How To Become A Good-Enough Investor: Investing Lessons Since 1996

You don't need to be a great investor to make lots of money. You just need to be a good-enough investor. Once you're good enough you'll be able to ride an almost constant tailwind toward financial independence. Further, you'll learn to no longer blow yourself up and lose all your progress.

One of my favorite things about investing is that it is a relatively meritocratic activity. You don't need a fancy college degree, a good personality, or be of a certain race or sex to invest. So long as you have internet access and at least $10, you can get started.

My Investing Background

I've been investing since 1996 when I opened my first Ameritrade account while still a student at The College of William & Mary. Back then, I would day trade like a banshee between classes. It took me about seven years to realize day trading is a waste of time and money.

I studied Economics, got my MBA at Cal, and worked at Goldman Sachs and Credit Suisse for 13 years before retiring in 2012. I continue to be an active investor with 20% – 30% of my portfolio.

Since 1996, I've lost plenty of money during the Asian Financial Crisis, the 2000 Dotcom bust, the 2008-2009 global financial crisis, and now the 2022 post-pandemic letdown. From making too concentrated bets in single stocks to buying a vacation property I didn't need, I've made plenty of errors.

However, despite all the mistakes, I still managed to accumulate a million dollars by 30. At 45, my investment portfolio has grown large enough to provide enough passive income to take care of a family of up to five in expensive San Francisco.

How To Become A Good-Enough Investor

If you can get your investments right at least 51% of the time and avoid blowups, you're going to come out ahead. Ideally, if you can get to a ~70% win rate or greater over the long run, you will likely accumulate way more money than you'll ever need.

1) Start with the objectives

To become a better investor you first need to understand why you are investing. List all yours reasons. Some common ones include:

Characteristically, bad investors do not invest with a clear purpose. Instead, they invest for the thrill of trying to make more money for money's sake. When this happens, they tend to lose discipline and turn into gambling addicts full of investing FOMO. Once you've adopted a gambling addict's mentality, your risk parameters get thrown out the window.

As soon as you've identified your key reasons for investing, you will reverse engineer how you will get there and take action. A good-enough investor is a rational investor who will take the steps necessary to achieve his or her results.

For example, you have a newborn who you'd like to go to college in 18 years. You estimate college will cost $500,000 for four years by 2040. Therefore, you will calculate how much you will need to earn, save, invest, and return to accumulate $500,000.

Next, you will learn about the 529 plan and the Roth IRA to save and invest for college. Finally, you will make a decision within 18 years whether paying 100% of your child's college expenses is a good idea or not. A good-enough investor plans for the future.

2) Understand your risk tolerance

The hardest thing about becoming a better investor is understanding your risk tolerance. It takes at least two bear markets to truly know. During your first bear market, you will have likely underestimated your risk tolerance as you may feel worse than you thought you would be about losing money.

During your second bear market, you will also still feel bad losing money. However, the shock won't be as painful because you likely made some adjustments to your asset allocation to better match your risk tolerance. Further, you're likely making a higher income to better be able to recoup your losses.

By the time the third bear market comes, 15-30 years later, you will already be a grizzled investing veteran. You've adjusted your asset allocation further to get as close to your true risk tolerance as possible. The key to quantifying your risk tolerance is to translate potential losses into lost time.

Knowing what you don't know is hard, which is why I've offered net worth allocations by age, work experience, and personality types in my book, Buy This, Not That. The people who blow themselves up investing are those who have significantly mismatched investments.

You cannot afford to listen to investing advice from someone who has not experienced at least two bear markets. I know it's easy to market yourself as an expert in anything nowadays. But please spend time understanding someone's track record and background before spending any money on them or their products.

Historical Bull And Bear Market Cycles

3) Have enough skin in the game to feel some pain

There's an insulting saying from George Bernard Shaw's 1905 play, Man and Superman, “Those who can, do; those who can't, teach.” One translation of the quote is to have enough skin in the game to matter.

We can pontificate all we want about an investment. But to become a good-enough investor, we need to invest enough money in an asset to make it sting if things go wrong. If there is not enough skin in the game, you won't care enough to do your due diligence.

Rationally, the more you believe in your conviction, the more you will invest. The more you invest in a particular asset class, the more research you will do before investing. You'll also pay lots more attention to protecting your investment.

A good investor invests enough to pay attention. Then presses once they have a solid grasp of the investment thesis. A bad investor either invests too little or too much based on their risk tolerance or doesn't invest at all.

Real Estate Investment Case Study

I first became interested in real estate crowdfunding in 2016, The idea of investing in my favorite asset class without having to deal with tenants and manage maintenance issues was enticing. Further, I wanted to diversify away from my expensive San Francisco real estate holdings.

Due to my lack of knowledge about real estate crowdfunding and commercial real estate at the time, I decided to start with a $10,000 investment. I read all the quarterly reports, filed my taxes according, and then did a post-mortem analysis of the successful real estate investment.

A $10,000 investment was enough to keep me interested, but not enough to keep me up at night. During the investment experience, I also realized it would take too much time to assemble a meaningful portfolio of individual investments and track them. Therefore, I decided to invest $250,000 into various private real estate funds instead. I was happy to pay a committee to invest in deals for me.

In 2017, I wanted to invest a greater amount in private real estate because I had sold a San Francisco rental property and needed to reinvest the funds. My son was born in April 2017 and I wanted to simplify life and spend more time with him. Further, I had a strong conviction in my heartland real estate thesis which I came up with in 2016.

Investing Enough To Make A Difference

In total, I ended up investing $954,000 in various private real estate funds and deals. I would have invested more, but one of the early real estate platforms went under (not the investments), COVID beat up commercial office real estate, and I had to recalibrate my risk exposure.

Now that I've received over $624,000 in distributions back, I will be increasing my risk exposure to private real estate investing again in 2023 and beyond. I think the timing is right as real estate slows. Heartland real estate is a 20+-year investment thesis for me.

private real estate investment dashboard

4) A good investor knows baseline returns and valuations

As a stock investor, you know the historical annual return of the S&P 500 since 1926 is about 10%, with dividends reinvested. A good-enough stock investor also stays on top of valuations versus historical averages.

A good-enough stock investor understands historical valuation averages

Every good investor knows it is impossible to consistently outperform the S&P 500 index over the long term. Hence, every good investor knows to invest the majority of their assets (80%+) in low-cost index funds.

A good-enough real estate investor knows that historical annual returns are about 2% above the annual rate of inflation. Good-enough real estate investors also know what an area's historical cap rate average is versus the current cap rate average.

A good investor also understands past performance is not indicative of future results. Past performance only provides clues into the future. From there, a good-enough investor has to decide how the future will change.

Historical asset class returns

An Example Of A Change In Future Baseline Returns

In August 2020, I came out with my post suggesting retirees lower their safe withdrawal rate to about 0.5% at the time. Alternatively, employees should strive to accumulate more capital before retiring.

The idea was to incorporate a dynamic safe withdrawal rate to match with the volatile times. A good-enough investor is able to see things for what they are and change when variables change.

A lower safe withdrawal rate or accumulating more capital not only would better protect you if we were to fall back into the abyss (another bear market), it would also benefit investors if the markets continued to rally. And rally we did in 2021 with most asset classes having banner years.

Then a year later, in 2021, Vanguard came out with its 10-year median forecast for U.S. stocks, U.S. bonds, and inflation. At the time, the return forecasts looked to be overly conservative.

Vanguard 10-year return forecast for stocks and bonds

But if you believed in these new baseline return assumptions, you would have adjusted your investments accordingly. In 2022, the stocks and bonds forecast is now looking prescient. However, not so much for the inflation forecast.

This leads us to another lesson on how to become a better investor.

5) Don't be delusional and attribute the results to your wrong reasoning

Although the dramatically lower return forecasts for U.S. stocks and U.S. bonds are looking right for Vanguard so far, its reasoning could be off. Conduct a post-mortem analysis of your investment thesis once the results are in.

For example, Vanguard assumed inflation would move even lower, meaning the risk-free rate would also move even lower. With a lower risk-free rate, returns for stocks and bonds may decline since investment returns are relative to the risk-free rate. Total returns = risk-free rate + risk premium.

However, the risk-free rate (10-year Treasury bond) went way up because inflation skyrocketed. The pace and magnitude of rate increases caught investors by surprise, thereby bringing about a bear market.

In other words, Vanguard got its call directionally correct, but for the exact wrong reason. A good-enough investor knows whether the results were due to his original investment thesis or not. A bad investor confuses the two.

How to become a good investor or good-enough investor. Don't be delusional and suffer from Dunning-Kruger Effect

Examples Of Confusing The Result With Your Thesis

Example #1. You got into an elite university because you thought you have superior intelligence. In reality, you were a legacy admit and your parents bribed your way in as revealed in Operation Varsity Blues. 20 years from now, you might end up depressed and confused about why your career or business never took off. Only when you recognize your merit was an illusion will you find peace.

Example #2. For my buy heartland real estate thesis in 2016, things were muddling along in 2017, 2018, 2019, and 2020, as indicated by Fundrise's Heartland eREIT returns. Then in 2021, the returns exploded higher due to the pandemic. More people started relocating to the heartland and buying up cheaper property.

My investment thesis turned out right. But it took a while to significantly outperform. I have to be careful confusing brains with luck. If the pandemic didn't happen, 2021 might have shown a more normal 9-15% return versus a 41.7% return. Nowhere in my original heartland investment thesis did I have a pandemic accelerating such a dramatic demographic shift.

Although the Heartland fund is closed, all of Fundrise's funds are predominantly focused on Sunbelt / Heartland real estate.

Fundrise Heartland REIT returns

6) Become a better investor by inviting dissension

We all have had high-conviction investment ideas go wrong. Bad results are why post-mortem investment analysis is so important. We don't want to make similar logical but incorrect assumptions in the future.

Having blindspots is extremely dangerous when it comes to investing. As a result, good investors ask others with differing points of view for feedback. They ask other people to highlight what they may be missing.

As an investor, it is easy to develop groupthink. Groupthink is common in corporate management, team sports, personal finance, social media, etc. Eventually, you might find yourself in one big echo chamber driving off a cliff. Be careful!

If you're mainly interacting with people who look like you with the same socioeconomic background, you are likely suffering from groupthink.

Are you being contrarian for contrarian's sake? Or are you really seeing something others are not? With my Series I Bond interest rate decline bullish thesis, it seemed to me like other investors were not connecting the dots. The bullish thesis seemed obvious, which made me wonder what the hell was I missing?

Luckily, I have a platform that invites open commentary. In addition, you or anybody can read Financial Samurai for free and comment as well.

Adopt Emotional Agility To Be A Good-Enough Investor

Based on experience gained since 2009, when Financial Samurai started, I can now usually tell who is likely not a good investor from their dogmatic responses.

The angrier and nastier a commenter is, the more likely the person is less educated about personal finance. In addition, I've noticed the longer you spend time in school (e.g. PhD) the more rigid your are in your investing analysis. Academics has a way of boxing in your thinking.

For example, some folks raged against my thesis that families need to earn $300,000 a year to live a middle-class lifestyle in a big city. I can understand their anger if they are earning much less. However, these folks probably don't live in a big city with kids. They are incapable of imagining a cost-of-living lifestyle different from their own.

It's hard to know what you don't know. Listen to other viewpoints with as open a mind as possible. Meet new people from different cultures. Travel the world. Get out of your echo chamber.

The more emotional agility you have the better the investor you will become. Having too much emotion kills investment returns. Ideally, you want to invest like a disciplined robot. Unfortunately, none of us are emotionless.

If you find yourself getting easily angered by the news, social media, or even blog posts, please work on your emotional issues first before making large investment decisions.

7) A good-enough investor is the man or woman in the arena

Do you know who never wins? It is the person who never steps into the arena and fights. Instead, they sit in the cheap seats and criticize people for doing while not being willing to do anything themselves. Be the man or woman in the arena.

Yes, it may feel embarrassing if you get your investment thesis wrong. Yes, people may make fun of you for failing and losing gobs of money. But who are they to criticize?! After all, it was your money at stake. Don't look back at your life with regret having never tried!

The people who try to make you feel bad are those who are unwilling to try themselves. Conversely, the people who are supportive after you've failed understand what you're going through because they've been there themselves. Failure is an inevitability. Embrace it!

You will learn from your mistakes and make more optimal decisions going forward.

8) A good-enough investor knows when to take profits

If you never take profits then there is no point in investing. Yes, the ideal holding period for the S&P 500 and real estate is likely forever. But do you really want to be 92 years old and be worth over $100 billion like Warren Buffett? Maybe for a month.

Instead, it's better to have a smoother consumption curve. Not only will you enjoy your wealth more, you'll also save yourself a lot of time and stress as a younger person trying to accumulate such wealth. I'm confident the majority of Financial Samurai readers will die with too much money, hence why decumulation is eventually in order.

If you are a growth stock investor, selling stock from time to time is important. Given growth stocks tend not to pay dividends, you must occasionally extract some of the value of your investments by selling. Bear markets destroy capital gains in a hurry.

Good-Enough Investors Pay Attention To Valuations

When valuations get to one standard deviation above trend, it's best to reduce some risk. When valuations get to two standard deviations above trend, you may want to sell your entire position.

One of the biggest mistakes bad investors make is extrapolating good times for too long into the future. I did this in 2007 when I bought a vacation property for too great a percentage of my net worth. I had made the most money I had ever made in 2007 and thought my income would just continue to go up. Oh how wrong I was.

Mean reversion is real. A good-enough investor takes profits when valuations get out of hand. You can be right for the short term. But you may not be right forever.

A good investor knows to take profits
ARK Innovation ETF gives up all its pandemic gains

9) Never stop studying the markets

If you really want to be a good-enough investor, you have to treat investing like a second job or at least a side hustle. The larger your investment portfolio, the more you should pay attention. If you don't take investing seriously, you could quickly lose a boatload of money.

In 2009, I lost 35% – 40% of my net worth that had taken me 10 years to build. That year of pain was enough for me to right-size my asset allocation and pay more attention. If you've lost a lot in the latest bear market, don't let the pain go to waste.

Conduct quarterly reviews of your net worth and investment. Subscribe to investment newsletters from people with experience. Read books and blogs about personal finance. Good investors immerse themselves in finance, economics, and the ways of the world.

But you know what? Having a second job as an investor is also damn tiring, especially during bear markets. Therefore, do you really want to be a good investor or just a good-enough investor? I choose the latter.

10) A Good-Enough Investor Pays Attention To Bond Yields

The risk-free rate of return is the yield on a Treasury bond yield. As Treasury bond yields go up, investors can earn more risk-free money. As a result, it's important to calibrate your stock exposure based on bond yields.

Let's say you can earn 5.5% risk free with inflation at 3.2%. You're a retiree who doesn't like to take much risk. 5.5% compares favorably to stocks with a lot more risk and a historical return of 10%. Yes, 70% of the time, stocks go up. But when they go down, they can go down by 30%+ in a hurry.

Good-enough investors know their opportunity cost.

A Good-Enough Investor is Good Enough To Get Rich

It takes decades to become a good investor. Even after investing since 1996, I still don't think I'm very good at all. Instead, I'm a good-enough investor who generates enough passive income to live my desired life.

Unless you want to become an investment professional, there's no need to be a great investor. Heck, even great investors can't outperform their respective indices over the long term, so why should you bother trying? Instead, focus on the things you're good at as a DIY investor.

Your investments are meant to operate in the background so you can live your ideal lifestyle. If your investments are sucking joy out of your life, you likely need to recalibrate your risk exposure. The same thing goes for if you feel high after every win.

Be aware of who you are. You don't have to be a great or even a good investor to get ahead. As with most things in life, being good enough is good enough!

Readers, do you think you are a good investor? What are some other recommendations on how we can become better investors over time?

Resources To Help You Become A Better Investor

Empower is the best free tool to help you become a better investor. With Empower, you can track your investments, see your asset allocation, x-ray your portfolios for excessive fees, and more. Staying on top of your investments during volatile times is a must.

Invest in private Sunbelt real estate to diversify and ride the long-term demographic long-term of relocating to lower cost areas of the country. Fundrise specializes in investing in Sunbelt single-family and multi-family homes where valuations are lower and rental yields are higher. Private real estate is a great way to diversify your public stock and bond portfolio.


For more nuanced personal finance content, join 65,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

37 thoughts on “How To Become A Good-Enough Investor: Investing Lessons Since 1996”

  1. Charles Gribble

    In my 80s now. Is there a case to be made for choosing higher return (riskier) fixed income opportunities vs equities or real estate?

  2. “ skin in the game “ when I invest $1000 in a stock I don’t care about it. I will probably lose money as I did little or no research. I am an idiot and I should lose money.
    When I am on margin and invest $100,000 in a single stock, I have researched the stock for months. I watch the news everyday. I have stomach aches when the stock goes south and I must figure out what to do.
    This is not sound, prudent investing. I do it for the high when I am right and for the despair when I am wrong.
    I do not want to play this game without the emotional component.
    Imagine Buffet when he invests billions in Apple. What a rush.

  3. Thanks as always for your thoughtful post. When it comes to purchasing real estate that you may one day rent, I’m curious how you think about whether it’s a good investment. Is it just as simple as it being cash flow positive? If had the cash flow elsewhere would you be willing to gamble on an investment rental that was cash flow negative, but with high appreciation potential and with the expectation that you can refinance perhaps to cash flow positive when rates drop?

    I recognize you’re shifting away from managing properties, but curious how you’d think about it all the same.

  4. “It took me about seven years to realize day trading is a waste of time and money.”

    Seven years to realize your were losing money with transaction costs, short-term capital gains penalties, and with sub-par performance attempting to time the market? Hmm.

    1. I know right? I’m pretty slow that it took so long. But trading was addicting and I was young. Just trying to be honest.

      I didn’t lose money every year. I made money 5 out of 7 of the years. And in 2000, at age 23, I got lucky and made about $155,000. See: Never Stop Searching For Unicorns

      I rolled the profits into a 2 bedroom condo in 2003 when I moved to SF. So many internet companies tumbled then and I stopped trading as much. See: Get Rich By Turning Funny Money Into Real Assets

      But it was when my boss pulled me aside in a conference room and scolded me for trading too much did I finally stop. Career limiting move!

      How are you investing your money? Where are you on your financial journey? Thx

      1. From his past comments, Bill is 54 and has 90% of his net worth in the stock market.

        He also said he wanted to work until age 67. So that means he will have to work until age 72 or later if the stock market doesn’t recover.

        I might be snarky as well if I was Bill. But probably not. Really interesting to see how people respond in a bear market.

        The angrier people are online the more frustrated and scared they are about investing, the economy, etc.

        1. Yes. It sucks to lose money. The more emotional you are, the more your asset allocation is out of whack. Good opportunity to adjust accordingly.

          Money is meant to be a tool. Don’t let money control your life.

          But Bill did provide some good feedback on confusion he has about asset allocation. Will write in a new post! So thanks Bill!

        2. Yes, but the next time the stock market doesn’t recover will be the first time.

          Unless we invested unwisely or locked in our losses by selling on the downhill slide, it’s a decent bet that in a few years we will look back and shake our heads at how dismal we thought the market was going to be.

          It’s kind of how if you look back at articles from the past, everyone for hundreds of years, maybe since humans first learned to think, always thought they were living in the end times.

  5. I’m still trying to become a good enough investor. It isn’t easy.
    My biggest problem is knowing when to take a profit. I always reinvest because I want to grow our net worth. But I’m getting older and it’s probably time to enjoy life a bit more.
    Currently, we still have a large percentage of our net worth in the stock market. I’ll reduce it the next time the market hits a new high. Hopefully, in a few years.

  6. Great post Sam, and you are so right about having to go through 2-3 Bear Markets to become a grizzled investor. I’m on my 3rd (at least) Bear Market, and I truly feel at peace-having not sold anything. In fact I’ve been a buyer, whereas before I would have liquidated long ago. I think you just have to tune out all the noise and be in it for the long haul, and everything will fall into place.

  7. I have the hardest time taking profits partly because of CG taxes, partly because I want to accumulate more, partly because I think it’ll go even higher, and partly because I didn’t know what else to do with the $ if taken out of my portfolio.

    But after surviving three bear markets, I am finally realizing how dumb it was not to take any profits. Next time I’ll DCA out.

  8. Hi FS, Five pounds try 3 to 5 day water fast. Weight gone, detoxify and new set point at desired weight. See Sten Ekberg or Eric Berg on YT. Good luck. Enjoy this time of Thanksgiving. SteveO

  9. Hi Sam,

    I really appreciate your articles and your insight. You are an extremely knowledgeable, yet humble guy and it’s what endears you to your readers!

    Reading your posts is what drew me to “invest” time in Personal Capital and it has made a huge difference in my awareness of my finances. I have most recently been discussing potentially using them as a fiduciary which i have never used. I am curious what your thoughts are on using them as an advisor or continuing to do it on my own as a “good enough” investor. Appreciate your thoughts!

    Thanks once again for your extremely valuable posts and hope you and your family have a great Holidays.


  10. I think the basic premise is to be smart in how you approach stuff regarding trading and investing. Things CAN be beneficial and profitable, but often times there can be more sob stories that are not advertised.

  11. I love these personal stories, this is why Financial Samurai rocks. And it’s why I don’t want Sam to retire, lol.

  12. Manuel Campbell

    I am a good-enough investor. My return is 10.4% since I started tracking my performance in 2008 (just before the financial crisis). The S&P500 has done 9% annual return during the same period. So, I would say that’s good-enough, but not great. Although I am always learning and I hope I can get better going forward …

    I’ve also learned my first lesson – like you – during the tech bubble. Although I had a very small amount of money at that time, this was a very significant one for me back then. I was still in college and that was all the money I had made working as a kid.

    I lost around -50% in a few months. After a quick +50% gain, I sold everything, for a net loss of -25% (ie. 100% X (1 – 50%) = 50%; 50% X (1 + 50%) = 75%). That’s also when I learned how compound interests work and how difficult it is to recorver from substantial losses in percentage term.

    What saved me in my future investments – aside from going to business school – was reading Graham and Dodd “Security Analysis”. This is the best investing book ever and I read it from time to time.

    I have added to my knowledge with other investing books, like Peter Lynch and Ray Dalio for example, and book of economics from Adam Smith and Ludwig van Mises to have a better understanding of the economy and financial markets in general.

    But, as a practical guide to investing, I still think Graham and Dodd is the best of all.

  13. I am currently struggling in my own portfolio with #8 take profits out. I know I should do this, but really have not sat down to figure out my “rules” for when it makes sense. You mention standard deviation above trend, can you elaborate on how to calculate this and what exactly it means?

    Thanks for the thought provoking article!

  14. Fascinating to me that the PE ratio hardly even approached the historical average even at the depth of the pandemic fear. What does it say that when many investors saw the world of business ending that we still didn’t approach historic PE ratio ave? Wonder how much that means? What needs to happen to wait for that to hit again? No with this mass inflation fear and highest rates in years, still not even close.

  15. Great article and thoughts! Can you write a version of your book and target it for pre-teens/teens? I’d love to give it to my 11yo and 13yo grandkids to start learning and thinking!


    1. Thanks. It would probably take me at least a year, if not to, to write another book.

      The book is appropriate for teenagers as well. I wrote it in an inclusive way for any intellectually, curious person, wanting to learn more about personal finance. Thanks

  16. For a long time I had been accumulating cash but was too fearful of investing it the stock market (beyond maxing out my 401K). I read as much on-line investing advice as I could get my hands on. It turned me into a victim of “paralysis by over analysis” and I could not make a decision and the money collected dust in my savings accounts. I finally read the advice of Warren Buffett who recommended investing 90% into an S&P 500 index fund (Vanguard’s) and the remaining 10% invested in short-term U.S. Treasury bonds. That magically lifted the fog of indecision and I’ve been following that admive (for the most part) since that time without ever second guessing myself. If I’m going down at least I’m going down with the Big B.

    1. And if you want Buffet’s edge, then you can also invest in BRK-B. After every stock ownership announcement, he moves markets. And he gets first looks before everybody else.

  17. Hi Sam,

    This is one of the more thought provoking investment posts I have read of yours in a while. Thank you, and I plan to re-read again.

    Regarding the Vanguard forecast, I had no reason not to believe the forecast, however, after looking at the forecast, I made no change. I continue to want to beat inflation and was comfortable with my asset allocation between RE and Equities in particular. My biggest learning from the current bear market is to build up the cash hoard as you advised, as we narrow in on “fake retirement” within the next 18 months.

    Therefore, curious about what changes you made in light of the forecast?
    Above you stated “But if you believed in these new baseline return assumptions, you would have adjusted your investments accordingly. In 2022, the stocks and bonds forecast is now looking prescient.”

    1. I had a stock allocation of about 33 to 35% of total net worth at the end of 2021. I brought it down by about 5%. But I did not touch my municipal bond allocation because I have always planned to hold the bonds until maturity for tax-free income.

      I have found that whatever happens to the markets now, I am relatively at peace now. I have been optimizing for income more than growth over the past three years since my daughter was born.

      It’s really the cash flow that makes the biggest difference. So long as the cash flow is steady or even rising in a bear market, I am good, because they are markets will eventually end.

      The key is to survive for one or two years for the likely duration of a bear market. B/c bear markets eventually end.

  18. I have followed you for a long time now, do you offer voluntary individual advice? Could you help me make wise financial decision? I am having a hard time making financial investment decisions. I can be the luck one today. Thank you

  19. I really enjoyed this post and wish I had read it when I was 18. It took me a long time to start investing mostly because I was just too scared to start and felt too afraid that I was going to make a mistake.

    Fast forward several decades later and yes, I’ve made plenty of mistakes. But I’ve also had some good wins. I don’t really regret the mistakes that I made because I know I needed to learn from them in the process, and they’ve made me a better investor today than I was in the past.

    There’s still tons that I do not know, but I know enough to feel like my money is working for me most of the time. I’ve also found comfort in easy investments like ETFs, munis, treasuries, eREITS, and now feel I have well diversified my overall portfolio for my own needs.

  20. I’ve been fascinated by finance and the stock market from an early age (I asked Santa for a stock portfolio in the 4th grade). As funny as it sounds, having the experience of losing everything in the bubble (a summer’s worth of allowance) struck a chord that has stuck with me well into my adult years.

    I learned very early that I’m a below-average investor, and decided to limit my portfolio’s exposure to broader indexes. I use rules to help govern where to invest (stock, bonds, cash, RE) and how much (fixed per month). The extent to which I try to achieve an appropriate risk-adjusted return is purely through asset allocation.

    One thing we have done to help our financial standings is to have what we call a financial retreat once per year. We go somewhere remote and do a full diagnosis of our financials. This includes examining spending habits, planning for large purchases, reallocating assets, estate planning, and forecasting free cash flow to determine how much we can invest on a monthly basis. We then compare how we’re doing relative to forecast on a monthly basis, and do a more thorough examination on a quarterly basis.

    This process has helped provide rigor to our personal finances and taken a lot of the emotion out of the decision-making progress. While our return profile won’t blow anyone away, we have avoided blow-ups and continue to grow our networth 20-40%/year for the past 5 years.

    1. In my opinion, anything above a consistent 18% return is pretty monstrous over time. 20-40% is definitely blow-awayable, especially if you were able to avoid downsides in 2018 and 2022.

      How much of that net worth growth is from asset appreciate/dividends vs. earned income?

      1. Our blended returns were mid-high single digits (blended cash, stock, RE, etc). My wife and I are Henrys who prior to 5 years ago, didn’t have much equity/investment. By adopting a more rigorous investing mindset, we’ve been able to buy investment properties and invest free cash flow.

  21. New great insight:

    “When valuations get to one standard deviation above trend, it’s best to reduce some risk. When valuations get to two standard deviations above trend, you may want to sell your entire position.”

    Knowing when to sell is harder than knowing when to buy.

  22. Great article, you covered all the aspects!
    “If you are a growth stock investor, selling stock from time to time is important.”

    I’m a growth investor since I have a 20+ year time horizon till retirement, although I wished I realized some of those growth gains earlier this year (contemplating reducing my overall growth exposure). I’m thinking of reallocating some and putting it into in the general Vanguard S&P500 ETF. Ofcourse the tax man will come so I have to be careful how much I want to sell. After a while, selling requires a lot more planning than buying.

  23. As someone who’s done everything from opting out of my company’s 401(k) plan to investing on margin (and lost), I’m just happy making as few mistakes as possible nowadays.

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