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Or, Confessions of a Former Millionaire.
In 1998, I became a millionaire. Not cash in the bank, but total assets.
It didn't hurt that we'd bought our waterfront home in more affordable south Alabama during a 2 year lull in price increases in 1993. In five short years the place was worth about three times what we paid for it.
I'll take lucky over smart any day.
The corporation where I had worked for over 30 years had, several years before, changed their employee retirement plan from a "defined benefit plan" (a guaranteed monthly check every month for the rest of my life and that of my wife) to a "defined contribution plan". Beginning in the early 80s they put a percentage of my salary into what was basically a glorified money market fund. As a result, when I decided to retire in 1998 there was a sizeable six figure nest egg there. I would still get a small monthly pension from what my time in service had "earned" prior to the plan changeover. Thank god for that.
When I left the company I received a lump sum from the defined contributions account. Now it was mine to invest however I saw fit. I was not a novice. Over the years I had made various investments, including some pretty risky stuff. Common stocks, precious metals, and even commodity futures. Overall I'd done pretty well in most of these ventures.
I took the lump sum and opened an IRA brokerage account. This gave me the most flexibility as to what kinds of things I could invest in. Within the account, over a period of a couple of months I bought shares in 8 or 9 mutual funds. Most were with Janus. I thought I was pretty well diversified, although I did notice there was some overlap in stocks owned in the various funds. We were all drinking the dot.com Kool Aid back then.
When the markets, and especially the dot.coms, began to tank, I held on. Janus still painted a bright picture for tech stocks. Computers and computer related companies were not going to just go away, in fact more and more people and corporations were buying computers and related gear. Janus trumpeted that they were now able to pick up more shares of the dot.coms for pennies on the dollar. We were all gonna be rich. Sounded reasonable to me. I considered myself to be a seasoned old hand at this.
I continued to watch my assets dwindle.
At one point, prior to the market decline, I'd handed over about 20% of my money to an investment advisor. He seemed to be a really sharp young guy with some innovative investment ideas to further diversify my holdings. My wife, who is a far better judge of people than I am, was enthusiastic about his plans. It was hard work being my own "investment advisor" and nothing would have made me happier than to turn to whole thing over to someone whom I trusted AND who could provide a reasonable return.
Anyway, as the market began, and then continued, its decline I continued to hold on "for the long haul".
And held...and held.
Finally, when the money I managed was down by a third, and the money the bright boy had was down by a half, I pulled the trigger, fired him, and sold everything. It was damned painful.
Now I am the most conservative investor you've ever seen. I don't think I'll ever own another mutual fund or share of common stock again. I invest in various solid, conservative debt instruments that actually pay INTEREST!
Oh, we're still doing OK. Still paying the mortgage and buying groceries. But the money we'd planned on for travel, or a new car, or remodeling the bath, or replacements for some of our garage sale furniture, etc. just isn't there any more. We count our pennies.
Oh, and I'm no longer a millionaire. :-(
This is why I'm not in favor of "private" accounts for Social Security funds.
Whatever happens probably won't affect me. I've been collecting my monthly check for over a year, and I don't know what the hell we'd do without it. We also count the days until Miz t. is eligible.
Just my two cents worth.
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