When I first wrote about Understanding Structured Derivative Products As An Investment in 2012, I received some pushback. The media was going on about how structured products helped accelerate the financial crisis partly because investors didn’t understand what they were getting themselves into, much like how some adjustable rate mortgage borrowers didn’t understand how their loans worked. Further, readers said I could just create these structured investments myself with options for less money.

But I’m always one to keep an open mind about the various types of investments out there. And structured products so happened to fit my desire for some downside protection and upside participation. A structured product, also known as a market-linked investment, is a pre-packaged investment strategy based on a single security, a basket of securities, options, indices, commodities, debt issuance or foreign currencies.

In 2012, I had just negotiated a severance package after 11 years at my former employer. I was thrilled to get out of jail with money in my pocket, but I was also nervous that I no longer had a steady paycheck at age 34.

Despite the nerves, I mustered up the courage to invest in the S&P 500 and the Dow Jones Industrial Average with all my severance. I felt like I was playing with the house’s money because I almost didn’t get a severance after I had inadvertently sent an old client document to my personal e-mail as I was backing up more than a decade’s worth of material. My firm put my severance on hold for a week, then said everything was OK as the client document was old and immaterial.

Given I didn’t have a job, I didn’t feel 100% comfortable going naked long just in case the market recovery was a head fake. Therefore, I decided to invest in structured investments.

Without structured investments, I wouldn’t have felt confident investing at least $150,000 in 2012 and lots more in the stock market since 2013. Instead, I probably would have missed out on some of the equity rally by hoarding cash or buying CDs for security.

It’s easy to forget about the uncertainty back then since things have been so good for so long. Let’s see how these sometimes frowned upon and often misunderstood investments performed.

I’d like to think that I’d be able to stay the course and go all-in during a stock market downturn like everybody I meet on the internet, but I’d be lying to myself.

Experiencing rapid losses in 2000 as a 23-year-old freaked me out. Therefore, I sold all my after-tax internet and tech stocks within two months after the downturn began because I was losing roughly $5,000 a week. In the end, I lost about 10% from the peak. If I hadn’t sold, I would have lost around 65% over a two year time period. What’s worse, I would have had to wait until Aug 1, 2013 to get back to even! Can you imagine sitting on dead money for 13 years?

Between 2000 – 2013 I continued to max out my 401(k) and buy stocks. But I didn’t have the foresight to go all-in on August 1, 2002 when the NASDAQ bottomed. Instead, I mostly hoarded cash and bought 4.5% yielding CDs as I moved from NYC to San Francisco in 2001. The last people to join a company tend to be the first to let go.

Seeing how violently stocks corrected between 2000 – 2002 made me gun shy to ever bet the farm again. Instead, I bought San Francisco property in 2003, 2005, 2007 (Tahoe, oops), and 2014 because it felt so much better to have a physical asset instead of a paper asset.

After the financial crisis of 2008 – 2009, I again didn’t step up to the plate and buy large amounts of stock or property between 2008 – 2011. All I did was continue to max out my 401(k) and make sure I didn’t get laid off. I became disillusioned with the financial services industry and wanted out. Therefore, I ended up hoarding more cash to give me options just in case I decided to take a leap of faith, which I did.

It wasn’t until August, 2012 that I bought 12X more stock than my normal cadence due to a severance windfall. I viewed my severance as the house’s money, so I figured why not risk it all and see if I could make more in the future. With my non-severance cash flow, I remained conservative.

Despite feeling like we were out of the woods by 2014, I still couldn’t invest aggressively in the stock market. I was again fearful of losing money. Instead, I decided to buy a SF fixer in 2014 because it felt like there was some serious mispricing of SF ocean view property. But the other reason why I bought was because I wanted to reduce my housing expense by renting out my old place.

During the last downturn, I lost about 35% of my net worth. I don’t plan on doing that again.

Losing 35% is not as bad as the S&P 500 losing ~60% during its worst period, but it still hurt like hell due to the speed and absolute dollar amount of the loss.

Realistically, my target scenario during a recession is to stay flat – neither make nor lose money. But my blue sky scenario is to actually try and make lots of money as the world collapses all around.

Here’s how I plan to do it and how you might too if you’ve accumulated enough money or are planning to retire within the next five years. 

I love window shopping and never buying a gosh darn thing. Vendors hate me, but my bank account thinks otherwise.

This habit started when I was a teenager making minimum wage with shoes and clothes. Spending 30 hours slaving away behind a grill to be able to buy a pair of new basketball shoes felt like a bad trade. But at least working those laborious jobs made me appreciate the value of a dollar.

Then, when I had a regular day job, my window shopping habit morphed into visiting car dealerships and test driving the latest models. There were several dealerships on the drive home so I figured why not drop by, eat a free cookie and have a free beverage while inhaling that lovely new car smell! I must have averaged 20 visits a year for 10 years. It was impossible to buy a new car when I knew the money could be invested to make more money in order to finally escape work.

Now I’m addicted to putting in lowball offers on homes and going through rigorous negotiations. If I win, money will likely be made. If I lose, awesome, because maintaining a property and paying never-ending property taxes are no fun. Since 2H2017 I’ve submitted four lowball offers with likely more to come.

It feels amazing to walk to the edge, look down, and walk back to safety. Do you guys ever feel the rush of this type of excitement, that is, almost parting with your hard-earned money?