Keeping a history of all the numbers force me to be honest with myself. After blogging for three years already, there were so many up & down in my own money.
2006/5/9 was the first day of the record of my own net worth. My scaled down net worth number had $555629.93, which I knew was not sustainable. It was right around the time that precious metals made an almost parabolic new high, and my company stock was at a very high point. 31% of my net worth was in my company stock (options) at that time. I chose not to sell, knowing fully well that the stock market high should come in early 2007 (my guess at that time). Unfortunately, my bets were wrong. Even though my company is more like a leading company and more like a mid to big cap stock, it didn’t track the general stock market at all. This part of my 30% net worth dwindled by 84% twice. Even today, the total loss is 63% since May of 2006. I had a chance to sell my company stocks in 2007, but I was too busy with my daily job, and before I could gather my thoughts, it went down big time again. I failed to be always mentally prepared. The window of opportunity is always fleeting.
Going forward in the later part of 2006, my net worth suffered mainly from the big loss of 84% in my company stocks, and a small hit from the precious metal temporary setback. During the period from 2006 to 2008, my net worth fluctuated mostly between positive 20% to negative 20% at $500000 (scaled down number), depending heavily on how my company stock behaves, and/or precious metal prices.
Early (Feb/March) in 2008 however, just when I was reducing my stakes in precious metals, my relatives sent some big amount of money under my custody. Because I always managed the entire portfolio in terms of a bigger extended family, even though those cash was not mine, I felt compelled to hold on to my existing positions in precious metals. Frankly, I did not know whether $US/gold will continue to go down or up. The increase in my total family cash was so big that it was more than my own entire cash position. The timing practically couldn’t be worse. The $US cash increase was at about the highest point of gold. For the benefits of the entire family, I decided to hold on to my precious metal positions. In fact, I tried to seek permission to invest part of the cash from my relatives.
Well, what happened later in 2008 was a total crash in everything, with $US staged a dramatic comeback. From 2008/5/16 at $558131.75, my net worth crashed to $240512.41 on 2008/11/20, a 57% loss in about six months. What’s worse was that the cash that I’ve prepared on the sideline for about $350000 (scaled down) plus more in the banks was not really usable. I was told that about one third of my relatives’ cash needs to pay for tax in the following year, and that they are going to remove the cash too next year.
Since last November, I have almost doubled my net worth to $479758.93, without putting those big pile of supposedly prepared, but “phantom” cash much into use. In fact, I have also accounted a 33% drop in my home value since the rise. I’ve learned extremely hard lesson through this. I can never rely on anyone else for my own financial success. If other people lose their money, it is truly their own choice and their own business. I should always simply mind my own business, even when “other people” are my close relatives. I can give them advice, but whether they take my advice or not, it is their business. I should never make ANY financial decisions, including the effects of other people’s money. If other people get rich, they won’t give it to me. If I get much poorer because my decisions taking others’ money into consideration, they couldn’t care less because of my own wrong decisions. The bottom line is that unless I am given very explicit instructions with very explicit timeframe for the management of money, I should never invest with the combined portfolio in mind, even when the combined portfolio is my extended bigger family. Money is always the most sensitive issue among people. I should always mind my own business.
I could have come out of 2008 market crash with a big gain easily, if my investment plan was not meddled up by a big phantom cash infusion at the peak of the (precious metal) market (Feb/Mar 2008), and all withdrawn at the bottom of the market (Nov 2008). But I’m content with just about breaking even finally. I can’t possibly describe how terribly I felt when my care for my relatives totally backfired on me.
Another big mistake that I made was that I simply did not hedge my positions in my company stock in 2007, even though I knew that a big fall was coming. Such hedge was very hard to implement due to the raw size of my leveraged positions through company stock options. To cross-hedging of this position using market double-short ETFs also has a lot of complication because my company doesn’t track the general market that well at all.
Today markets are again at a high point, and I expect my net worth to go down in the coming months. However, hopefully this time around, I can correct my previous errors. Not all of my current cash position belongs to me right now, but I think I’ve raised sufficient amount of my own cash. The second half of 2009 will be again full of volatility. I think a high cash component in portfolio is good for safety.
I’ve obviously out-performed S&P500 in the last 3 years, but an almost flat performance is nothing to brag about. I could have done much better, if I mind my own business and follow through with actions on my own thoughts.
Did I go under my 1st Million in 2008? Hell, a resounding yes! Am I back above now? Well, you can take a guess.