Getting comfortable with larger sums

[racemize]

This will sound kinda weird but this is how I was able to make the conversion with managing a larger net worth.

 

Once it first occured and the stock was sold I just let it sit in the account for a couple of months to get accustomed to the larger number.  Then started investing on a % allocated.  Once that $ number went up, the emotional attachement a person has to money was pretty much gone during that process (read a few books about thinking differently while this was occuring).  The money I have now it just basically a number and I really don't have an emotional attachment to it.  There was a specific day where the conversion from being emotionally attached to just a number that I am trying to increase.  It has made life so much easier for me to view money this was. 

 

Hope this makes sense.

 

I also have that feeling.  I look at the numbers constantly, but they don't feel all that real any more.  I'm not planning on using that money anyway, just making it grow until I die and give it all away.....

 

I wonder about this, here comes a heretical thought.  You save up and spend all this time investing, you never spend any of it and then you give it all away.  What was the point exactly? 

 

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

If you're saving for the future, or you spend part of your savings I get this.  But if you live on less in some monkish lifestyle and never touch a dime to unload all of it I'm missing something.  Why not just disavow money in the first place, live the monk lifestyle and then make an impact through your time?

 

Well, two-fold answer:

 

1) I'm looking for financial independence, but I'm also working on a career avenue that might pay indefinitely.  Unless/Until that takes off, I'm still using the "live off the interest" plan, so I'm saving/investing for that plan.  In that case, the principal will still be given away at the end anyway.  Even in this case, the numbers just don't feel that real to me.  I look at them and try to make them bigger, but they have no impact on my life anymore.  When they get big enough that I don't need to work, they'll have an impact and I'll notice, I guess.

 

2) I just like investing.

[rukawa]

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

I would argue that you should be a politician. Basically all Buffett has done is found a really inefficient and incredibly difficult way to tax people and use the resulting taxes to fund health care, foreign aid etc. The same thing Buffett did is accomplished much more effectively by taxing people and funding things through government. One Deng Xiaoping is equivalent to a thousand Warren Buffett's.

[Jurgis]

If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.

 

That's not true for some people (especially all the INTJ's here???  8) ). They might be much better in making money - like Buffett - than in running foundations, digging wells in Vietnam or teaching kids in Africa. They might not look for having their name on the building, but rather feeling good for paying for the malaria medication or eye surgeries. This is valid approach.

 

And they might not live a monkish lifestyle if their portfolio is way bigger than getting some upper middle class yearly income ($100K let's say).

[FFHWatcher]

Great discussion. My thoughts on this topic are my own and are not text book stuff, just real life experiences.

 

- Percentages sound great but I struggled with them and in the last couple years have changed to a multiple of my annual years income (approx.).

- If I live a $50,000/yr lifestyle, then I use this, or a multiple of this for my investment decisions. 

- It sounds easy to say, I have suffered a 25% loss on an investment but if that loss might be permanent or at least could last years because your original investment thesis was wrong or poor timing, then I would suggest picking a multiple of your annual years income and say that you are willing to lose up to that amount.  For example, I am willing to lose up to 40% of one years income (ie. $50k x 20-40% = $10-$20k) on a single investment and once I hit that number, I (almost) always sell it. 

- I also run some scenarios for upside and downside in a normal situation and then invest a multiple of my annual income into any one investment idea. For example, my limit may be one years income in any one investment idea (ie. $50k is my maximum investment) and may start with a 40% position and then I may or may not add more, depending on my conviction level.

Moral of my experience : use multiples of your annualized income once you get up to the larger portfolio values.  If you have 10x's your annual income invested, then you might have 10 ideas @ 1 years annual income in each or 20 ideas with 0.5 years annual income in each or something similar, depending on level of conviction, etc.  Once you get to 20, 30 or 40x's you annual income in an investment portfolio, then I have no advice except to work your butt off not to lose it.  Gains from there won't mean much but losing most of it will.

- It is very, very tough on me mentally to lose multiples of my annualized income, so picking something similar to a stop loss limit as a dollar amt has worked for me.  I have maybe missed some upside but it doesn't compare to the downside losses and anxiety that I have avoided.

[mikazo]

Thank you for all the great responses so far! It's given me a lot to think about. I plan to summarize all the advice and then print it off to go in the front of my investing binder.

 

I wonder about this, here comes a heretical thought.  You save up and spend all this time investing, you never spend any of it and then you give it all away.  What was the point exactly?

 

Maybe people are just greedy hoarders? :D

[oddballstocks]

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

I would argue that you should be a politician. Basically all Buffett has done is found a really inefficient and incredibly difficult way to tax people and use the resulting taxes to fund health care, foreign aid etc. The same thing Buffett did is accomplished much more effectively by taxing people and funding things through government. One Deng Xiaoping is equivalent to a thousand Warren Buffett's.

 

I enjoy this forum but sometimes I feel like everyone on here is going 120mph and I'm struggling to go 25mph.  I have absolutely no clue what this means.

[Jurgis]

I wonder about this, here comes a heretical thought.  You save up and spend all this time investing, you never spend any of it and then you give it all away.  What was the point exactly?

 

Maybe people are just greedy hoarders? :D

 

http://a248.e.akamai.net/origin-cdn.volusion.com/u47ok.bmqn6/v/vspfiles/photos/LP-413-2.jpg

 

 

;)

[WideMoat]

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

I would argue that you should be a politician. Basically all Buffett has done is found a really inefficient and incredibly difficult way to tax people and use the resulting taxes to fund health care, foreign aid etc. The same thing Buffett did is accomplished much more effectively by taxing people and funding things through government. One Deng Xiaoping is equivalent to a thousand Warren Buffett's.

 

I enjoy this forum but sometimes I feel like everyone on here is going 120mph and I'm struggling to go 25mph.  I have absolutely no clue what this means.

 

Well on this forum, you can find wisdom and sophism, but since they have the same Greek linguistic root, don't worry--they are really just the same thing. ;)

[Uccmal]

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

I would argue that you should be a politician. Basically all Buffett has done is found a really inefficient and incredibly difficult way to tax people and use the resulting taxes to fund health care, foreign aid etc. The same thing Buffett did is accomplished much more effectively by taxing people and funding things through government. One Deng Xiaoping is equivalent to a thousand Warren Buffett's.

 

I enjoy this forum but sometimes I feel like everyone on here is going 120mph and I'm struggling to go 25mph.  I have absolutely no clue what this means.

 

Now that I have met you Nate, that means I am going about 10 mph.......

[ZenaidaMacroura]

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

I would argue that you should be a politician. Basically all Buffett has done is found a really inefficient and incredibly difficult way to tax people and use the resulting taxes to fund health care, foreign aid etc. The same thing Buffett did is accomplished much more effectively by taxing people and funding things through government. One Deng Xiaoping is equivalent to a thousand Warren Buffett's.

 

I enjoy this forum but sometimes I feel like everyone on here is going 120mph and I'm struggling to go 25mph.  I have absolutely no clue what this means.

Lol I was about to comment on this too - I'm not sure what the paragraph is getting at or especially how you would go about measuring Den Xiaoping in units of Buffett.

 

I do however share Den's view on cats

[Liberty]

Is it so you get your name on a building when you give it away?  How many people remember the names on buildings at places?  If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.  People remember Mother Theresa even though she doesn't have a name on a building.

 

I would argue that you should be a politician. Basically all Buffett has done is found a really inefficient and incredibly difficult way to tax people and use the resulting taxes to fund health care, foreign aid etc. The same thing Buffett did is accomplished much more effectively by taxing people and funding things through government. One Deng Xiaoping is equivalent to a thousand Warren Buffett's.

 

I enjoy this forum but sometimes I feel like everyone on here is going 120mph and I'm struggling to go 25mph.  I have absolutely no clue what this means.

Lol I was about to comment on this too - I'm not sure what the paragraph is getting at or especially how you would go about measuring Den Xiaoping in units of Buffett.

 

I do however share Den's view on cats

 

It's basically claiming that Deng Xiaoping had a bigger impact on the world than Buffett.

 

It's true, but kind of pointless. That's like saying that the people who wrote the old testament had a bigger impact than Deng. So what?

 

What matters is how much good you can do versus your potential. We're not all Buffetts, but most of us can do better than we're doing now and should strive for that.

 

It would also be possible to get into the argument that Buffett is pretty much doing just net good, while many politicians do a mix of good and bad things (many from unintended consequences, over long periods of time), and that if you try to look at it net-net, maybe Deng doesn't come out that well, or maybe he was just cleaning up the mess that other politicians before him created, etc. I don't want to get into it.

[randomep]

I wonder about this, here comes a heretical thought.  You save up and spend all this time investing, you never spend any of it and then you give it all away.  What was the point exactly?

 

Maybe people are just greedy hoarders? :D

 

http://a248.e.akamai.net/origin-cdn.volusion.com/u47ok.bmqn6/v/vspfiles/photos/LP-413-2.jpg

 

 

;)

 

What do  you guys say when you get the phone call from your discount brokers hawking something?

 

They ask me what is my financial plan, thinking they are setting me up for their pitch. And my answer is always: no plan really, except to enjoy it like playing poker. Oh that sure shuts them up!

 

People play poker to get some kind of rush, so I invest. And the object of the game is to die with the most money or toys.....

 

 

[Jurgis]

I don't get phone calls from brokers. I guess I am well hidden. I'm also on the "do not call list" ( https://www.donotcall.gov/ for USers ).

 

Anyway, since we are grossly OT, perhaps I should tell how I got into investing. I was playing all these computer games and then I thought: "what's the point? you waste all this time, win all these pixels. how about play the real thing and make real money". And the rest, as they say, is history.  8)

[randomep]

I don't get phone calls from brokers. I guess I am well hidden. I'm also on the "do not call list" ( https://www.donotcall.gov/ for USers ).

 

Anyway, since we are grossly OT, perhaps I should tell how I got into investing. I was playing all these computer games and then I thought: "what's the point? you waste all this time, win all these pixels. how about play the real thing and make real money". And the rest, as they say, is history.  8)

 

nono you don't understand, these are MY brokers. I use discount brokers cos I want to deal with machines, but when my accounts go over the 100k threshold, it is like clockwork they'll call me and try to manage my finances....

[Jurgis]

nono you don't understand, these are MY brokers. I use discount brokers cos I want to deal with machines, but when my accounts go over the 100k threshold, it is like clockwork they'll call me and try to manage my finances....

 

Ah, sorry, I misunderstood. :) I get these once in couple years. I have a list of gripes with Fidelity, so every time they call I start on the gripe list. They don't call for another year. :) And I hope that my gripes will get fixed at some point haha.

 

But overall Fido is pretty good - they usually send emails telling me to call their financial advisers to manage my finances, which I just ignore. And most of their people I deal on the phone are knowledgeable and professional. Branch staff are usually much worse though. I think it's a revolving door of young hungry inexperienced financial wannabes there... I wish them luck, but it's not great when they are learning ropes on you... :)

[randomep]

 

Ah, sorry, I misunderstood. :) I get these once in couple years. I have a list of gripes with Fidelity, so every time they call I start on the gripe list. They don't call for another year. :) And I hope that my gripes will get fixed at some point haha.

 

But overall Fido is pretty good - they usually send emails telling me to call their financial advisers to manage my finances, which I just ignore. And most of their people I deal on the phone are knowledgeable and professional. Branch staff are usually much worse though. I think it's a revolving door of young hungry inexperienced financial wannabes there... I wish them luck, but it's not great when they are learning ropes on you... :)

 

Ok back to being OT, I played (or lived for) chess when I was a kid. As an adult I put similar skills into poker. But in the end I realize.... I suck. If I devoted my life to chess, memorizing opening theory, studying the games of the best, maybe I could become master level, so what. It is like an IQ, memorization, concentration test. And poker, really poker is a game of maximizing minute odd advantages, and to win against good players it requires waiting maybe hundreds of hands to get an opportunity for an advantage...... in other words, chess and poker are boring.

 

Investing is much more interesting to me, the parameters are almost limitless, not like 52 cards or 64 squares.

 

Also, it is not a zero sum game. Collectively, the whole field makes money!

[Hielko]

In poker you have an opportunity to use your edge almost every hand. The money isn't made in one big hand that occurs once in a thousand hands, but it is made by playing the spots that occur constantly just a little bit better than the rest. Stuff like knowing when to open 74s is probably more important than being able to fold the second nuts in a sick spot.

 

And to go back on-topic: I think you have to view the value of your investments as just a number to keep track of your score.

[randomep]

In poker you have an opportunity to use your edge almost every hand. The money isn't made in one big hand that occurs once in a thousand hands, but it is made by playing the spots that occur constantly just a little bit better than the rest. Stuff like knowing when to open 74s is probably more important than being able to fold the second nuts in a sick spot.

 

And to go back on-topic: I think you have to view the value of your investments as just a number to keep track of your score.

 

Yes you have the opportunity to do it open on crap like 74 every hand but you won't. The guys who bluff with 74 will do it infrequently. To do that you have to build a tight reputation over many many hands.  Don't get me wrong, it takes skill, probably more than what I have. But it is just a small world, at the poker table everyone is folding looking bored most of the time. But I know they are watching everyone else trying to read the limited information on everyone else.

 

Ok enough of chess or poker.

 

Back to the topic, I like to always look at a spreadsheet of my aggragate holdings. That way I won't freak out and focus on one stock that lost say $20k. Everything evens out, I make $20k on one stock and lose it on another....... the law of large numbers works.

 

 

 

 

 

[Jurgis]

OT. I tried chess when I was kid - I sucked, never got over not grokking it on deep level. Never played poker. I played bridge a bit - missed that great opportunity to play against Buffett/Gates when they were on Yahoo bridge (I think) and it was relatively easy to get onto table with them. Of course, they would have handed me my ass on silver platter.

 

Overall, maybe I should start a new thread about living as (maybe) above average person but seeing that you'd never be the best in anything. Interesting feeling. 8) Though might be more applicable to all INTJs here.  ;)

[rohitc99]

Overall, maybe I should start a new thread about living as (maybe) above average person but seeing that you'd never be the best in anything. Interesting feeling. 8) Though might be more applicable to all INTJs here.  ;)

 

difference between being in top 2% versus top .000001% ? i think being in the top 2% is not a bad place to be :)

[Guest Schwab711]

 

Ah, sorry, I misunderstood. :) I get these once in couple years. I have a list of gripes with Fidelity, so every time they call I start on the gripe list. They don't call for another year. :) And I hope that my gripes will get fixed at some point haha.

 

But overall Fido is pretty good - they usually send emails telling me to call their financial advisers to manage my finances, which I just ignore. And most of their people I deal on the phone are knowledgeable and professional. Branch staff are usually much worse though. I think it's a revolving door of young hungry inexperienced financial wannabes there... I wish them luck, but it's not great when they are learning ropes on you... :)

 

Ok back to being OT, I played (or lived for) chess when I was a kid. As an adult I put similar skills into poker. But in the end I realize.... I suck. If I devoted my life to chess, memorizing opening theory, studying the games of the best, maybe I could become master level, so what. It is like an IQ, memorization, concentration test. And poker, really poker is a game of maximizing minute odd advantages, and to win against good players it requires waiting maybe hundreds of hands to get an opportunity for an advantage...... in other words, chess and poker are boring.

 

Investing is much more interesting to me, the parameters are almost limitless, not like 52 cards or 64 squares.

 

Also, it is not a zero sum game. Collectively, the whole field makes money!

 

I had a very similar progression of interests for very similar reasons. The best skill to learn is finance and investing if you want to make money. Even if you are the best poker player you just can't make much money. The hardest part about investing is acquiring capital. :)

[bargainman]

This is a great conversation and great to hear everybody's thoughts. I have certainly struggled with this through the years as well. I remember years ago seeing my portfolio fluctuate by a couple of thousand dollars a day sometimes, while on the other hand I would deny myself buying a new laptop for example for a year or two or more (or decide to buy the cheaper option at lunch which might save me $2 to $5). Making the connection between what you do in your portfolio and how much that really buys in the real world has always been a bit tough psychologically. I don't think I have much advice to provide on top of what people have already sent, but I will share a few experiences.

 

Strangely, I actually feel like I am less risk-averse than I used to be even though I am older. Basically after you have a certain cash cushion, say, a few years worth of living expenses, even if you took a 50% loss, hopefully temporarily, is basically has next to zero impact on your near to middle future.

 

One day I looked at my portfolio and I realized that I had double as much money as I had a few years ago, but my lifestyle really hadn't changed and other than an added sense of security, that much money, which was several years worth of living expenses/ annual salary, was having next zero impact on my day to day life.

 

One of the other things that you also start to appreciate is the power of compounding, and inertia.  I put a small amount of money into a high growth compounder about 15 years ago, and now it's one of my biggest positions.  Even though it may not be the correct financial thing to do, I find it's easier to hold stocks and not sell, when you acquire them for a pittance of their current value.  So basically in some areas inertia has taken hold, and I just don't touch anything so I don't have to worry about the problem.

 

I'm not sure if that helps much.  :)

[Happy]

If you're truly doing this for an impact (my presumption) you could probably make a bigger impact by donating your time and life to some mission.

 

That's not true for some people (especially all the INTJ's here???  8) ). They might be much better in making money - like Buffett - than in running foundations, digging wells in Vietnam or teaching kids in Africa. They might not look for having their name on the building, but rather feeling good for paying for the malaria medication or eye surgeries. This is valid approach.

 

And they might not live a monkish lifestyle if their portfolio is way bigger than getting some upper middle class yearly income ($100K let's say).

 

I agree. If investing is your true passion and you probably would like doing those alternatives much less and would be worse at them, why stop doing it just because you don't really want/need to spend the money yourself? Roger Federer probably doesn't play tennis just for the money either.

 

[rpadebet]

This is a great conversation and great to hear everybody's thoughts. I have certainly struggled with this through the years as well. I remember years ago seeing my portfolio fluctuate by a couple of thousand dollars a day sometimes, while on the other hand I would deny myself buying a new laptop for example for a year or two or more (or decide to buy the cheaper option at lunch which might save me $2 to $5). Making the connection between what you do in your portfolio and how much that really buys in the real world has always been a bit tough psychologically. I don't think I have much advice to provide on top of what people have already sent, but I will share a few experiences.

 

Strangely, I actually feel like I am less risk-averse than I used to be even though I am older. Basically after you have a certain cash cushion, say, a few years worth of living expenses, even if you took a 50% loss, hopefully temporarily, is basically has next to zero impact on your near to middle future.

 

One day I looked at my portfolio and I realized that I had double as much money as I had a few years ago, but my lifestyle really hadn't changed and other than an added sense of security, that much money, which was several years worth of living expenses/ annual salary, was having next zero impact on my day to day life.

 

One of the other things that you also start to appreciate is the power of compounding, and inertia.  I put a small amount of money into a high growth compounder about 15 years ago, and now it's one of my biggest positions.  Even though it may not be the correct financial thing to do, I find it's easier to hold stocks and not sell, when you acquire them for a pittance of their current value.  So basically in some areas inertia has taken hold, and I just don't touch anything so I don't have to worry about the problem.

 

I'm not sure if that helps much.  :)

 

+1

 

 

[Liberty]

This is a great conversation and great to hear everybody's thoughts. I have certainly struggled with this through the years as well. I remember years ago seeing my portfolio fluctuate by a couple of thousand dollars a day sometimes, while on the other hand I would deny myself buying a new laptop for example for a year or two or more (or decide to buy the cheaper option at lunch which might save me $2 to $5). Making the connection between what you do in your portfolio and how much that really buys in the real world has always been a bit tough psychologically. I don't think I have much advice to provide on top of what people have already sent, but I will share a few experiences.

 

Strangely, I actually feel like I am less risk-averse than I used to be even though I am older. Basically after you have a certain cash cushion, say, a few years worth of living expenses, even if you took a 50% loss, hopefully temporarily, is basically has next to zero impact on your near to middle future.

 

One day I looked at my portfolio and I realized that I had double as much money as I had a few years ago, but my lifestyle really hadn't changed and other than an added sense of security, that much money, which was several years worth of living expenses/ annual salary, was having next zero impact on my day to day life.

 

One of the other things that you also start to appreciate is the power of compounding, and inertia.  I put a small amount of money into a high growth compounder about 15 years ago, and now it's one of my biggest positions.  Even though it may not be the correct financial thing to do, I find it's easier to hold stocks and not sell, when you acquire them for a pittance of their current value.  So basically in some areas inertia has taken hold, and I just don't touch anything so I don't have to worry about the problem.

 

I'm not sure if that helps much.  :)

 

Great stuff. Thanks for sharing.

 

I can totally related to the disconnect between the sums I invest and what I spend on my daily life. I'll sometimes hesitate and agonize on whether I should be ordering a few more books or upgrading a computer and then turn around and invest 2 years' worth of expenses into a company...