Author Topic: Observation on the psychology of the stash: hitting the win-win zone  (Read 4022 times)

lhamo

  • Senior Mustachian
  • ********
  • Posts: 10077
  • Location: Seattle
I have been tracking our net worth on a daily basis since October 2008.  It has been really fun to see how the crash and the recovery affected us -- in short, it made us very, very wealthy because we didn't sell any assets, bought both stocks and property strategically as the market was bottoming out, and dollar cost averaged throughout.  Our net worth is now more than 3x what it was at the bottom (which for us was March 9, 2009). 

With the gyrations of the market the last few months, I have observed an interesting change in my psychology.  I am totally in the win-win zone these days.  When I look at my net worth balance, especially in relation to the days when our retirement investments hit the books, I have one of two reactions:

1)  Market is up: Yay, our net worth is higher!
2)  Market is down: Yay, we got more shares on sale this pay period!

I have pretty much had this mentality since the bottom of the market days, but there used to be a little twinge of sadness/worry on down market days.  I think I have hit the zone where our net worth is high enough that I don't even have that twinge anymore, though.  We could have our net worth drop by 50% or more and would still be very wealthy.  Good place to be in.



forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
I have been tracking our net worth on a daily basis since October 2008.  It has been really fun to see how the crash and the recovery affected us -- in short, it made us very, very wealthy because we didn't sell any assets, bought both stocks and property strategically as the market was bottoming out, and dollar cost averaged throughout.  Our net worth is now more than 3x what it was at the bottom (which for us was March 9, 2009). 

With the gyrations of the market the last few months, I have observed an interesting change in my psychology.  I am totally in the win-win zone these days.  When I look at my net worth balance, especially in relation to the days when our retirement investments hit the books, I have one of two reactions:

1)  Market is up: Yay, our net worth is higher!
2)  Market is down: Yay, we got more shares on sale this pay period!

I have pretty much had this mentality since the bottom of the market days, but there used to be a little twinge of sadness/worry on down market days.  I think I have hit the zone where our net worth is high enough that I don't even have that twinge anymore, though.  We could have our net worth drop by 50% or more and would still be very wealthy.  Good place to be in.

Yeah, it's great! I've been 100% stocks since 2001. When the 2008 crash happened I just wished I had more money to buy stocks. I'm probably up 10x since the crash. I wish prices would drop again so I could buy more.

Spondulix

  • Pencil Stache
  • ****
  • Posts: 643
  • Age: 39
  • Location: Los Angeles, CA
I think of it like a Zen approach... I have a couple co-workers who are just starting to get into trading, and some days they'll say, "did you see the market went up a ton today?" My response is, "Is that so?" If they say, "I got killed in the market today!" My response is usually, "Is that so?" It's really interesting to see (when you're looking at it from a place of not having an emotional response) how much of an emotional swing they have.

humblefi

  • Stubble
  • **
  • Posts: 107
    • Humble FI
A couple months back, I had a similar thought process when somebody in the forum mentioned that 1 in 4 Americans feel stressed about money. I spent some time thinking about this and realized that how one feels is directly related to amount of UNCERTAINTY in one's life. Many years ago when I started working, a drop in $10K in my portfolio was a big conversation topic at lunch....not so much today. I attribute it partly due to improved finances but the rest due to reduced Uncertainty in the area of money by better planning of my path to FI.

I wrote some of my thoughts here: http://humblefi.com/2015/02/20/money-stress-how-i-am-trying-to-manage-it/.
Take a peek if you have some time.

Thanks for the nice topic!

bearkat

  • Stubble
  • **
  • Posts: 122
  • Age: 30
  • Location: California
On a daily basis? I check ours monthly and I'm thinking that might be too frequent ...

What do you like about tracking your net worth that often?

Doubleh

  • Bristles
  • ***
  • Posts: 284
  • Location: London

1)  Market is up: Yay, our net worth is higher!
2)  Market is down: Yay, we got more shares on sale this pay period!


This is pretty much where I'm at now, although I've come from the opposite direction! I used to love when the market went down as I could buy more stocks and still do, but I'm gradually learning to appreciate the upswings also - probably easier as my investments have grown and I see months where our investment go up as much as we earned.

lhamo

  • Senior Mustachian
  • ********
  • Posts: 10077
  • Location: Seattle
On a daily basis? I check ours monthly and I'm thinking that might be too frequent ...

What do you like about tracking your net worth that often?


Maybe I have undiagnosed OCD and this is how I deal with it! Ha...

We had hit our first $1mill net worth in 2007 and I had originally thought we would stay above that once we hit it.  But then the markets started to get scary so I thought, well heck, let's track it and see what happens -- how bad it gets and how long it takes for it to recover.  Because I was pretty confident even if things got ugly and we dropped below that mark it would eventually recover and we would hit that $1 mill on the upside again.  Didn't know if it would take months or years, but wanted to see what the ride was like and how it would feel to watch things drop, and then come back again. 

And it did come back. And now I have several years of data points that show we can have huge drops in one day, as well as huge gains, but that overall the trend has been nicely, steadily upward. 

Or again, maybe it is just undiagnosed OCD.  Works for me anyway.   I have all our accounts in an online aggregator, so checking the networth balance takes a couple of minutes tops.  It is part of my morning routine. 


Workinghard

  • Pencil Stache
  • ****
  • Posts: 637
I check daily too.  The twinges when the market goes down are becoming less.  I noticed a shift once we hit seven figures. As that increases, there's less twinges as I'm comfortable with our baseline.  I imagine the twinges will become even less once we start drawing SS which will cover our expenses but not necessarily our play money.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
I glance at the market movements most days. Sometimes if the swing is big I'll do some mental math and say to the wife, "hey we lost x months of salary today". Then a few days later I'll say the opposite (because it generally goes back up). Or vice versa. Mostly I do it to remind her that fluctuations don't matter. We won't be selling anything, so we don't need to take whatever price the markets are offering for our stuff that day.

lhamo

  • Senior Mustachian
  • ********
  • Posts: 10077
  • Location: Seattle
Another data point for the similarly OCD-ish:

Logged on to account aggregator site this morning to find net worth down several thousand. 

Immediate reaction? 

"Hope it stays down until my retirement account shares get purchased on the 15th!"