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It was not a wise thing to do—and it’s not an example I’d want my kids or grandkids to follow. But I’ll tell you a tale anyway. It’s a story of loss and comeback, of fear… and, truthfully, more fear. I guess confession is good for the soul.
Quite a few years ago, I noticed something simple: the price of gasoline was falling. From that observation, I made a leap. I began buying oil companies and energy ETFs. At first, I eased in. Then, one day, I didn’t. I committed a large chunk of my portfolio—far more than any reasonable person should—to this single idea.
And then the drop accelerated.
To keep things simple, let’s say I started with 100% of my investment. After the decline, I was staring at 50%. Just like that, half vanished—at least on paper.
I remember thinking, “Oh crap.” (One of my favorite semi-offensive phrases.)
Then I reached for a well-known investing rule: “The first rule is don’t lose money.” I told myself that if I didn’t sell, I hadn’t really lost anything. My account statement suggested otherwise. Still, I held on.
Eventually, the tide turned. Energy prices recovered. My battered position began to heal—and then to grow.
For some time now, I’ve been selling, little by little. I don’t know when the rise will end, so I trim in small amounts. But as prices climb and buyers seem eager, a new thought creeps in: “Oh crap… am I selling too soon? Too cheap?”
That’s the strange thing. I’ve made a substantial profit, yet the fear hasn’t gone away. It’s just changed shape.
When I was down 50%, I feared losing more. Now that I’m up, I fear missing out.
Here’s what I’ve come to believe: unless you are absolutely certain—borderline hubristic—you will feel fear when you step outside a traditional, diversified portfolio. The classic 60/40 mix doesn’t just aim to balance returns. It helps manage emotions.
I didn’t follow that path. I made a concentrated bet. It worked out—this time—but that doesn’t make it wise.
Uncertainty—and fear—are constant companions in investing. They show up when prices fall. They linger when they rise. They whisper when you buy, and they nag when you sell.
So what’s the lesson?
Not that you should swing big. Not that you should avoid risk entirely. But that you should understand what kind of investor you are—and how much fear you can live with.
Because in the end, the real risk isn’t just losing money. It’s making a mistake you can’t recover from.
Maybe you have a tale you can tell.
I occasionally make a modest investment in suffering sectors. Most recently in a Vanguard health sector fund. The key word for me is ‘modest’.
Buffett says be fearful when everyone is greedy and be greedy when everyone is fearful. Can you afford tools 50% of your equity portfolio and sleep at night??
I can always sleep at night, and most days in the afternoon too. 😁
Why? Because my hope is not found in wealth.
– Happy Easter everyone.
No doubt I have been blessed. It took me about 30 years to learn, the market will always go up and down. After 30 years,,I learned you have to save and be disciplined, because retirement is not cheap. I read all I could about the S&P 500 and why it is such a good investment. Then I started following Buffett and Berkshire stock. I learned about corrections and bear markets, and how the S&P always bounced back. After another 20 years I said picking stocks just is not my bailiwick. So I modified the Buffett rule, 90% S&P 500 10% treasuries, and since I have been 65 or so, continue to work toward my new goal, 85% S&P 500 and 15% cash to tide me over all the corrections. Yes, when we have difficult years like 000, 2001 and 2002 my portfolio dropping 44%, you just have to know the market always, at least so far comes back. Generally in 5 years or less. I sleep like a baby because my 15% cash is always there for the lean years. However, everyone is different, that is why so many combinations can work for you. Overall after 60 years, my average yearly gain is about 10%, and that works for me.
i got completely out in ’99. i thought the market might react badly to y2k. so i looked like a wizard. but, i became guilty of fomo in 1/01 with a small part of the total and about half of that is just back to ok a couple years back…20+ years……i agree about emotions. i suppose if you can get yourself in a position where you can afford to wait….you should be ok.
Part of being able to “afford to wait” is obviously the size of your portfolio, but another important component, especially if one does not have a large portfolio, is to have the correct allocation which can be accomplished by using the bucket portfolio mechanism.
discipline is essential.
Managing my emotions after the Dot-Com bust has made me a much better investor. and, I sleep better at night, too. I’m a firm believer of being prepared for the next downturn as well as a boom market. Purchasing stock sectors that are out of favor is a tried and true, long term approach. When the EV economy was being pushed and subsidized was one such opportunity.
I’d like to say look how smart I am. 😁 But the truth is I had no clue. 😳
Cheers
I definitely lean ‘financially conservative’. In my current investments, more than 50% of my total funds are in ‘guaranteed return’ accounts (some earning around 4% and some earning 7.5%). I haven’t started to draw on my retirement funds yet but probably will start towards the end of this year.
On days when the stock market goes up in a big way, I sometimes regret not having more of my money in stocks. But on those days (weeks) when the stock market drops sharply, I love that I can sleep at night knowing a large percentage of my money is happily immune to stock market swings.
By guaranteed return accounts do you mean deferred annuities or something else?
I have a “TIAA Traditional” account (which I will turn into an annuity at some point, but am not required to do so). In addition, I have a state pension plan that has a guaranteed return of 7.5%. My (obvious) plan is to let that money stay there for as long as possible…
“I have a state pension plan that has a guaranteed return of 7.5%. My (obvious) plan is to let that money stay there for as long as possible…”
When I left the hospital (a decade before turning 65) I had some money in a defined contribution plan with a guaranteed minimal return of 5% until I turned 65. At that point the account had a little over 100 K in it and decided if I was ever going to do annuity this was the chance so I took the plunge. I felt that with MDs in the system they would have a highly rated insurance company, so no work on my part. I looked to see what I could get with commercial insurance companies and it wasn’t close. All I had to do was sign one paper and it was done.
Gotcha. Thanks
You’re welcome.
“So what’s the lesson?”
For me it is broad market index funds and an allocation I’m comfortable with (for me it’s 45/45/10). If the markets go down then my 55% non equity position cushions the blow. As an example today the Morningstar US Market Index was down 1.69%, but our portfolio dropped only .56%. When the markets rebound, and they always do, I’ll recover at a slower rate, but that’s the price of being able to sleep when the markets drop. I can’t control if the markets drop, but I can minimize the damage by keeping my equity allocation lower.
I think my biggest lesson is this: when my fear was greatest, I needed to hold fast. Second—if I may add another—I came dangerously close to making a mistake I might never have recovered from. I can’t do that again.
Fairy tales seldom work out. I wasn’t especially smart or lucky. I was blessed—and rescued.
Most people really don’t know what fear is. I do, when I shorted orange juice futures just before a long freeze.
I think you’re correct. You stumbled onto the hard edge of your comfort zone — and were lucky enough that, once it showed you exactly where that boundary lay, it gently led you back to safer ground. Lesson learned, and properly absorbed.
Is it permissible to use the “C-word?” I can edit it out but it is real.
Funny. When writing my first edited article for HumbleDollar, I included a quote from my dad that included the word “s#*t”. Jonathan edited out the special characters, restoring the quote to it’s actual spelling. So I think “crap” is okay. 💩
Great post. Oddly, I’ve never been able to invest with that kind of conviction — I don’t think I have the temperament for it. What makes that strange is that I’ve invested in a business venture and founded my own company, both genuinely high-risk moves. I’ve always kept those two worlds mentally separate though — business risk felt different from portfolio risk, somehow. And I have some seat-of-the-pants, hair-raising stories on the business side to prove it.
By comparison, my investment journey has been pretty boring.
Which makes me curious — was it the 2014–16 oil price collapse that gave you your hair-raising haircut? Forgive the pun.
Started in 2016 then big dip ~2019…