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All Time High Net Worth

Don’t Let The Numbers Mess With Your Head – Stick To Your GAME-PLAN

What kind of saver are you?

Do you consistently just set aside $2k/mo? Do you simply max out your retirement plans and not worry about the rest? Do you take whatever is left at the end of the month after paying bills and transfer it to your savings account? Do you go to the bank and cash out your money and stash it at home? Do you simply keep it in your checking account?

What kind of investor are you?

Do you buy mutual funds and hold them for the long-run not caring what they day-to-day price fluctuations are? Do you buy individual stocks, selecting companies which you know have good business strategies and which you expect to be around for a long time? Do you invest in peer-to-peer lending? Do you invest in real estate? Or do you just put your money into whatever investment funds your 401k account has decided on for you? Are you saving most of your money for a potential business venture in the future?

What kind of spender are you?

Do you have a set amount in mind which you just don’t surpass? Do you spend based on whatever your heart desires at the time? Do you have a budget you follow which you adjust based on whatever category needs more spending each month? Do you simply pay your important bills and spend whatever is left at the end of the month?

How do you consume news?

Do you have a favorite channel you tune into every morning or after work to catch up on what’s going on in the world? Do you listen to NPR on your way to work? Do you have a favorite magazine or newspaper you like to read? Do you sort through Facebook to see who has posted what news and read the comments? Or do you simply tune out completely and rely on a good network of friends/family to provide you with pertinent information?

Why the fuck am I asking you so many questions?

Because you need to pick a method that works well for you and stick to it. That will maximize your chances at success. Flip-flopping will increase your anxiety, make you act out of fear and likely lead to regrets.

Friends and news are how we are often swayed. A few of my friends fret every time something comes on the news which in turn affects the markets. Interestingly, in the 38 years that I’ve been alive there hasn’t been any dramatic market upsets – by that I mean most of the declines have recovered and surpassed their previous highs.

I have a couple of friends who have quite successfully capitalized on down markets. They use news sources to find inefficiencies in the markets and they capitalize on them.

If you are a real estate investor investing in rental income properties you likely won’t care much if the value of your properties suddenly drops due to a decline in the real estate market. Why? Because rents usually don’t correlate with the value of the real estate, you are trying to generate income by having a tenant. If you suddenly started worrying about the value of the real estate and decided to sell it because it was ‘trending down’ not only would you lock in your loss but you would lose out on the monthly rental income.

If you are a passive mutual fund investor, like me, and see that your net worth is at an all-time high you wouldn’t just sell all your funds. Because the passive investing strategy is a long-term strategy and you likely are hoping for dividend income in the future once your stash grows large enough. You may also hope to sell some of the appreciated funds once you actually need the money.

The same holds true if your funds trend down. My net worth has just shot past $600k, that’s the highest net worth I’ve had. I’m excited because it means that I’m on the right track. But just like I hit the highest point today I could hit a net worth of $350k in just a few months because of economic changes. Will I adjust my investment strategy? Nope.

The point of this post is develop a well researched strategy that works for you and stick to it. I’m not suggesting you put on blinders. There is nothing wrong with acknowledging an all time high NW or an all time low NW such as many experience in 2008. Just be sure that you don’t make changes to your strategy based on fear.

Soon (who knows when) the markets will drop down just like they have many times in the past. Could this be a good time for you to get into some aspect of the market for which you were priced out of in the past?

Whenever I hit a new net worth high I review my Investment Policy. It’s a document that I think everyone should have. In it you write your investment style, what you will do and what you won’t do. It has gotten me through some unsure times.

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