Can I Turn 2K Into 2M: Welcome to Yield and Sass

Can I turn a 2,000 dollar portfolio into a 2,000,000 dollar portfolio?

I am the last person you would expect to see investing in the stock market. My granddad was quite literally a cad carrying communist. My dad wasn’t quite so vehemently opposed, but he thought the only use for stocks was as a good way to lose money. He didn’t exactly see it as a con, but in his hierarchy of appreciation for things, it was somewhere between a malarial mosquito and a trash can. 

His daughter was raised a little differently though. Between growing up in classical music and an Ivy League degree, I grew up surrounded by the offspring of folks who were fluent in stocks. My friends’ parents passed that knowledge onto their kids who in turn shared it with me. It was only a matter of time before I felt confident enough to invest.

I’ve been watching the market since the 90s, but it was only two years ago that I finally took the plunge. I decided to take 2000 dollars of utterly disposable income and throw it in the market just to see what happens. Kind of like when you were a kid, and you wanted to stick your finger in the electric socket I suppose.

1700 went into broad market index funds, and 300 went into pot stocks for some shits and quite literal literal giggles. I then promptly forgot this investment and didn’t bother checking on it for a few years. I assumed I had disposed of my two grand of disposable income, and then out of the blue, I decided to log into the account again and see how much money I’d lost. 

My pot stocks had all but evaporated. (Should have known better than to buy stock in companies run by people whose product is best known for sapping motivation.) However, even with those losses, I’d turned 2000 dollars into 2800 dollars. I had learned how to trade.

And with that an experiment was born. If I could turn 2000 into 2800, could I turn it into 2,000,000? It would take time, but now, I was curious.

Here’s what I’ve learned about trading so far in my life: 

Your primary job as a trader is not to lose your capital. Figure out how to do that, and you’ve won half the battle.Worry about making more money, after you’ve figured out how not to lose your money. 

Hedge your bets, and when you’re done hedging your bets, hedge your hedges. The way to do that is to plan other investments that will do well, if your stocks do poorly. (And sooner or later, they will.) 

Never have so much of your portfolio in one place that you’re stressed about it. If you’re nervous, you’re not allocated properly. 

Are you worried that the market will drop? Good, you should be. Keep money in metals and bonds. Worried about political instability and wars? Good, you should be thinking about that too. Invest in defense stocks and oil futures (or don’t, if you morally object). Worried about oil prices spiking and throwing a wet blanket on the market? Oil stocks do delightfully when the price of oil rises. 

The point is to know what the hedges on your specific investments are and spread out into them, so you can sleep at night. 

As I write this, I keep 1000 dollars of my portfolio available for active trades. 2200 is in broad market index funds that pay dividends. For those of you who aren’t familiar, that’s a mutual fund that owns a little bit of just about every company and its brother. I don’t have to worry about which stocks to pick for that segment of my portfolio. All of them have been picked. As long as the overall market does well, they do well. 

You can make money in any market conditions. The key is knowing where. Generally speaking, when stocks are going down (and again, they will), normally, bonds will be going up. This is less certain than it used to be, but gold will certainly be going up. When stocks are going up, bonds are going down. What do you care? You’ve got your bets hedged and your hedges hedged too, right? 

With your portfolio set up this way, it’s not a question of will your portfolio make money? It’s a question of which segment of your portfolio will make money? The worst case scenario is you break even.

Real estate prices will go up and down, but land will always be valuable. What does real estate have to do with the stock market you ask? They may be different makers, but the principle remains. 

Certain asset classes will always be a meaningful store of value. Land is one of them, and stocks are another. I keep a significant portion of my holdings in gold that I bought 10 years ago. Particularly, as our government deficit spends with all the glee of your cat unrolling the roll of toilet paper roll in your bathroom, that’s a solid place to see money slowly grow over time. In fact, as long as we keep making more humans and can’t cost effectively make more gold, I don’t expect my gold to decrease in value until about half-past-never. 

I got funny looks from my finance friends when I bought it 10 years ago. “It’s a bad deployment of your capital,” they’d say. I could have cared less though because I knew I wasn’t going to lose money on it. I had and have no intention of selling it, until gold goes to 10,000 an ounce. 

The market will go down. It will also come back up. Over time, the market will grow. When I first started watching the market, I thought it was the other way around, and the market would go up but then come back down. To date, gravity has worked in reverse for finance. 

Don’t believe me? Have a look at the graph, courtesy of the good folks at Macro Trends. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart? It makes the crash of ’29 look like a fender bender. 2008 is barely even a scratch. Covid in 2020 is practically a near miss.

Don’t invest in bubbles. When the commentators start to look like a starry eyed kid on the night before Christmas, run. They may find a lump of coal in their stocking in the morning. Don’t you still have yours hanging out. 

However, after the dust settles from those market crashes, the basement bargain shopping is phenomenal. If I ever do take a long term position in the big behemoths, you can bet it’ll be after a hefty decline. Buy low and sell high. 

We’re all pigs. The problem is when pigs become hogs. This last one is the most important. A little old Italian guy I once knew told me that, and it stuck with me. This applies to so many areas in life. 

What does this mean practically? Know your entry and exit points on investments. Know what a stop loss order is, and know what take profit sell order is. Have a plan and stick to it. Otherwise, you’re just gambling. Basically, you have to know when to pull out. (Yes, I said that, and I regret nothing.)

Am I an expert trader yet? Not in the least! Nothing in this blog is financial advice for anyone but me. But I have a modicum of common sense, a finely honed bullshit meter, and a healthy dose of sass. And with that, I give you Yield & Sass. 

So can I turn 2,000 dollars into 2,000,000 dollars? Stay tuned, and let’s find out.