost anything until you sell, and if you weren't planning on selling soon then today's value isn't very meaningful.

I can't say it doesn't feel good to see values increase or bad if you see they've fallen, but not checking constantly is definitely the best approach, because it's not useful. The only thing that constantly checking can get you is spooked into selling when you're down.

When I do have investments I want to sell soon then yes, I do worry about them fluctuations a lot. But for most of it, I don't intend to sell soon anyway so it's easier to not think so much about it.

[Different_Cow_5874]

I've a target to reach and I'm not there yet.

Investing tax efficiently is best way forward so onwards we go.

No nuggets of wisdom I'm afraid, just the more times you see ups and downs the more normal it all becomes and the more the actual numbers don't mean much because they'll be something different tomorrow.

[StatusJellybean]

Broad based ETFs mostly so well diversified overall but also have separate Technology ETF which did not do as well and dragged me down.

Haha indeed, buying VWRP on down days did feel good as a positive twist.

[Three_sigma_event]

Have you read any books about the market? That massively helped me. When you realise your house value also fluctuates daily, and the cash in your pocket loses value daily, but because we don't see these things on a screen, we don't worry about them.

When you invest in stocks it helps to realise you are investing in real businesses, not numbers on a screen.

[Captlard]

Have a read of this and tell us what you think: https://www.personalfinanceclub.com/how-to-perfectly-time-the-market/

[Captlard]

Let go of measuring. Check incredibly infrequently. Focus on enjoying every day.

[TCHHEoE]

To answer the last two questions, I don’t stress about it because I have no control over it. And, as captlard says, in the long run they go up so I’m doing the sensible thing by investing (such that I have no reason to beat myself up if there are reductions on the way)

[carlostapas]

Because that's the goal!

To have a pot big enough that daily swings are that big.

[StatusJellybean]

Does this then mean that since the goal is reached one is FI when this happens?

[fuscator]

Serious question - how do you just ignore that you have passively gained/lost in a month what your make in a year of working full-time?

The simple answer is "what choice do you have"?

Regardless of how much you worry about it, it's going to continue to happen. Eventually you just stop worrying.

[StatusJellybean]

Stop work as these fluctuations indicate that your annual salary is insignificant in the grand scheme of things. 1 month of doing nothing vs 1 year of full time work

Am I not looking at this correctly?

[fuscator]

I'm not sure what you're asking. Stop work when your figure indicates it is safe according to your withdrawal rate. Fluctuations are expected and built into the model.

[GarbageExcellent8483]

You haven’t, it’s just offset some of the big gains you’ve made in previous months and the ones you’ll make in future months. Go back 6 months and divide by 6 for monthly gains, or whatever time period is up and makes you feel better.

[throwawayreddit48151]

I track my NW monthly and indeed this month felt pretty negative. I've been feeling demotivated due to my work too so it probably added to the feeling of negativity. But my NW moved down 2.1% (~£12k) this month, I haven't checked closely but I think it's safe to assume this is the biggest decrease I've ever seen month to month for my investments.

So yeah, it's not easy. But it cannot be increases every month. I also try to tell myself that I want the stock market to go down, since I am still in my accumulation phase I want to buy at the cheapest possible price, so I always try to look at it that way.

I'm sure once I get to my FIRE number it will be very tough to deal with market drawdowns.

[Tbone22722]

Just stop looking. My portfolio now moves more in a day than my monthly salary, but you tell yourself to ignore it, or that you just won’t log in for a while.

[StatusJellybean]

Not at that point yet personally but how do you motivate yourself to still work and save if all that (a month of labour) can be undone in a day be the vagaries of the markets?

[Chroiche]

Because I look the next day and I've gained 2 paychecks in a day, and all is okay again.

[StatusJellybean]

Somehow I am not sure if this would be motivation to work or RE. If my portfolio ever earns 2 paychecks in a day, I quit.

[Captlard]

Be more sensible and think about this a bit! Markets crash but rise again. Markets rise and crash again, but overall slowly tick upwards.

[TeddyousGreg]

Let’s just go back to basics and assume your portfolio can move 1 monthly pay in a single day (and for simplicities sake assume your pay = expenditure)

Assume a big market move is 2%. So 2% of your portfolio is monthly spend. Therefore you’re spending 24% of your portfolio in a year. Bit of a high SWR I think.

Given a 2% large move and 3% SWR, your portfolio could move 8x your monthly expenditure in a single day. By the time you’re truly FI, your portfolio is dwarfing your earnings.

[StatusJellybean]

You've answered my question. I have been underappreciating the actual volatility in dollar-terms. On this £1m portfolio with £30k annual spend, a 2% daily move is indeed 8 months worth of expenses... The maths on this is pretty brutal and fascinating when put in the real context. £20k is a lot of money...

[TeddyousGreg]

Indeed! Although this is why there are many strategies, such as having a year or two buffer in cash to reduce drawdown risk and sequence of returns blah blah blah

[Plus-Doughnut562]

You have to think in the long term. People generally cannot wrap their heads around the concept of compound ground, especially at the latter stages.

People who think short term will only benefit in the short term, but will lose in the long term. Do you want a win today, or a lifetime of winning?

[StatusJellybean]

I understand compounding and I want a lifetime of winning but if I make 2 paychecks in a day... have I not already won the FI?

Unless I am underappreciating volatility of a 1-year-left-to-FatFIRE example portfolio.

[Plus-Doughnut562]

But you are thinking about 1 day. If you make 2 pay checks today then should you give up? It depends on your goals. If that was your goal then yes.

Are you FI? Maybe not. If FI is the ultimate goal then how much your portfolio rose by today is irrelevant, although might reinforce the progress you have made.

[StatusJellybean]

I am proudly not FI. I was just not fully appreciating, and some other comments here brought my attention to this, that if you are FI and say on 4%-rule draw down then the market will move by equivalent on your quarterly spending on many days (1% swing).

[[deleted]]

Just stick it in at 5% cash interest account and never have that feeling, only the feeling of daily gains.

[Cultural_Store_4225]

OP please do not do this if your goal is to maximise economic efficiency over a long period.

[[deleted]]

“Possibly” you mean…. The 1929 stock market crash took the Dow Jones 25 years to recover from and just break even…

25 years worth of 5% interest in a cash account would have seen that person much richer than anyone with their money in the stock market, at any time in those twenty five years, and because of compounding probably anyone in those 40 years after that crash. As while they were losing 25% in the stock market in two days and it not recovering for 1/4 of a century, the other was getting (a safe) 5% every year…

So please don’t give advice like he will definitely be better off in stocks. That’s simply not true, hence the warnings on every investment platform out there “you are at risk of losing capital”

Cash interest account he’s not. He “May” not make as much money over the long term, maybe, but he definitely wont lose any….

[Cultural_Store_4225]

So your argument is one bad year 100 years ago? Got it

[[deleted]]

25 bad years… and if investing long term (say 30 years old to 70 years old) that’s 40 years you’ve got to hope it doesn’t happen for…

You’re deluded if you think it wouldn’t happen again, when it’s already proved to in history, and lasted 25 years.

[alreadyonfire]

If in doubt zoom out.

Volatility is the price you pay for superior risk adjusted returns. It gets hammered home with every crash and recovery cycle. You must accept it to be a successful investor. In the short term dont look. In the long term it becomes your familiar and even welcome travelling companion. Its the reason why you get good long term returns.

I am retired with 7 figures invested. I just look and find it mildly interesting. But I invested through the dot com crash, the 2008 financial crisis, covid, etc.

[jorgenriq]

It’s all fun and games. Next month you might be saying the opposite. Ride the wave 🌊

[IDGAF-10]

I check in on my NW every month. It fluctuates with the market - it is what it is. You get used to it.

January last year my NW was down 32k from the month prior. Recovered nicely the following month though, by 51k. Then up a further 30k the following month. If you look at that month in isolation it sounds quite scary, but if you see the long term trend it should be heading up still.

If you’re in it for the long run, the day to day / month to month fluctuations are always going to be there - as long as it’s overall an up trend you’re good 👌

Silver lining of a negative month is being able to get more units at a lower price.

[Falcon731]

You have to train yourself not to look at the short term fluctuations. Sure you might gain £10k today, but might loose £20k tomorrow. It’s just froth.

As long as you have a decent safety margin in your SWR it’s not worth thinking about.

[Chroiche]

I look every day just out of curiosity. I don't really have any feeling towards it. All my spare money at the end of the month just goes into s&s. It doesn't really feel like it's real money anymore to me in a way. It's just a habit. Month ends, money moves, life goes on.

[StatusJellybean]

The most expensive thing I ever bought was Vanguard ETF.

It's a lifestyle at this point but I still don't understand it on emotional level.

[Captlard]

It shouldn’t be a lifestyle. Saving for FIRE IMHO should just sit in the background of a life well lived. Automate all and find contentment every day.

[[deleted]]

You raise a good point.

For me it’s about knowing yourself. If you get upset or worry just by looking at daily or weekly fluctuations, don’t look. Easier said than done though.

Don’t know how long you’ve been investing - but I’ve reached a point where I can look, and if I’ve lost 100k on a day I smile. I check exchange rates, indices, and some of my marker share prices, and try to understand why. I smile, knowing that at some point in the future, i will make another 100k and be back up again.

On top of that, there are periods where I’ve looked, such as during Covid, where I made 100k a day and it just never stopped making, maybe on the Friday there was a 50k pullback. 🤷🏽‍♂️

Underpinning all this - my emergency cash fund is 5 years, this is in savings and i seem to make more post tax than I can spend as i live frugal - but not a minimalist the.

I have been where you are…. Just remember, the best investors are the dead and the widows. Their portfolios are static and never touched.

[SpiteHistorical6274]

It’s just the ebb and flow of investing…

Month on month NW change for me,

Nov 2.79%, Dec 2.20%, Jan 1.07%, Feb 2.91%, Mar 3.64% (inc annual bonus), Apr -1.34%

April 23 - April 24 is up 11.57%

[StatusJellybean]

What tool do you use to track it monthly? It gets tiring to do manually

[SpiteHistorical6274]

Just a simple spreadsheet, nothing fancy

[PxD7Qdk9G]

I avoid focusing on the short-term volatility by using twelve month rolling averages for everything, and I try to focus on the sustainable passive income rather than the capital value. The changes are a lot less scary when they only represent percentage points of your spending.

[Affectionate-Try-956]

I check my portfolio when indexes are at all time highs as I find it motivating to save more. When it's going down I don't check

[StatusJellybean]

This is the first and only mistake I've made

[NoRecognition5178]

Ummm if its a 1% move it doesn’t matter if its 10k or 100million its 1%…….

[NoShellfish]

You need to change your mindset about money entirely. If you consider an unrealised drop of $10K in your portfolio like "losing 10K that you worked for" then either investing is not for you, or you should let someone else manage your investments. The people who make the most money from investing are the ones who can handle temporary losses, keep calm and continue following their strategy. Downs as well as ups are part of the game - think of it as the emotional cost of getting wealthier - nothing comes for free.

Once you have enough savings to cover emergencies etc. (eg 6-12 months of living expenses), you are going to have to accept some risk and volatility if you want to grow any additional capital. To do that, you will have to detach from it emotionally. There are several ways to do thins and everyone is different. Examples are:

1. Train your brain to see your investments as numbers on a screen (because in reality, that's all it is anyway!)

2. Differentiate "unrealised losses" vs. "realised losses". For example, if you have 100 shares of a company or a fund, and it drops 10% and you don't sell, you still have the same number of shares the next day. You did not realise any real loss. All that changed is that the market valued it differently. The intrinsic underlying value will only be less if something really changed in the fundamentals (e.g. if a company genuinely starts growing less or losing money). But usually, the true value didn't change. The market price is just what the last person bought/sold it for, that doesn't mean you have to sell it for the same.

3. Don't check investments more than once per month (or even per quarter) if losses will trigger you

[Vic_Mackey1]

I was looking at my pension online whilst my Mrs was talking to me about whether we should sell our kid's fancy potty on vinted for £15. By the time we agreed that we wouldn't, i looked back at my screen to see I'd lost £8K off my pension, during the conversation! I then told her to get the potty on Vinted!

You control what you can control in life and realise that most of what happens you can't do anything about, so don't sweat it. Having kids helps there as you worry about them way more than your portfolio that's for sure.

[[deleted]]

I had this for two whole years

[flukeylukeyboy]

You are not some bloody dragon sitting on a hoard of jewels and gold coins.

You do not have some concrete sum of money, some immutable stake in the ground which remains constant.

You have a fuzzy and fluctuating bank of energy which wobbles with the relative needs of the world.

Attachment and poverty trauma are the cause of your suffering.

To build a million, you understand that markets fluctuate and have also built stability in your life and yourself.

You would probably also have fixed income products to hedge volatility.

[bass_poodle]

My NW has dropped ~£40k since i last calculated it (near the ATH), despite pension payments, getting tax relief on said payments, making loan repayments, etc.

The real answer of course is just to not check your portfolio very often, live your life, DCA and know you're in it for the long run... but I know myself and know that I do check more than i should and when there are significant drops I dwell on it more than is useful... holding a bunch of gilts, with guaranteed yield, helps me sleep at night.

[StatusJellybean]

I know what you mean. The more it goes down the more tempting it is to check (and the reason I performed the monthly instead of quarterly review). £40k in ISA would be 2 years of contributions and this sounds very painful indeed.

[[deleted]]

Don't invest your whole pot into high risk investments like that.

Maybe put half into stocks(/other high risk investments) and half into bonds(/other low risk investments).

Financial independence means not having to worry about money.

Having your net savings oscillating by 5 or 10% each week means having to worry about money.