Lost $200k (22% of net worth) gambling in a month but im ok with it? Denial???

[FIREin2018]

i FiRED 2 years ago at age 47.
single, no kids, house paid off.
i have about $700k in combined retirement (roth/ira) and non-retirement $.
yearly expenses ~$20k so only need $500k - $600k based on 4% rule.

i gambled excess $ on oil, got stupid lucky and made $200k profit last month during this pandemic. ($200k of $900k = 22%)
then i continued gambling in the stock market because greed and a month later, I'm back to breakeven. :(

Easy come, easy go.
it's was excess $ i was gambling with and was ok with losing it all.
i view it as going to the casino with $1000, winning $2000 and then losing that $2000.
i'm more embarrassed than anything else that i lost that kind of $.

but i've been told that im in denial and i'm rationalizing this.
What do you think?

[lhamo]

Have you done anything like this before?

Have you learned your lesson?

If not,  maybe look into Gambler's Anonymous.

[FIREin2018]

Have you done anything like this before?

Have you learned your lesson?
If not,  maybe look into Gambler's Anonymous.

yup, years ago i made $75k in the stock market in a few days.
i didnt sell and lost the $75k.
got out at breakeven.

i guess i didnt learn my lesson. :(

why do you suggest GA if i didnt learn my lesson?
it's still excess $ im ok losing.

[projekt]

This is a pretty well-known result in behavioral economics, that people feel about twice as bad for a $x loss than they feel good about a $x gain.

[John Galt incarnate!]

This is a pretty well-known result in behavioral economics, that people feel about twice as bad for a $x loss than they feel good about a $x gain.

The intensity of the "bad" feelings is a bit more than 2X.

When the value of their portfolio plunges investors' feelings of loss/fear/unhappiness/anxiety  are 2.3-2.5 X the intensity of their feelings of gain/happiness/contentment when the value of their portfolio surges.

[marty998]

Stop losses would be a good option for you if you can’t resist the temptation to “gamble”

[lhamo]

Have you done anything like this before?

Have you learned your lesson?
If not,  maybe look into Gambler's Anonymous.

yup, years ago i made $75k in the stock market in a few days.
i didnt sell and lost the $75k.
got out at breakeven.

i guess i didnt learn my lesson. :(

why do you suggest GA if i didnt learn my lesson?
it's still excess $ im ok losing.

Whatever.  You do you.  I can think of a lot better uses for $200k, though....

[MrThatsDifferent]

I think you think you might have a problem with this. It’s good to be honest, you can tell us anything. I’d suggest either going to a therapist or Gamblers Anonymous. You didn’t want to jeopardize all that you’ve worked for on this behaviour. Understand what is happening with you and take control. Let this be your wake up call.

[Padonak]

You are my hero! Keep gambling my friend, don't listen to Karens.

[FIREin2018]

Have you done anything like this before?

Have you learned your lesson?
If not,  maybe look into Gambler's Anonymous.

yup, years ago i made $75k in the stock market in a few days.
i didnt sell and lost the $75k.
got out at breakeven.

i guess i didnt learn my lesson. :(

why do you suggest GA if i didnt learn my lesson?
it's still excess $ im ok losing.

Whatever.  You do you.  I can think of a lot better uses for $200k, though....

yeah, me too.

i could have splurged on a Tesla.
never owned a fun car before but i have rented ones before.
probably still better to rent just for a weekend.

i do feel like an idiot for losing that much $ though

[2Birds1Stone]

Keep gambling, you will learn your lesson when you're back at work, eating cat food.

[projekt]

Very topical post for me, having just watched "Uncut Gems". Wow, what a trip!

[PDXTabs]

i gambled excess $ on oil, got stupid lucky and made $200k profit last month during this pandemic. ($200k of $900k = 22%)

Was it really excess? I think that is the question.

[Sibley]

Question. Do you have a history of seeking thrills? Doing crazy risky things for the excitement?

[bigblock440]

Have you done anything like this before?

Have you learned your lesson?
If not,  maybe look into Gambler's Anonymous.

yup, years ago i made $75k in the stock market in a few days.
i didnt sell and lost the $75k.
got out at breakeven.

i guess i didnt learn my lesson. :(

why do you suggest GA if i didnt learn my lesson?
it's still excess $ im ok losing.

Whatever.  You do you.  I can think of a lot better uses for $200k, though....

Sounds like they would have never made that $200k without gambling though. 

[bigblock440]

As long as you have a base that you don't ever touch or use to try that, I think it's fine.  You just need to learn to walk away with your winnings a little earlier and stop thinking your luck will hold out.  I think the casino analogy is accurate.

[J Boogie]

It sounds like you need to either re-classify your investment strategies from "gambling" to something along the lines of "high risk short term play" and use something like a stop loss strategy the next time you get the inkling to pursue a high risk short term play.

I self manage my 401k and pursue a few different higher risk short term plays occasionally. Every time I go up a decent amount I trim the positions and put the money into stable and proven up and to the right stocks like MSFT, UNH, etc that never really go on sale or surge all that much.

The way I see it I'm playing against the S&P. My overall strategy to beat the S&P is to avoid the obvious losers it contains while holding a broad base of what are probably winners like GOOGL and MSFT and AMZN. Anytime my other high risk high conviction plays give me even a small edge over the S&P, I take the win and pile it into safe territory where it can compound my performance vs the S&P.



But maybe you're just bored and need a hobby to dive into to keep you from doubling down next time you lose big.

[Chris Pascale]

Having had a couple days of discussing this, what is your perspective?

What stopped you from gambling more money? Do you have a mental safety valve?

[Dicey]

Keep gambling, you will learn your lesson when you're back at looking for work, eating cat food.

[ROF Expat]

i FiRED 2 years ago at age 47.
single, no kids, house paid off.
i have about $700k in combined retirement (roth/ira) and non-retirement $.
yearly expenses ~$20k so only need $500k - $600k based on 4% rule.

i gambled excess $ on oil, got stupid lucky and made $200k profit last month during this pandemic. ($200k of $900k = 22%)
then i continued gambling in the stock market because greed and a month later, I'm back to breakeven. :(

Easy come, easy go.
it's was excess $ i was gambling with and was ok with losing it all.
i view it as going to the casino with $1000, winning $2000 and then losing that $2000.
i'm more embarrassed than anything else that i lost that kind of $.

but i've been told that im in denial and i'm rationalizing this.
What do you think?

Just one thing to consider:  You make reference to only needing $500k to $600K based on the 4% rule.  That's true, but the 4% rule is based on risks modeled on long-term, low-cost investing in index funds.  I don't think it would even be possible to make a guess on what a "safe" withdrawal rate would be for someone who is speculating or "gambling" with significant portions of a portfolio. 

$20k per year is a fairly lean fire and doesn't leave a whole lot of room for you to cut expenses.  If we see another 30% market drop and then a flat market for three or four years, your portfolio could be under a lot of strain.  If you add any kind of loss from "gambling" and/or some unexpected expenses, you might find yourself looking for work.   

It is all your call, of course, but I think you got lucky that you only had paper gains and losses.  If you enjoy "gambling" in the market, you might think about viewing it as an entertainment expense and set a very specific amount to money to do it with.  Personally, I'd keep it physically separate from the retirement accounts that I rely on for income. 

[FIREin2018]

Question. Do you have a history of seeking thrills? Doing crazy risky things for the excitement?

i used to 20yrs ago.
roller coasters, sky diving, bungee jumping.
but since ive done those, i no longer have a desire to do them again.

stock market gambling as a pent up substitute?

[FIREin2018]

Having had a couple days of discussing this, what is your perspective?

What stopped you from gambling more money? Do you have a mental safety valve?

looking back, i'm an idiot for losing $200k.
i didnt need the $ so i let it ride.
it was greed.

what stopped me from more loses was by going up so high that breakeven was a natural stopping point.

[FIREin2018]

Just one thing to consider:  You make reference to only needing $500k to $600K based on the 4% rule.  That's true, but the 4% rule is based on risks modeled on long-term, low-cost investing in index funds.  I don't think it would even be possible to make a guess on what a "safe" withdrawal rate would be for someone who is speculating or "gambling" with significant portions of a portfolio. 

$20k per year is a fairly lean fire and doesn't leave a whole lot of room for you to cut expenses.  If we see another 30% market drop and then a flat market for three or four years, your portfolio could be under a lot of strain.  If you add any kind of loss from "gambling" and/or some unexpected expenses, you might find yourself looking for work.   

It is all your call, of course, but I think you got lucky that you only had paper gains and losses.  If you enjoy "gambling" in the market, you might think about viewing it as an entertainment expense and set a very specific amount to money to do it with.  Personally, I'd keep it physically separate from the retirement accounts that I rely on for income.

one thing i didnt add.
at age 62, i get a pension of $700/month in today's $. (no cost of living increases once i start collecting.)
at 65, i get another pension of $300/month. also no cost of living increase once i start collecting. i'm budgeting this $300 for my medicare premiums.
at 67, i get social security. (no idea what that would be)

so in addition to having $100k as a cushion to my FiRE, i will have another cushion of $700/month in 13 years.

[RedmondStash]

It's not the amount that makes it a problem, it's the behavioral pattern.

If you can have a drink now and then, or even several times a week, and then stop cold if there's a reason to -- if you drink because you want to and not because you need to or can't stop yourself -- you're probably not an alcoholic.

If you can gamble now and then, but you can stop at a predetermined point, you're probably not a gambling addict.

I wouldn't focus so much on the amount as how easy or hard it was for you to stop, whether you're getting that itch to gamble more, and how hard it is to resist.

I'm not a professional, though, so if you think this might be a problem, it's probably worth at least talking to a pro, or even a member of GA as a sanity check.

[Sibley]

Question. Do you have a history of seeking thrills? Doing crazy risky things for the excitement?

i used to 20yrs ago.
roller coasters, sky diving, bungee jumping.
but since ive done those, i no longer have a desire to do them again.

stock market gambling as a pent up substitute?

It's possible. There is such a thing as addictive personalities, or needing the thrill of risky actions. Because as others have pointed out, this IS risky. You're not going to fall to your death from extreme heights, but you could seriously hurt your financial well being.

Think about it. Maybe do a bit of research, and definitely do some self reflection. Maybe talk to friends or family who know you well. But I would recommend you stay far away from casinos and online gaming.

[BTDretire]

Let me get this right, you are living on $20,000 a year and you think you can gamble?

[vand]

i FiRED 2 years ago at age 47.
single, no kids, house paid off.
i have about $700k in combined retirement (roth/ira) and non-retirement $.
yearly expenses ~$20k so only need $500k - $600k based on 4% rule.

i gambled excess $ on oil, got stupid lucky and made $200k profit last month during this pandemic. ($200k of $900k = 22%)
then i continued gambling in the stock market because greed and a month later, I'm back to breakeven. :(

Easy come, easy go.
it's was excess $ i was gambling with and was ok with losing it all.
i view it as going to the casino with $1000, winning $2000 and then losing that $2000.
i'm more embarrassed than anything else that i lost that kind of $.

but i've been told that im in denial and i'm rationalizing this.
What do you think?

Like you said, easy come, easy go.

You may or many not have what it takes to be a long term successful trader, but right now the fact that you have no bankroll management or risk control suggests very much the opposite.

Personally I'm always dubious of claims that "I got out at evens". I suggest the truth is much more "I got out after I lost more than I could stomach".

[Roland of Gilead]

I solved my stock gambling itch by putting all of my risk in a $2500 Robinhood account and enjoying the small trading there.

In 2 years it has grown a tad over 1000% to $29,000 and I am still enjoying it.  It has kept my hands off of our other accounts.

[clarkfan1979]

This is a pretty well-known result in behavioral economics, that people feel about twice as bad for a $x loss than they feel good about a $x gain.

+1

[Raeon]

I'm right there with Roland. I have a Robinhood account specifically for gambling. My IRAs are kept at other brokerages and I don't touch them outside of an occasional rebalancing.

That said, I think the larger problem here is boredom.  You are looking for something to fill that growing empty spot inside and the market play was giving you some excitement again. It may be good for you to find some other (less expensive) hobby to fill your time with for awhile.

[FIREin2018]

Like you said, easy come, easy go.

You may or many not have what it takes to be a long term successful trader, but right now the fact that you have no bankroll management or risk control suggests very much the opposite.

Personally I'm always dubious of claims that "I got out at evens". I suggest the truth is much more "I got out after I lost more than I could stomach".

true about lack of risk control. :(

but no about more than i can stomach.
my usual bankroll when i goto the casino is $1000. I've lost it all a few times in my life.
so i'm used to the feeling of losing all i started to gamble with.

so I *should* be ok with losing the $100k i started with.
dont get me wrong, it'll still suck just like it sucks driving home with an empty wallet.

my bankroll mgmt at the casino is by time.
i'm there for x hrs (or till i go broke), then i leave mainly because the promo period for that day is over. (i go because there's a good promo taking place.)
Note: I'm slightly up at the casino since i began keeping records 5 years ago, mainly because of poker and hitting some promos of $300 - $2000.

you made me think of something.
there is no time limit playing the stock market.
i guess my mistake was not setting a clearly defined win limit before quitting. :(

i quit at breakeven because, to me, it's a natural stopping point of my roller coaster Adrenaline rush. ($0 to +$200k back to $0)
i had my fill of enjoyment.

[Gronnie]

Winnings are your money -- they aren't excess money or house money. Once you win them, they are yours. It's not logical to think otherwise.

[Much Fishing to Do]

I guess I don't understand the concept of "excess money".  I understand your minimum needs point to a FIRE number calculation resulting in less than what you have, but I seem to able to find plenty of uses for money above my FIRE number.  $600k may be 'Enough' for your needs, but wouldn't $700k be better? (I just use that number as if you repeat your experiment it sounds like you;d be gambling with that $100k again).  And if $700k isn't better than $600k, why the desire to take risk to make even more money with no use?

I don't know, I guess I just see my FIRE number as a target where I've decided I'm no longer willing to trade my time for the more money that time can bring and the thing I could do with that more money.  If someone were to pay me twice my FIRE number for one more hour of work I'd do it and wouldn't see it as a non-event, as I think it would improve my life thru increased odds of FIRE number holding up, more wants (travel etc) being available to me, more giving I could do, etc.).  But of course it would in reality take many years for me to double my decided FIRE nest egg thru work and thats not worth it for the additional funds.