Josh Brown wrote an article for Fortune that dissected the differences in how Baby Boomers (and also Gen-X, we’re included too) accumulate retirement assets and how their young Millennial/older Gen-Z children are getting rich quickly on meme stocks and crypto currencies. Read the whole thing but this line captures it very well and maybe very painfully: Jerry spent three decades saving and investing, prudently, and dutifully. He and Nancy have accumulated $1.2 million—for them it’s all the money in the world. Took them their entire lives. Aiden made $800,000 in the past 12 months, starting with the $25,000 his grandfather left him. He did it from a phone, knowing virtually nothing about the instruments he traded.
I think Josh is isolating possible envy at the quick money being made. Decide for yourself if that exists, I have no idea but that is an emotion that needs be dropped right away. But investment process does need to evolve even just a little. There is a balance between abandoning all discipline and going all in on meme-stonks and expanding your process to take in new ideas in proper proportion.
Backing up just a moment, Josh briefly lays out how the 4% rule could fail going forward. It is built on interest rates that don’t exist anymore. That doesn’t mean it must fail but you have to understand why it worked in the past to have a better shot at it working for you in the future and if you doubt it can work for you in the future then you need to figure something else out.
The something elses include taking less than 4%. Taking your 4% a few years later than you planned. Allocating more to stocks than maybe you intended (take it easy, I am talking incrementally). Making an allocation to asymmetry a crypto currency that Aiden is speculating on. We’ve talked 100 times here about starting a position at 1% and letting it grow into something huge or going to zero.
What is 1% of your liquid net worth? Is it $3000? How about $9000? If 1% is $6000 and you grow it into $60,000, that obviously has a substantial impact on your financial plan. If it goes to zero, you might make that up in a day or two. Ages ago I saw a Tweet responding to a “if you bought Bitcoin in 2013 you’d have a gajillion dollars” and the response was “if you bought Bitcoin in 2013 you sold it and soon as it doubled.” If you’re going to expand your horizon to include asymmetry you have to train yourself to not sell after it doubles.
I think the way Josh laid out his article made the case for asymmetry, but it is clearly not right for everyone.
I also think embedded in Josh’s post is the argument for cultivating a third income stream beyond Social Security and portfolio withdrawals. My wife and I are walking the walk with our Airbnb. I continue to cultivate my Incident Management Team opportunity (I am keeping my training; I would still need to be hired) although that is not one I expect to ever use.
What are you interested in and really good at? Try to figure out a path to monetize it. You might never need that monetization but cultivating it now creates optionality for the future in case you don’t ride $1000 in Stonkcoin (I made that up) into $1 million.