Seeking Stable Financial Blood Sugar
Last summer I decided to start de-risking my portfolio and reduce my stake in equities. As I wrote in that post the decision had nothing to with timing the market. I know that I nor anyone else can do that successfully.
My decision was driven by two main factors – I keep getting older and I have enough. Way more than enough actually. So as I said in that post, why keep playing the game the same way and expose myself to the same level of risk when I can lock in more of my gains and live contently?
So I’ve been moving some money from equities to bonds, but not drastically. I’m still well over 60% in equities, but not nearly as high as I was this time last year.
Smooth Operator
In January 2022 the S&P 500 declined 5.3%, but my net worth only declined 3.1%. I actually ran the numbers for the 5 months since I made most of my moves.
| S&P 500 | My NW | |
| September ’21 | -4.80% | -2.60% |
| October ’21 | 5.70% | 3.90% |
| November ’21 | -1.00% | -.007% |
| December ’21 | 3.50% | 2.60% |
| January ’22 | -5.30% | -3.10% |
As you can see the S&P 500 see-sawed from September till the end of January. Down, up, down, up , down. My net worth did too, and in November when the market lost 1% I barely lost any money.
For more seasoned investors who understand risk exposure this is nothing but a “duh” thing. If you are one of those investors then sorry but I also write to help those just starting out or others in my age group who are less experienced with investing.
For those newer folks my asset allocation is creating more stability, intentionally.
Less Sugar, More Stability
Regular readers know I write about health and diet a lot. And I relate them to finance. Well here I go again. The standard American diet (appropriately called SAD) is full of processed foods, carbohydrates, and sugar.
Most Americans eat 3 meals a day and snack 3 or 4 more times in the same day. Every time they eat they’re getting a sugar high afterwards as the excessive carbs and sugar they’re consuming spike glucose in their blood stream.
Soon after the blood sugar spike comes the crash. This destructive pattern creates a roller coaster ride of blood sugar surges and crashes that looks like this:
A more healthy way of eating is to eat fewer meals but more importantly to eliminate sugars and vastly reduce carbs. You’ll still get some surge in blood sugar after eating but it’ll be way less of a spike. So the crash afterwards will be way less of a crash. Overall you’ll have a more consistent blood sugar level throughout the day and steady energy.
That looks more like this:
I’ll let Stanford trained Dr. Casey Means explain in this very short clip from her most recent appearance on the Mark Hyman podcast:
In a nutshell this is what I want from my portfolio. I want gentle rolling hills. I want fewer massive highs (yes I said it), because what comes with those massive highs is crushing lows.
I’ve already won the game, I just want to take my portfolio and live in peace already. And hell yeah I’m going to spend a lot of it 🙂
My Diet, My Money
I lost over 75 pounds in my 30’s and 40’s and feel like a million bucks. I’ve been on a journey to eat healthier that whole time and have gotten to a point where I’ve virtually eliminated sugar and greatly eliminated carbs from my diet.
I’ve reached that state of gently rolling hills with my blood sugar and I can tell you it beats the shit outta the unhealthy glucose spike-crash cycle that I used to live in.
And now I’m increasingly tuning my portfolio to do the same for me. I rarely look at what the stock market is doing, but sometimes see a news headline about massive highs or down days in the Dow Jones or S&P500.
I’m now in a place where these big bumps are just gently rolling hills to me. I have stable financial blood sugar, and it’s a healthy place to be.
Great work Dave! It looks like you are doing what makes you feel comfortable and happy.
“If you already won the game, quit playing.”
Layin’ off the junk and keepin that blood sugar as level as possible
I think the 10+ year bull market has made a lot of investors forget the importance of bonds and forgo them altogether in their portfolio.
I think it’s a good idea, and love the analogy! I’ve been on the same journey of trying to level out blood sugar levels. For whatever reason (genetics, I guess), I’m just naturally prone to high glucose 😭
the lengthy bull market has done lots of weird things to people and how they see investing, and much of it is not good. But it’s created trillions in wealth as well. Thanks for the kudos!
I’ve long been a fan of a widely diversified portfolio. Every year I have an asset class that performed (relatively) poorly, but I love those smooth hills. I’m too old to be climbing those big hills, anyway….
Haha, very true. The small roller hills are where I usually attack my friends on my group rides 🙂
good analogy, dave. what are you gonna buy with all those riches? i’ll bet it’s a gigantic s.u.v. to pull a bass boat.
Oh you know me so well, I’ll probably go on a bunch of cruises too, I love floating shopping malls 🙂
I never get tired of the health and finance comparisons (my two passions)!
Great analogy and an important message for younger/newer investors who might be overly optimistic, having had little experience with down markets… especially the longer down markets, which we haven’t seen in a long time now. It was also interesting to see a comparison of your portfolio to the market after de-risking.
Very true, the next long down or stagnant market is going to be a shocker to so many. The covid hit was nothing, it lasted a grand total of 2 months.
I stay at 55% stock 45% bond/cash/alternatives. Like you that throws off more than I need. And when the market tanks it only hurts half as much. It’s still never fun to watch a market melt down like the one in 2020, but it’s just a mild discomfort.
That’s a ratio I’ll likely be at or near when I’m your age, I think that’s wise. And a nice smooth ride
We have enough, probbaly way more than enough to live our current lifestyle. Because we have a good cushion, I’m still at 85%+ risk assets (stocks, REITs). Because that 10-15% of low risk assets can last us 5+ years, I don’t mind dialing up the risk in the pursuit of an 8 figure net worth. I still see incremental lifestyle value in a nice $3M beachfront house, travelling first class everywhere and only feel comfortable doing so at the 8 figure level. The downside is losing, say, half our net worth. But even then, we shouldn’t be in the poor house and can still live a comfortable retired life.
Just a different approach and perspective I think may be worth mentioning.
Absolutely, you’re doing what I call “going for it” and you clearly understand the risks. Everyone has to balance things based on their risk tolerance and knowing risk tolerance comes somewhat through trial and error, meaning you have to experience up and down markets to know what you’re comfortable with.
Same here. Markets swings don’t really get my blood pressure up anymore. It’s nice that something that used to be a massive peak or jump of a cliff is now just a small roll up or down a gentle hill.
Laying off that sugar dude – nice!