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Did You Profit From The Stock Market Boom?

A healthcare professional might look at their portfolio and wonder how it can look so sluggish when they’ve invested so many hours the past year trading stocks online. They aren’t exactly sure how much the portfolio profited because it’s hard keeping track of so many transaction – the trading-spreadsheet got abandoned long ago.

The recent stock market boom has posted double-digit gains and this post is about whether the average healthcare professional profited from such a stock market boom.

How about you, did you enjoy a 10% gain in 2016?

How about a 20% gain in 2017?

If you did then you are a savvy trader because those are the numbers the average US stock indexes threw down the past 2 years. And because they are indexes it means that the investor didn’t have to do any work at all except for the rare portfolio rebalancing in order to enjoy such sexy double-digit profits.


How Did Other Investors Do?

In reference to this article, most Americans haven’t benefited from the recent stock market boom that the economy enjoyed.

How you design your portfolio has to do with a lot of factors including your risk profile, your investing horizon, your income level, and job security.

However, economists and investing gurus agree that if you aren’t exposed to stocks then you aren’t benefiting from the long-term returns. Bonds might feel safer and CD’s might give you a warmer feeling but they both tend to only keep pace with inflation over the long-run.

What Americans Invest In

Quite a few Americans are invested in company stock, bonds, and fixed income investments such as CD’s and savings accounts. An even larger percentage is banking on their primary residence appreciating to profitable levels.

Individual Stocks:Stock Index Funds

Even worse, those who are getting some stock exposure are invested in individual stocks which fluctuate a lot and are hard to diversify in unless you have a large number of stocks with a grip of cash invested.

The small percentage of US investors who correctly invest in passive stock index funds can fall victim to devastating investing behaviors such as bailing on the portfolio when there are no returns or cashing it out prematurely. Not to mention the popular frenzy selling when the stock market crashes.


Sample Portfolio Mistakes

I’ll share 2 stories with you guys, one involves Dr. Mo and the other a buddy of mine.

Case 1: Dr. Mo

In 2015 I cashed out my investments in order to buy a condo. The reason that this may have been a mistake in hindsight is that I could have taken on a mortgage at the absurdly low 2015 rates and paid it off quickly.

I cashed out about $180k worth of investments and used some of it to pay off my student loans and the rest to pay for the condo.

Case 2: My Frugal Low-Income Buddy

As for my buddy, sometime in early 2014 he decided that the stock market was bloated and heading for a crash. He pulled out all his investments – $650,000. He’s still waiting for the market to crash so that he can invest at lower rates.

Case 3: High-Income Frugal Buddy

I am not saying that the dude in case-2 is wrong for doing what he did. If he succeeds in timing the market just right then he might do just fine.

Another buddy with a $2M portfolio decided against cashing everything out and instead cashed in only a healthy portion and converted it into CD’s but left the rest to ride.


Understanding The Stock Market Boom

A 10% gain in 2016 means that if you had $300k invested then you were up by $30k.

You’d start 2017 with $330k and would have added another $66k to your portfolio by end of 2017, for a total of $396,000.

Let’s Go Back to 2012

If you started in 2012 with this passive index fund investing strategy then your $300,000 would have turned into $630,000.

The downside with individual stock investing is that there are too many little players to keep track of and it can be time-consuming to handle all the trades.

It’s possible to replicate the same returns because only a few stocks are responsible for these double-digit gains. But you would still need a very large sum of cash to be properly diversified.


Selective Investing Memory

We downplay our losses and inflate our gains.

I realize that there are successful day-traders out there and I’m sure that in such a bull market they have been getting 30%+ a year instead of the 10-20% gains that I’ve enjoyed.

Day-trading takes practice, expertise, perseverance, and a lot of time.

It was 2012 when I first started keeping track of my investments on a spreadsheet and within a year I realized that I was actually losing more than gaining. My memory failed me – the whole time I thought I had a gain or at worst broke even.

The gains I had were during bull markets. As soon as the market took a downturn my portfolio would be riddled with losses.


The Time Invested Trading

Those anxious nights waiting for the next morning’s stock results isn’t something you’ll miss. You turn on the computer, see some losses, see some profits and do the math to see if selling specific stocks would offset some of your losers or floaters.

Once you have a few player in the market, it’s not like you can take a day off from trading – you have to log on multiple times a day, research each of your stocks, and decide what you’re going to do.

And even though you can take the weekends off, it sucks having to think about your portfolio all weekend long without being able to make much of a difference.


The Devil’s Advocate

It’s really enticing to write about such a topic when we’re experiencing a bull market. But of course I wouldn’t be writing this post if we had just hit the 2008 market crash.

Or perhaps I would have published this post in 2007 or 2000 when the market was going up, up, up – right before the infamous crashes. Would it therefore mean that investing in stocks is bad?

I guess I haven’t been investing long enough to answer that but other successful investors around me in their 50’s and 60’s seem to think that stocks are the way to go as far as low-maintenance securities investments go.

Looking at one of my index funds, VTSAX, a broad passive US stock index fund, it seemed to have recovered just fine after the aforementioned crashes.

For the time being, the long-term investing game seems to be easiest played on the equities turf. I’m curious to see the day when that will change but I don’t expect it to be in my lifetime.

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