Long term investing is hard without discipline. One of the biggest problems I consistently observe is people’s inability to control their spending once they start making money or a lot more money.
We all know someone who is making the big bucks, yet is just living paycheck to paycheck (see: Scraping By On $500,000 A Year). After three months of grueling work out of college, I decided to buy a new used car. Not only did I get a car that was parked several subway stops away for $200/month, I also got a brand new motorbike!
What kind of 23-year-old dumb ass idiot buys a car and a motorbike when the subway system in Manhattan is so efficient? My base salary was only $40,000 and I was trying to save money by living in a studio with my high school friend. But I couldn’t help but buy the two things I always wanted since high school. Thankfully, I got a bonus which allowed me to max out my 401k and save something extra. But I could have saved much more.
After I left Manhattan for a competing firm in San Francisco two years later, I promised to start fresh and seriously clamp down on my spending. I got word my job was at risk due to the dotcom collapse, so I felt I had dodged a bullet by escaping the east coast.
Disciplined Investing
After two years of working in banking, I knew I wouldn’t be able to last for an entire career. Therefore, I saved like a madman. 100% of each bonus was invested. And my spending was kept to a minimum by living in a crappy 2 bedroom, 1 bathroom apartment at the edge of SF’s Chinatown with a mentally disturbed person I met on Craigslist. I eventually got a car, but it was a seven-year-old Honda Civic I bought off my mom for $7,200.
Based on my consumption habits in Manhattan, I knew I wouldn’t be able to properly control my spending once I started making more money as an Associate and beyond. Therefore, I began investing ~20% of my after 401k savings in 5-7 year CDs, ~50% in real estate, ~10% in private equity, and the remaining ~20% in stocks each year.
Because I worked in the financial services industry, it was important to diversify from just stocks given my career and compensation were closely linked to the performance of the stock market. But what I realized about my stock investments was that I didn’t have the patience to hold onto securities long enough to make meaningful returns.
Instead, I would buy and sell stocks to the point where the department head called me into a meeting to ask whether I had a trading problem. Apparently, I racked up $12 million in trading volume one year compared to the next highest employee who traded $5 million in trading volume!
I apologized for my behavior, even though it was perfectly within the rules to day trade index ETFs, and promised to focus on my career instead. That meeting with the department head was the turning point to start investing everything outside of my 401k into private investments and real estate. If I had continued trading so aggressively, I probably would have been laid off.
As I look back on my investments, the biggest returns are those that I’ve held the longest. San Francisco real estate is up about 5-6% a year un-levered since I first invested in 2003. With a 20% downpayment, we’re talking a 25% – 30% a year return. Then there was my 10-year investment in Bulldog Gin that has annualized an estimated 15% annual rate of return. Finally, there’s a 7-year duration mortgage backed securities fund I was forced to invest in during the crisis that has annualized 24.5% a year.
The S&P 500 has annualized roughly 7% – 10% including dividends since the beginning. Not bad in comparison, but actually not as good as any of my real estate or private equity investments. Sure, investing in the S&P 500 has potentially less risk (still went down big in the crisis), with pure liquidity. But who knows, I may have panic sold during the downturn since it’s so easy to click some buttons to get rid of a position. Plenty of people sold and never recovered!
Related: The Inflation Interest Rate Paradox: Why You Must Continuously Invest
Saving Yourself From Yourself
Investing in private funds, long-term CDs, and private companies basically saved me from myself. I still ended up hurting my net worth with my vacation property purchase in 2007, but it could have been much worse. When there is a 7 – 10 year duration for each investment you end up doing the following:
1) Tighten up spending. The more you accumulate, the more tempted you will be to spend the money sitting in your bank account. When you lock money up in a long-term investment knowing there’s a penalty for early withdrawal, you won’t go blowing it on a ridiculously priced car, a crotch rocket, or other superfluous things you don’t need. The feeling is similar to purposefully making yourself poor in order to stay disciplined. Compared to the typical consumer who spends most of what s/he makes, you’re not only not spending, but you’re also likely earning a return that will create a widening wealth gap over time.
2) Staying calm during a downturn. When you’re locked in, there’s nothing you can do. As a landlord, your main concern is receiving a steady rent check. It’s too hard to sell property in a cratering market. As a private equity investor, you’re mainly concerned about whether your company makes it past the dip. Luckily for Bulldog Gin, they were able to raise another round of financing after the crisis. With CDs, you’re just collecting your guaranteed income. When you know you can’t sell with ease, the panic starts to disappear.
3) Experiencing windfall surprises. Given your investments are so long ago, you tend to forget about them. When the funds finally expire or your private equity investment finally has a liquidity event, it’s kind of like winning the lottery because you’ve been living without such funds all this time. In Feb 2014, I had a nice six figure windfall because of an expiring 5-year CD. I used $260,000 of it for a downpayment on my Golden Gate Heights fixer. If I didn’t have that windfall, I don’t think I could have afforded my current home, which would be a crying shame because I love the place so much.
The surprise windfall is a very similar feeling to getting a “surprise” tax refund. Even though the money has always been yours to begin with, it still feels nice when the money finally returns home. With long-term investing, the feeling is even better due to a return.
For those who are undisciplined with money, I highly suggest looking for investments where you can lock your money away for years. Not only will you quickly adapt to living without such funds, you’ll also get motivated to earn more money to make up for your lower liquidity. When it’s finally time to collect, you probably won’t even need the money!
Here are some examples of long term investments I’ve held:
* Two Venture Debt funds expiring in 2020 – 2026.
* Various zero coupon municipal bonds expiring in 2021, 2022, 2023, 2024, 2025 with a 3% – 4% yield.
* 4.1% yielding, 7-year CD expiring in 2018.
* 3.75% yielding, 7-year CD expiring end of 2017.
* RealtyShares Diversified Marketplace Equity fund expiring in 2021 with a 8% preferred return and 15% target IRR.
* Looking for more ideas. Maybe the 5-year Fundrise Heartland eREIT or a venture capital fund to find the next Snapchat.
The goal is to consistently lock my money up each year to create a perpetual windfall machine. It’s been years since I last went on a foolish spending spree. But as I enter my 40s, I’m afraid my old habits will return!
Readers, do you find it difficult holding on to public investments during difficult times? Do you have a propensity to spend your raises and year-end bonuses instead of investing the money? What are your best long term investments and how do you control yourself from trading too much?
I have a long-term investment horizon and invest in mainly index funds. I’m trying to pay off my student loans before venturing into other asset classes such as real estate. I would like to think that I won’t be my own worst enemy when the next bear market and/or recession hits.
I do like the idea of adding other long-term, more illiquid investments to my portfolio once I’m free of my student loans.
We were lucky. We bought a number of large individual stocks at the end of 2008 when everything was crashing. Then we sold out a couple years ago when I just didn’t have the stomach for it going down when I was taking off work to have our last kid (I wasn’t sure if I was going back and I wanted cash to get through it). A year later we started buying back in with index stocks and now just set aside our cash every month. In fact this week it’s on my to-do list to go through our budget and increase the amount we’re setting aside.
All of this is our taxable. Being young we are both fairly aggressive in our retirement accounts in mostly stock index positions and that is where most of our net worth is.
I gave up investing in single name stocks because I didn’t have the discipline to ride out dips. I am really glad I saved myself from myself by giving that up because I only lost money when I wasn’t long-term focused. I’ve done much better since I started investing in ETFs and so far haven’t been tempted to sell my positions even when the markets have gotten ugly. When downturns get me anxious I do my best to remind myself I’m investing for the long haul and use those opportunities to add to my positions instead of sell.
I do spend more now than when I was in my early 20s and making less, but I don’t consider myself a reckless spender by any means. I spend more on things like higher nutritional food, services, mortgage vs rent, and technology which I mostly use for work. I also have made sure that I save a lot more now that I’m making more. Saving and watching my investments grow can be very addicting.
I truly believe the most important characteristic of a successful investor is emotional control and some people just do not have it no matter what. They NEED a strategy to prevent this from clouding their judgment. Your recommendation of locking into long-term investments is one method (and is a method the majority of people inadvertently use by buying a house with a mortgage), but that’s not too easy if you’re an ETF investor like we are.
My wife and I have a dynamic where I’m the one who manages both of our money and she is happy to have no involvement (in terms of our investments). We both know my wife would be unable to stomach a downturn in the market (we’re 90% stocks) so it’s best she has no idea when it happens and how much we’ve lost. For example, we recently went to a casino and lost $20. She was devastated and ended up walking out crying, begging to go back in to win it back….
I guess you could say this is our strategy of saving ourselves from ourselves, I know I can stomach a market crash because I know stocks always go up long-term, and we’re in it long-term.
We also recently just had to deal with the “lifestyle creep” you mention. My wife got a 75% pay rise this month (new job) and the temptation to spend all of that on “stuff” is difficult to manage. We sat down and reviewed our financial plan going forward and allocated the money largely to investments and partially to variable costs like travel. I think the important thing is to not lock yourself into fixed costs like renting a more expensive place or buying a new car from pay rises, as you quickly expect these luxuries forever and it’s hard to go back to not having them. You can always adjust your budget for more variable costs if you’re disciplined with money, so allocating more to travel is fine as we can just reduce this later if necessary.
It’s definitely difficult to not increase your lifestyle expenses when you get such a huge pay rise, but the payoff down the line is insane if you invest it all. We’ve shaved an estimated 5 years off of retirement thanks to investing the majority of this pay rise as opposed to increasing our lifestyle.
I think we’ve all made some stupid decisions when we were younger. Unfortunately, it’s those financial ones that can hurt the most.
I’m going to try to do everything in my power to instill a good amount of financial knowledge on my daughter in the hopes that she skips the stupidity (to some degree) while a young adult. That alone may give her a major head start in life.
Your idea of locking away some of your money makes sense in some scenarios. For the time being, I actually get pretty excited when things turn to $%# just knowing I’m buying low. However, I’m sure that’s because I’m not living off (or using any of) my investments right now. Once that changes, I’m sure I’ll be changing my tune! :-)
— Jim
Sam, you’ve mentioned the Fundrise Heartland eREIT several times across different posts but it sounds like you haven’t committed to an investment yet. What’s keeping you from doing so?
More research and more funds. I’m talking to one of the people today about the refund for other lasting questions. I’m also waiting for a couple liquidity events to hit my bank account at the end of this month and early next month. They are my bulldog gin investment and my mortgage back securities investment made in 2010.
I like to know exactly how much I will be getting from both after taxes before I make an asset allocation decision.
I love the idea of making yourself poor to as a method of enforcing discipline. I hadn’t considered it in those terms, but that’s exactly how I manage my day-to-day finances. I maintain a relatively low cash balance in my checking account for my regular operating expenses. Beyond that I try to put my money in a place where I don’t see it every day and don’t think about it. Even though I know I have liquidity options if the need were to arise, I don’t live as though that money is available to me because I basically forget about it.
Great Post.
I don’t think you have to worry about old habits returning. You have developed stronger and smarter habits as you matured, learned and gotten smarter.
We were in a similar scenario. We did some stupid things years ago but righted the ship, initiated and adhered to a long term plan. The plan has performed beyond expectations and we could easily spend greater amounts outside of our L.T investing and still accomplish any remaining goals.
Aside from the occasional gaming trip to the craps tables; neither one of us wants to spend more. We live a comfortable, happy life with current consumption habits and see no need.
The L.T. plan continues because it’s now built into our DNA. Maybe some people think we are dumb and we should “enjoy” more consumption – It would be hard to do.
Great idea. Locking your investment away for a long time will prevent you from dipping into it. Most of our investments are somewhat liquid, although I really hate to sell them. I’m thinking about muni bonds, but the rate still seem really low. We’ll check it out more.
RealtyShares sounds good too. I invested a bit this year and will add more if things go well.
Loved the clip. It took me back to my days on probation in Big City PD. One of my FTOs was a legendary D-Bag. We hated each other. Aside from despising me, his other favorite pastime was Day trading.
We spent most of each morning watching him lose money and I loved every second of it.
Index funds: set it and forget it!
This article really resonated with me. When I was a younger person starting in the back office working at a major investment bank, I set up a trading account and would go wild with buys and sells. I was also part of an investment club, which was all the rage at that time. I had tons of fun both ways, but honestly I don’t remember actually making any money doing either. The interesting part is that at that time, I had very little money, certainly nothing in retirement plans. Now, I am in my late 40’s and have a pre-tax balance of $1M and post tax balance of $800K in cash and securities. I do absolutely no equity trading at all, instead am in index and some actively managed funds both pre and post tax. Funny, but I guess you do get wiser as you get older.
I am curious to see how I will perform during the next bear market. The last time I had very little invested, I wasn’t doing my own investing, the money was in India and I was here, and I ignored it, because I had already been ignoring it, because at the time I ignored all things money. This was a good move, but I can’t take any credit for it.
I’d like to think that I’ll hold strong and ride it out. I hope I don’t turn into a headless chicken and attempt to sell it all. At the very least I hope I’ll remember to come here and declare my intentions before I hit sell so that you and the rest of your readers can smack some sense into me and save my ass.
Great post. Last year, refinanced 4 investment properties from 30 year mortgage down to 15 year at 3.375 rate and properties still cash flow comfortably A year later, I have $125k in forced savings. Sadly, that $125k would have been frittered away if I had not committed myself to the 15 year. This year, will put 2 more investment properties in 15 year mortgages. Also, love the point re working harder to find ways to make up for the lost liquidity. Forces you to be more financially disciplined.
my company makes me preclear all trades with my managers approval – also I have to hold securities minimum of 30 days – this ensures I never am tempted to have a short term view.
This is the exact reason my goal is to be 50% real estate, 50% stocks/bonds. I need to have a large amount locked up and hard to sell, I know my personality!!
Do you still have the desire to trade frequently? It is wild you were trading that much more then the next guy! As a doc I have no desire to see more patients when I get home and so I wonder if you feel the same way with trading now. Keeping it simple is what I am trying to do.
How did you get such great rates on CDs?? Their rates are sooooooo loowwww these days. I’d invest a boatload if I could get 4% guaranteed on CDs.
I’m almost 41 and ready to retire. I don’t think your old habits will come back. Youth is fleeting, but wisdom is permanent.
However, I don’t question your SP500 returns “since the beginning of time” but they are unrealistically low. Even the 9.7%, compounded, I use on the SP500 with dividends reinvested could be considered a bit low, depending on the timeframe you look at.
This is the source I use as I didn’t want to “cherry pick” returns, either good or bad, and thought this document would provide me with the most unbiased forecast. I have held total stock market index funds in my daughter’s 529 plans, since her birth 7 years ago, and those returns are actually much higher than 9.7%.
berkshirehathaway.com/letters/2016ltr.pdf
That’s awesome you are making much more than 9.7% a year in your daughter’s 529 plan. However, do you think starting the 529 plan 7 years ago, close to the bottom of the last great correction may distort your return expectations? How have your investments done since graduating from college, for example?
I fear that investors are being too optimistic with their investment return assumptions given interest rates have continued to come down over the past 10-20 years. Planning for even 1% – 2% more per year can create large financial distortions over time. It’s better to stay conservative.
Remember, everybody is a genius during a bull market! What’s stopping you from retiring btw?
PS The link to the Berkshire letter doesn’t pop up for some reason.
This is going to sound strange, but what’s keeping me from immediate retirement is a dental implant. I put some money in an FSA to replace a dental bridge this year with a dental implant. I went into the dentist office last week, thinking this procedure would be one and done, or two and done at the most. It turns out after they put the implant in, I need four months for the bone to heal before they can put crowns in.
This does give me more time to engineer my layoff. I bought your book, so I am ready and set to go.
Not sure why the link doesn’t work, but if you go to berkshirehathaway.com, they have all the letters there. I agree with you about being conservative. However, realistically the market could outperform averages as well. Funny, I knew when I set up my daughter’s 529 account that she had market timed her birth really well. My son also has excellent returns, but I do think they will revert down to the mean, which is 9.7%, or much lower, or much higher, depending on the period of erratic returns one picks.
This sounds incredibly painful. What was the cause of you needing a dental implant at such a young age? I’m actually going to the dentist right now for a quarterly teeth cleaning, because I am deathly afraid of having to do major work on my teeth in the future.
It’s never a bad idea to wait and save more money if you can stand your work. Thanks for buying my book. I think it will help you come up with a game plan for severance negotiation.
When I was a kid, I had very poor dental care. I saw a dentist twice from ages 0-18. Luckily my parents encouraged me to brush my teeth daily, or it would be a lot worse. Long story short, I had a baby tooth into adulthood that eventually was loose and my options were to go with a hole in my mouth or get a bridge. At age 27, I chose a bridge. Now I am older and implants are cheaper than they were 13 years ago and I still have good dental insurance, so I figured might as well take care of this prior to my next career- a gentleman of leisure.
Sam- great article and one that I can really relate to. I have been following a similar approach as you with locking my money up in investments that have longer maturities as a way to limit the amount of spend each month / year. While I haven’t got into RealtyShares yet (have been researching it the past few months), my husband and I both put money away into CD’s with longer maturities. One point that I would add to your CD’s allocation is to look for mutual savings institutions that offer CD’s with good rates. These types of banks are normally smaller, local community banks that are trying to compete with the larger players in the market. The hidden advantage to holding a long term CD with a community mutual savings bank is that, if that bank decides to go public you receive the first right to purchase the IPO shares. Since you are putting your money into a long term CD with the intention of not withdrawing it, the ability to then participate in the banks IPO is nice kicker if that bank goes public. I am working on an article now that goes in depth on the process, but figured I would share as its an alternative way to make some additional money on your deposits.
Hi Sam
Regarding VC debt funds, do they all work with accredited investors or is it hard for a guy with no connections to get access? What are the typical minimums?
Hi Dan,
Check out my post on Venture Debt investing.
Usually for accredited investors and the fees can be 1-2% of AUM + carry. The returns so far for fund one is only about 5.5% due to too much upfront cost. For fund two, it’s still early. Both targeting a 16% IRR. They buy warrants in the companies as well, which could really boost the IRR at the end of the fund.
There’s this thing called the ‘J curve” in the first years of the fund due to expenses.
Sam
So true! I see these things all the time with friends and family. One family member got a high paying job and he had to get a corvette even though he’s behind on saving for retirement. Several co-workers went to cash during the crisis locking in their losses and missing out on part of the recovery.
For some reason I ended up with better habits. As a kid I would put away my Easter candy only to find it later all moldy. When everything was declining during the crash I was happy each time I was able to purchase my REIT fund shares even cheaper.
As a fellow banker by trade, I hear you on not planning a career out of it. I live a relatively frugal lifestyle and have never fallen into a big spending spree. My bonus goes primarily to max out my IRA & 401k, then some to my taxable account. I rely primarily on stock market index funds. It was definitely a challenge not pressing the “sell” button during the 2008 recession, but thankfully I held on for the long-run.
Last year I did lock up 20% of my investments in a small business venture with my brothers though. It’s a non-cyclical business. Small businesses have great potential for outsized returns, and we’ve been making some good progress with it so far.
I got out about Dow 12k and missed a lot of the downturn. Unfortunately, I didn’t get back in till nearly the same level so I netted out basically the same as if I had stayed in (maybe slightly better as bonds did well during that time). I do very little day trading – maybe 2-3 names a year with no more than 5% of my NW. At the margin, I may increase/decrease my net exposure to stocks or bonds a couple times during the year by 5-15% but overall, I’m generally a long term investor.
I experimented with trading strategies in my impetuous youth. Wow, what a mistake.
My best investment so far has been real estate. Granted, I’ve been riding the Silicon Valley post-2008 boom, accelerated by living within a stone’s throw of all of Apple’s campuses, but it’s been an impressive ramp in value.
The only question when it comes to long term value is if we’ll hold onto it when we relocate, or pay the taxes and commissions to sell and cut our ties with California.
A long-term perspective with investing is critical. In reviewing my own success in building to early FI, it’s consistent savings over years and mainly a buy-and-hold stock portfolio. I’ve had some successes in shifting asset allocations when various asset classes become more of a bargain but the bulk of the success is simply staying invested over time. Luckily I never panic in downturns and instead buy more if I have any cash available. This has certainly helped a lot.
Warren Buffet often says the best length of time to hold your investment is forever. I (and he) wouldn’t go quite that far in practice but there is wisdom there as you indicate as well.
Thanks for the article!
My propensity right now is to hoard cash, which is beginning to feel really uncomfortable. I’ve always banked bonuses and raises, and was pretty good about investing the money, up until the great recession. I held steady through the downturn, but reduced my exposure considerably after we broke through old highs. I’m currently looking hard at Peerstreet, as a good way to generate steady passive income each year. Any thoughts on them?
I kind of like Yieldstreet better. Lower LTV ratios, and already generally diversified between a handful of properties. The time commitment is usually about a year to 18 months too. The main problem is that new RE offerings are few and far between, and you have to be on top of it because they usually sell out in a few hours. Anyone else have thoughts on Yieldstreet? I also like their litigation funding investments, and I’m tracking the performance on my website if anyone else is interested.
What about the tax forms? Peerstreet is very simple, a 1099 or two. Yieldstreets are K-1s, which I have heard are not fun. I am in both PS and YS, but haven’t yet had to deal with taxes from YS. They arrive pretty late from YS as well (okay for us because we do them late, use taxact too which will help I hope).
Just trying to keep it simple going forward but do like what YS offers as low correlation to stocks (hopefully), and a place for (bond) money (risky so not really a bond replacement). Don’t need dozens of complex forms so a handful of them might be okay, but maybe just plain old bond funds and CDs would be better. Peerstreet and stocks may crash together, so risky risky.
Already have majority of portfolio in stock index funds at Vanguard, but a guy hates buying bonds with current low yields and rising rates, right! But they are much safer than either YS or PS.
Yeah, I have heard the taxes are a little more complicated, and you may have to pay taxes on Yieldstreet’s 1-2% fee as well. But I haven’t had to deal with them yet. I imagine they will be easy to upload onto Turbotax or whatever tax software you may use.
I’ve been noticing that some of the recent Yieldstreet litigation financing offerings (including the one that sold out in two minutes today) have a higher percentage of interest when you account for the discounted price Yieldstreet paid to acquire the portfolio. Today’s offering looked more like one of their “accelerated” portfolios, which usually have a higher 15% yield to offset the higher relative amount of accrued interest in the portfolio (aka, higher risk). I’m hoping this isn’t a trend–again, I’ll update the post on my website once I hear back from Yieldstreet.
It’s easy to think about alternatives as bond replacements, since they seem un-correlated to the market, but you’re right–the risk level puts them in a very different category. I’m buying more bonds now than I have over the last few years too, even though bonds are still only about 5-6% of my portfolio. If you believe the market is efficient, a bond ETF should have some of the future rate hike risks built into the price already. It’s more of a hedge play for me–and I don’t mind the fairly safe 3% yield.
I generally ignore my portfolio during down times. In up times I’ve historically sold out of individual legacy stocks I still hold from early on and move the cash to index funds slowly. Too date I’ve never sold an index fund and the individual funds have kept me happy, even if I’ve sold early. So I guess you could say I segregated a small amount of market play money that I pseudo trade in (average holding is still 2-3 years). Psychologically that keeps me out of my main set of investments.
When the financial crisis hit in ’08, I had only been working a few years so I didn’t have a ton invested at the time. Maybe around $20,000 – $25,000. So for me, the huge drop wasn’t as painful. Still sucked seeing my account drop by so much and then basically hold steady for a while as my contributions pretty much matched my portfolio losses. Fortunately for me, my dad had imparted a lot of wisdom on me from what he experienced during the dotcom burst. I knew I just had to get through the down time and it would all come back.
It amazed me how many smart people I know who were convinced “this time is different” back in ’08 and pulled all of their money out. I know it’s harder to stay the course when you have so much invested (shows the importance of diversification as you point out), but they were making a cardinal sin by selling at the low points of the market.
I’m still partial to investing in the stock market because that’s what I know the best. I’m working to diversify into real estate through crowdsourcing, but I’m taking that slow to test the waters. If interest rates really start to kick up, then I might consider a little more in fixed rate investments, but I still think we’re a ways off from that happening.
When I was younger I definitely traded much more. I would try to time the market, create entry and exit points. In my mind I thought I was doing the right thing and it was fun. But now that I’m older I don’t have the time or energy to do these things. I like putting my money in a passive index fund and letting the market run. I figure over the long haul that the market will go up and if Warren Buffett can use 4 pages out of his 29 page shareholder letter to call out hedge funds and active managers. I might as well be invested in passive index funds :)
I agree, even when I was day trading heavily, my actions and emotions were often my worst enemy when it came to losses. Also it’s a full time job with more stress than most people can handle. 99.9999% of people are better off investing in long term investments and index funds.
Sam The Day Trader! (learned something new today!). To avoid the temptation, I keep 90% of my investments in long term buy and hold, low cost index. I never sell, and I just keep the dollar cost averaging plugging along. I save 100% of every bonus (~20% of my annual salary is bonus, and I also save 20% from each paycheck).
To scratch the trading itch, I keep 10% in TD Ameritrade and do stupid trades. Options, VIX, precious metals, commodities. A lot of fun, and small enough to keep me out of trouble. Works for me….
I do the same with the bonuses and as much of my paycheck as I can stand. I have an account with RobinHood that allows me to trade stocks with no commissions. I keep some “play” money in there that lets me stay in tune with the excitement of the Netflixes of the market, without having the potential to hurt myself in any way.
When I first opened a brokerage account with Charles Schwab, I found out I could trade some index funds without a commission, so I would day trade a few hundred in a Japanese Yen ETF. I had less than zero idea what I was doing, but made a few hundred bucks from sheer luck. I think it helped me become interested in investing in the first place, and it was only after researching various investment approaches that I learned some actual investment theory.
I love that you’re keeping it real with this post. Sometimes we really do just need saved from ourselves. I’m surprised by the high rates on the 7-year CD’s. I suppose I’ve never looked at quite that long of a period of time to lock in my money. Also, I’m afraid I track my money too much to benefit from a surprise windfall of my own money, so I guess I’ll just have to keep up my motivation.