Good time to buy. 90% loss seems severe, possibly also good time to change employer (which is also essentially buying the dip - you get $N of RSU at the low valuation)
Changing employers might still mean a big drop in stock from when you start. Unemployment still hasn’t ticked down, the Fed is not done with its job of squashing inflation.
Good companies are giving solid refreshers to ensure you are paid more fairly moving forward. See if your company will do that, it’s sorta the same as getting a new offer elsewhere. If your current company won’t do that, that is a bad sign they are worried about bankruptcy and you should indeed leave.
A company worried about bankruptcy wouldn’t seem overly worried about issuing new options (which will become worthless if bankruptcy happens, so cost nothing but some paperwork).
There are many good reasons to leave a company whose performance is declining and where your compensation is cut to well below what you can make elsewhere, of course.
Options have this thing called "time value", so you lose just by nothing happening.
It's unclear if OP is getting options as part of his remuneration or if he is gambling, so impossible to advise. If he is gambling, he should just stop.
My perspective is a bit different since I don't have stock options, just plain retirement and such. So, take this with that in mind.
I would recommend giving yourself a break from following it. My reasons for not looking are these: Values of assets change a ton day-to-day, and a year or two from now who knows what it will look like! I also don't have any control over prices. I could shuffle assets around, but again I don't know what will happen a few years from now. So, I don't gain much by looking at the numbers often.
Sorry it's a stressful sad time for you though. It does suck!
Same advice. Unless you're a day trader, just pick strong assets and look at them once in a while. You'll get sick if you keep reacting to the fluctuations every day.
Since the GP talks about stock options I’m guessing these are part of their total compensation and not a discretionary investment. I’m in a similar boat - stock is about 50% of my total compensation but its value has dropped by 90%. It’s hard to be blasé about losing almost half my income.
Unless you are aiming for the C suite you should NEVER have any company stock as that is putting too many eggs in one basket. If you have all your eggs in one basket you better watch that basket on a level that only C suite people have access to. (I'm not sure if they do,but at least they can unlike those below)
In this case, you don’t have much choice if company stock makes up a large portion of your income. You can sell immediately but the money you receive from that transaction is much less - it’s lowered income even if you immediately diversify.
I.value company stock offers at zero. If I get it and can sell it is a nice bonus. I've seen too many burned by then. The only reason i'm not one is I knew this could happen so I didn't count one things. (They have worked out once in a.while too, but until the money is in my bank account I don't count it)
Yeah, exactly why I mentioned it. I don't have that setup, so it's different for me. Don't want to be dismissive of that point!
How does it work though? Do you sell stock to use as income? Do you hold onto it and get by on salary? I'm not really familiar with how people use these kinds of setups in total comp.
This is something covered very well by Taleb in "Fooled By Randomness." Simply by exposing yourself to random fluctuations on a shorter cadence, you are experiencing stress reactions that would never occur if you checked it on a less frequent cadence. Anyone who has played fantasy football will be familiar with this. If you check your players' scores every five minutes, it is infinitely more stressful than just checking them once on Monday morning.
I used to write software for financial traders, so I know it's possible to make money by following second-to-second shifts in the market. But it's a zero-sum game, and I saw our traders take a lot of money from people who were responding to second-to-second shifts in the market.
These days I put my money in long-term investments and then look at them every few years. The other day I saw mention of the big market price jumps. I thought, "maybe now's the time to rebalance things?" And then I sat very still until the urge passed, because reacting to headline news strikes me as a great way to lose money.
Also why defaulting to hooking up mothers in labour to continuous monitoring is a bad idea. Better, unless something else is medically called for, to check in at sparser intervals instead.
Also a good reason not to get these "breathing monitors" for infants, again, unless medically indicated.
Are you in Europe or the States? The two areas have vastly different economic outlooks.
The outlook in the US can best be described as "uncertain". Valuations are down because the market doesn't like uncertainty, but it doesn't necessarily translate into a future recession -- many of the economic indicators in the US are very positive.
OTOH, Europe is facing a hard winter unless an energy miracle appears.
The market is down 20% on the year, so that means that a lot of people are underwater on their options, so that the fact that yours still has some value means that you are doing better than many.
Huh? nonfarm payroll growth is up 263,000 in September.
The most predictive indicator is the unemployment ratio, and it's very low right now.
Perhaps inflation is a better predictive indicator, but we really don't know since we haven't had any for ~40 years. As I said, it's the uncertainty depressing markets IMO, not necessarily the outlook.
Unemployment really needs to be paired with the Labor Force Participation Rate. Unemployment is low, but LFPR is down as well. 10 years ago it hovered steadily around 63.5-64%. The pandemic crushed it, but we're still only back up to around 62.5%.
That's a lot of people not working that simply aren't in the market anymore, unemployment would look a lot worse if they were included.
LFPR is above the level it was pre-pandemic. Immigration is the best way of driving up the LFPR, but that was essentially nil during the pandemic and is still way down. Combine that with the aging population, and a slight increase in LFPR over the last 3 years is much better than could be expected.
Sorry, missed this reply! Here's my source for the LFPR stats I mentioned above, we haven't recovered from early 2020 yet (and are way off from the rates pre-housing crash)
At no point did the parent allude that. Perhaps the poster just doesn't have insight into every economy on the planet and didn't want to give nonfactual info.
Diversify asset classes. When you do have the chance to exercise stock options, do - to a basket of stocks (like a total market ETF) and other assets (such as bonds, cds, notes).
If you bought options your base case should be that they expire worthless, except some very special cases. If you sold options your likely case should be extreme loss, exceeding the premium in double digit multiples.
If you don't know this then you shouldn't have traded, and were misinformed. They're considered complex instruments for a reason, and the ease with which the masses trade them is something of a tragedy.
This has happened multiple times in the past and will happen many times again, as there's nothing new under the sun (from Livermore, one of the greatest speculators).
A fun little book that I like to recommend: "Confusion of confusions". It was written by a Jewish trader working with the 1600s Amsterdam stock and bond exchanges. It is a good proof of how little things have changed, you'll understand pretty much everything once you map the terms and concepts to their modern equivalents.
In which case - and sorry for not having any consoling words here for the OP here - I can unfortunately not really have much empathy here. An overwhelming majority of people especially here on HN laugh at you if you discount variable aspects of renumeration. Employer issued options or RSUs are down 90%? So what! You accepted a variable renumeration scheme. You knew ahead of time. You are no longer making 200k base + 200k in options/RSUs that you expected to actually yield you 500k in value for doing nothing? Well that's the deal you took.
EDIT: From the down voters I would appreciate some substantiated reply as to why this isn't true. Don't get me wrong, if I had taken such a deal and was now under I'd be miserable as well, especially if I counted on that money and maybe bought something on credit expecting a windfall later. Such as getting a huge mortgage I thought I'd be able to pay off very fast soon. I took the opposite deal. I rejected offers that wanted to give me a lot of variable renumeration and a small base salary and was laughed out of the room.
This was the general sentiment here 8 years ago and I’ve always trusted it. As such my various equities have always been treated as “funny money.” If it works out, great- but I don’t count on them.
If that sentiment has somehow reversed… well, you picked a bad time to do so!
I’d hazard a guess that you’re being downvoted because of your lack of empathy, which is the point of the post, but also because of your gotcha position around variable comp.
If you work for a startup and reject variable comp, you are wasting your time. Go get a safer, easier, better-salaried position.
If you aren’t working for a startup, you’re in no position to comment on the validity of the approach people take there working with variable comp.
You just walked into a funeral for people who got hit by a train and said “what’s the big deal? I never cross train tracks, they’re too risky.”
We don't know about the OP. He didn't say what his situation was. For the hypothetical situation of my parent my stance stays even if voted into oblivion. And I knew it would likely happen given the overall sentiment on HN. Like with variable renumeration itself knew what I was getting into. FWIW I have a variable mortgage and I knew what might happen and is now happening and that is why I didn't buy at the top of what the bank would give me.
If you work for a startup, like you say, there's usually no option to get more base comp. Absolutely understood. You do that when you are young and take a chance to hit it big. Don't complain if you don't hit it big though.
I never said I applied at a startup though and the example I made is more indicative of Amazon or Google.
The way I see the parents example the appropriate analogy would be a funeral for people that liked standing on the train tracks knowing a train was coming and trying to jump before it hit them and I wonder why everyone is surprised that it happened.
I’m not saying your position is wrong or irrational. You chose not to participate in an upside which can be a lottery ticket. It’s a fairly rational position. You asked why you were being downvoted so I tried to explain the reason, which it seems like you were already mostly aware of.
And even if the funeral is as you describe, my point is that people don’t usually want to be told at a funeral why the deceased was wrong. It’s for emotional support. Like this post.
Fair enough. Just to be clear tho, I was asking for a rational discussion (or as I put it "substantiated reply as to why this isn't true", not for why I was being down voted ;)
And again fair enough that in this situation it is very easy to not apply this to the original poster's question and situation (which analogy wise would be shouting at the entire group of people gathered at the funeral that it's this guy's fault for crossing the tracks vs. having a side conversation w/ someone who posited that maybe the guy was one of the ones that actually stands on tracks for thrill when he knows the train's about to be there ;))
Without additional info, telling a stranger that they had “200k in options/RSUs that you expected to actually yield you 500k in value for doing nothing? Well that's the deal you took.” is likely to gather some downvotes for tone, lack of empathy, and a bit of strawmanning.
It was a side conversation after my parent poster created a hypothetical situation precisely because the OP did not specify. Also see longer reply here: https://news.ycombinator.com/item?id=33141941
If you are not retired, then markets being down are a good thing, because everything is "on sale" / at 'discounted' prices. At least for the US† (S&P 500, NASDAQ, Russel 2000), the historical 1-, 3-, 5-, and 10-year returns after a 25% drop are quite good:
You should really start making regular contributions to get back in. You should always be fully invested: having cash on the side long-term is generally not a good investment. Even if you new ahead of time when the dips in the market would occur—which is impossible—it's still better to do regular contributions:
As for myself: I have no idea if I'm down, or by how much, since I haven't logged into my brokerage/trading account since January when I topped it up for the new year; almost all of my investments are automated so I don't need to see/touch things. I have several decades until retirement, so why worry about what happens of the course of a single year?
At the end of the day you should always be invested, and if you're worried about market undulations then you should own some bonds. And besides reducing gyrations, bonds give another advantage: a source of 'dry powder'.
If stocks get "too high" you rebalance by selling off some equities and buying bonds to 'lock in' the returns. When stocks drop you rebalance again by selling off bonds and 'buying low' in equities. Bonds/diversification can really help returns:
> By sitting in cash you're also losing money through inflation:
Also by sitting in Stocks, you not only lost 20% this year, but also 9% due to inflation for a total loss of ~30%+.
Cash is cash. It gets the job done. I'm not saying go 100% cash btw, but it has its place in this time of uncertainty. You cannot buy the dip if you're 100% invested, you have to be holding cash.
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I suggest holding 10% cash and rebalancing as needed. As the market goes up, you naturally sell stocks for more cash. As the market goes down, you naturally sell cash to buy more stock. This stabilizes the portfolio significantly.
Surely you have some cost-basis lot where selling just 10% of your portfolio results in a capital loss (ie: a tax _break_) if you were going to switch into Cash today.
> you would have to time the bottom to get back in.
Think of cash as a call option premium for being able to buy future investments at a lower price.
People tout the "cash loses to inflation" mantra as an absolute - they forget that in large market downturns, cash availability compresses while assets become in greatly less demand. So cash being available when everyone desperately needs it, but few have it, gives cash a value explodes on a opportunity basis for a window of time.
That sounds great in theory, but you can't implement it in practice. It's often easy in hindsight to identify where are those suboptimal 5%-away-from-perfect-timing points where you should have done a rebalancing, but we have no idea how close we are to the next peak/trough.
You also have to get back in at the right time. A lot of people called that the market would drop in March 2020. But how many realized that by August, long before vaccines were in sight, that the market wouldn't go below the pre-covid peak again? Somebody who sells in March and then buys in October loses a lot.
By keeping your stocks you lost your money to inflation too, and then another 20+% because you held through a bubble pop.
I think a lot of the personal finance investing advice given to people in the vein of “solid advice for 90% of people to follow without too much expertise” is becoming some weird dogmatic religion. You must never time the market (even at a loose monetary policy induced bubble), you must always hold total market/sp500 ETFs (even when they’re filled with overpriced companies), you should diversify into bonds (the most garbage asset class available for the past 20 years, until the last 6 months, when they became only partially garbage).
This advice has gone from being labeled as generalist advice with asterisks, through many rounds of telephone, to now being something that invites angry replies if you disagree with it.
"Losses" only occur when you lock them in. If your trading account is down now you have lost nothing—just like you haven't made money until you sell your holdings for cash.
Marking to market (looking at unrealized losses or gains, ie. the value of your portfolio before you sell) is useful if you trade on margin, use this as a collateral (borrowed against it), or plan to sell soon.
In all these cases, this is because you need to sell (directly or indirectly) and thus lock in whatever the current value is.
But until you sell, you have no actual (realized) loss (or gain).
I started investing during this downturn. I'm investing for 30 years. Either this is the end of the world as we know it and my money is going to be worthless or it'll be fine over 30 years.
Don’t. Wait for a few more years to see how inflation and interest rates and your portfolio goes. Retirement now is a massive gamble as major variables affecting your entire retirement plan are a complete lottery right now.
This was in the NPR recently [1]. It has a good perspective: just like jump ups in your portfolio aren't worth anything until you cash out, drops aren't losses until you cash out.
Or the Warren Buffett philosophy[2] is, don't make a number be the source of your happiness or sadness. Play with your kids, enjoy life, even if that number is horrible, will you be fine? Probably yes...
Sorry that this happened. You're not alone feeling this way.
I have lost about 95% of my liquid net worth this year, due to hubris, basically. The first half of 2022 for me was waking up every morning and feeling like puking a little as I get more under water, closer to that margin call, plunging through my stops.
After almost a year of this, I have found a perspective that is helpful for me and may be helpful for you.
It is my firm belief that you are meant to learn certain things in life, and your subconscious very carefully and meticulously arranges your life circumstances to learn these things. This is why you often find yourself shaking your head and saying "I got myself into this".
It may be different for you, but I have realized that the thing I needed to learn is that my net worth is not my self-worth. I realized that I've desperately been trying to make money my whole life so that people will like me and I can avoid the pain that I saw caused by poverty when I grew up.
I have been blessed to have money and realize that neither one of those things are true, and then I guess I have been blessed to be tested on what I learned the first time around by losing it.
I have also come to realize that I don't need all that much money to live a comfortable life.
These are the things that I learned. They may not be what you are intended to learn.
So, take it easy on yourself. What happened may have been completely out of your control, or it might have been something that you contributed to. Either way, it's done.
Take some time to feel shitty, because you will, but consider changing perspectives and start looking at what you can learn from this and maybe even what opportunities have opened up because of it.
The everything bubble gave a lot of people the mistaken impression that they were genius tier investors. I know I personally spent a lot of emotional energy on checking my own ego.
I’m involved in a few personal finance communities and this is very true. I especially see it in people who are in their 20s or 30s and started investing after the US subprime crash.
To make money, why else? Look folks, this wasn't my retirement money, it was money I didn't particularly need and had no idea what to do with.
It always worked for me before. My investing history is a long string of huge successes beginning in 2014.
I've always invested in companies I believed in and that had solid fundamentals.
It appears the market doesn't give a shit about company fundamentals right now. Most small growth companies are down ~80%. The two companies I lost everything in are currently priced below liquidation value.
Yeah, I bought on margin, so that gave me 2x leverage, so if it goes down 50% you get margin called.
I know you're joking, but as much as i've learned that my self worth doesn't come from making money, it doesn't come from bragging about losing it either :)
It is my firm belief that you are meant to learn certain things in life, and your subconscious very carefully and meticulously arranges your life circumstances to learn these things. This is why you often find yourself shaking your head and saying "I got myself into this".
@jeremyt care to elaborate on this thesis and wondering how you came to this conclusion, was it a self journey
I was attempting to keep religion out of it, but this is the Buddhist worldview.
I believe that my soul chose this life to learn what I'm learning. And whether I'm conscious of it or not, the "higher self" part of me hangs around in the background to ensure that I learn what I need to. This isn't typically what one would expect from what other religions would call a "guardian angel", but that's kind of how I see it.
Like, sometimes I can't take losses. That's deep family karma from being afraid of being poor. However, being unable to take losses means that you make poor decisions. Not being able to make good financial decisions makes people poor, and just continues the intergenerational cycle of poverty.
So, my unconscious "higher self" carefully arranges events such that I encounter maximum pain for going along with this karmic thing I'm supposed to transcend. The pain facilitates the learning, and thus the freedom from the karma.
Ultimately, the point of existence is to experience everything that can be experienced in every lifetime and learn everything that can be learned, resulting in ultimate freedom from karma and liberation from the cycle of birth and death.
Or, you can just meditate a lot, and I guess I'm working on that.
I'm not spiritual at all, but I did resonate with the Buddhist principle to acknowledge your emotions, rather than to react (or avoid) them. Something I'm trying to apply in my own life.
Strategies that result in 95 % drawdowns are not in the "making you money" bucket.
Since growth is compounding[1], the most important property of a money-making strategy is to keep drawdowns at at optimal level. This optimal level is a thrill ride on its own, but 95 % is plain overbetting and will never make you money in the long run.
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[1]: If you draw down from 100 to 10, it takes as long to go back to 100 as it would have taken to go to 800 had you only drawn to 80.
This is correct only if you look at single bets in isolation, or at bets small enough that you can actually make so many of them you get the EV in the end.
Once you look at a long sequence of large bets (where 95 % drawdown absolutely indicates a large bet), you'll find that those where big drawdown can happen grow slower because a big drawdown simply sets you back too far. It's worth earning a little less for each bet if none will cost you a huge loss.
Same here. My biggest bets were facebook, uber, and netflix, and they went down the most. Still, I still think that there’s no way these companies won’t continue their growth so I refuse to sell.
Facebook has 14% YoY growth, P/S of 3, P/E of 10.6, with 80.5% gross margins. If those don't sound like strong fundamentals, let me know what companies have better metrics, I'd actually be interested...
And as long as you truly learned things, and apply them later[0], then it is not money wasted. I graduated from Wall Street University about fifteen years ago, and paid some steep tuition fees, but I came out a better investor for it with consistent returns. (For clarity, WSU is not a real university, but a metaphor for “blew a lot of money in the stock market”.) Take those lessons learned, and go make even more than you originally lost.
[0] Examples including, keeping emotions in check or out of the decision-making process, disciplined stop limits/losses, and, umm, staying away from margin unless you have reasons beyond “margin let’s me buy more shares”. But these are my personal examples, go find your own. :-)
> It appears the market doesn't give a shit about company fundamentals right now.
I don't think it ever did. I think it's all about the free money pouring into the economy due to low interest rates set by the federal reserve. They turned off that tap, the flow stopped and the economy screeched into a halt.
> It appears the market doesn't give a shit about company fundamentals right now.
Fundamentals have never mattered all that much. Stock prices are based on demand for the stock itself, which is largely dependent on economic conditions. When the Fed was increasing the money supply a lot of that excess pumped up stocks because there was nowhere else for it to go, now that money is drying up causing the market correction.
“In the short term the market is a voting machine. In the long term it is a weighing machine”
- Buffett.
Fundamentals matter over long periods, but in short time spans it is, as you say, about demand for the stock which can have nothing to do with fundamentals.
Sorry to hear about your losses and this might sound like lecturing but I think it's worth saying.
What price did you pay for those businesses? When you say they had solid fundamentals what does that mean? A pretty common mistake is to overpay for a business with good potential. Unless you have some unique insight everyone already knows the business has potential and it's priced that way. The market as a whole had crazy crazy multiples which means it was overpriced even including the growth prospects. Sure, if you think Tesla can get to a point where it's selling all the cars in the world then you definitely should buy that stock at the price it was trading at.
Overpaying on margin is just compounding your problems. I never ever buy stocks on margin (and generally I avoid borrowing money for anything but the most solid investment, like buying a house). You have to always think about the worse case scenario and be willing to live with it. Ofcourse gambling a lot of money can lead to making a lot of money- it's just that the expected value is negative.
The other thing you always need to consider is how the company you're investing in will perform in an economic downturn. Recessions aren't an if, they're a when. There's a certain chance of recession every year. If you believe the company has strong enough fundamentals to survive a recession and strong enough management/leadership to steer it through difficult times then just hold on. Presumably you have a mix of those so on the aggregate you should do ok. If these great companies are below book price then double down on them but keep in mind the market is disagreeing with your evaluation. Otherwise you've miscalculated the expected value of your investments i.e. your belief in the companies and their fundamentals was incorrect.
The path you took was not an advisable one. The wins of the past decade were way past normal. The game seemed too easy.
Now that you have the experience, go read bogleheads.org and begin to learn a more sustainable path to wealth. (It's still very much attainable, especially for the typical HN reader.)
> “I have realized that the thing I needed to learn is that my net worth is not my self-worth.”
This is a really important point. I’m not a native English speaker. When I first heard an American use the expression “he’s worth X dollars”, it felt extremely wrong. Someone’s worth should never be attached to a dollar value!
I’ve got used to it by now, but I still wish Americans would come up with a more constructive way of talking about wealth than “personal worth.”
> I realized that I've desperately been trying to make money my whole life so that people will like me
Money themselves have zero value and certainly shouldn't be viewed from that perspective. Their only value as a tool to get things done or buy something. Nothing more.
In the markets, the hardest thing to mentally is usually the correct one over time. The markets goal is to trick everyone - so you have to be strategically, but intelligently, able to craft contrarian perspectives.
As long as you don’t sell you haven’t lost. Could recover in the next 2-3 years. Stock market is a risky investment. Own it and move on. Take responsibility for it and don’t feel bad. Brush it off as a loss. It is what it is - you took a risk at the end of the day.
In January 2021 the market seemed overheated so I mostly cashed out, and sold a lot of my 401K stock, putting it into safer assets.
From May to September as tech indexes got cheaper I began buying them up in my rollover IRA. Two and a half weeks ago I started loading up on tech indexes with my spare liquid assets - I am down about 2.3% on that right now.
I still have some spare liquid assets, but it's easily possible the market can go down more. IYW is down over 35% YTD, IGV is down 34.71% YTD. Then again, if conditions are rosy, you're not going to get to buy Google, Salesforce etc. at such discounts off their highs.
The price of tech stocks has been too high for me for a long time, so I have had a lot of cash. The past two and a half weeks I piled most of my spare liquid cash into the market. I still have a little bit more I can put in, but more than that and I start tapping into my rainy day fund. Any how, I don't think I would buy more on a small dip at this point, it would have to be a bigger dip for me to buy more tech indexes now.
I don't even like buying stocks, but it's hard to resist buying the tech stocks at such a discount off their peak at the end of last year.
You are right, it was indeed getting quite overhyped and extremely euphoric in both the stock market (and crypto). I quite frankly saw it coming months ago. [0]
It just had to end very quickly with a market crash after all what happened in the last two years.
Remember that the only number that really matters in terms of your bank account is 0. As long as you can hold off 0, you are doing fine. A lot of other people are in the same boat.
Otherwise, you don't need to look at the value of your options.
Perspective. Rather than spend the day looking at your portfolio, go outside, take a drive, amd volunteer or even just have a few conversations with those less fortunate than you. Folks that don't have investments, 401ks, but are still beautiful humans. Perspective will help you tp see what you have, not the small percentage you are loosing.
Stop watching the markets, stop reading the news, do something fun and engaging. This is the best advice you'll get (which is why so many people are giving it). If you're serious about feeling better, please take this advice.
My stock options have gone to basically zero twice in my career. It's OK. I knew going in they were gambles on companies I wasn't sure would take off, and I made sure I still had a decent salary from those companies. I also got a LOT out of those companies in experience.
You don't have to buy options that are underwater, or that you're not sure will go back up. You might choose to buy some anyway for Reasons (in both my cases I did do modest purchases, and nothing has come of them), or you might decide to go put your money elsewhere.
My advice to you: particularly if it's early in your career, don't put all your eggs in one basket, and don't have only one iron in the fire. Find other ways to squirrel money away. Diversify your holdings over time. Consider all the investment vehicles your company may offer: US companies I've worked for also offer ESPP, 401(k) contributions and matching, and RSUs (which unlike options are actual shares given to you), for example.
Finally, go talk to a financial advisor if you haven't already and come up with a long-term plan that makes sense to you. That should give you some peace of mind!
All this is good advice, but I haven't seen any prospective on personal budgets:
- Remember that money exists to be spent on useful things, it's not a video game score
- Understand your monthly spending and monthly take-home. If you're in a role that grants equity, I bet you've got a healthy surplus. If not, I bet you could make some lifestyle changes to achieve that.
- Take a moment to really accept that you are fine. You are not in danger, and shouldn't carry a fight or flight anxiety.
- Then think about your future. Can't sugarcoat it, you might have had more vacations or whatever if your options didn't decline, but I bet that you can chart a course to a decent retirement. Use an online calculator. Again, your future is fine. Not great, but fine.
- Think about what your future looked like when you graduated high school (or equivalent, wherever you did it). Did it definitely include being rich? If not, then you have lost nothing relative to that. And it's possible that on this company, the next one, or the one after that, you'll end up there anyway.
- Finally, spend a little money on something you like, and cut a little money on something you hadn't gotten around to canceling (streaming service, routine meals out, etc) You have so much control over your life.
This is great advice. One of the things I learned from the pandemic experience was how little money I needed to spend to be happy. I spent countless hours making music using iOS apps that cost next to nothing. The possession that’s given me the most joy over the past year is an old acoustic guitar that someone gave to me, free of charge, that sent me down the path of learning a traditional musical instrument for the first time.
I used to think that if I had enough money I’d travel. We have savings now that would support living abroad, and I can work anywhere, but after doing a bunch of traveling I find I’m always happy to be back home. I like cooking my own food, seeing family and friends, sticking with my familiar routines, and so on.
I recognize that sometimes funds are needed for things that would truly make a material difference to happiness, such as being able to sponsor family to immigrate or pay for a child’s education. If your decline in wealth impacts those things, then you (OP) have my sympathy, and I hope if you are patient then these things will still be possible for you. But if that is not the situation, the old aphorism that money does not buy happiness is very true. We don’t often live like it is, but it is.
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[ 3.0 ms ] story [ 259 ms ] thread- Buckle up my dude lol
That 90% could lead to a bankruptcy soon.
Changing employers might still mean a big drop in stock from when you start. Unemployment still hasn’t ticked down, the Fed is not done with its job of squashing inflation.
Good companies are giving solid refreshers to ensure you are paid more fairly moving forward. See if your company will do that, it’s sorta the same as getting a new offer elsewhere. If your current company won’t do that, that is a bad sign they are worried about bankruptcy and you should indeed leave.
There are many good reasons to leave a company whose performance is declining and where your compensation is cut to well below what you can make elsewhere, of course.
It's unclear if OP is getting options as part of his remuneration or if he is gambling, so impossible to advise. If he is gambling, he should just stop.
I would recommend giving yourself a break from following it. My reasons for not looking are these: Values of assets change a ton day-to-day, and a year or two from now who knows what it will look like! I also don't have any control over prices. I could shuffle assets around, but again I don't know what will happen a few years from now. So, I don't gain much by looking at the numbers often.
Sorry it's a stressful sad time for you though. It does suck!
How does it work though? Do you sell stock to use as income? Do you hold onto it and get by on salary? I'm not really familiar with how people use these kinds of setups in total comp.
I used to write software for financial traders, so I know it's possible to make money by following second-to-second shifts in the market. But it's a zero-sum game, and I saw our traders take a lot of money from people who were responding to second-to-second shifts in the market.
These days I put my money in long-term investments and then look at them every few years. The other day I saw mention of the big market price jumps. I thought, "maybe now's the time to rebalance things?" And then I sat very still until the urge passed, because reacting to headline news strikes me as a great way to lose money.
Also a good reason not to get these "breathing monitors" for infants, again, unless medically indicated.
The outlook in the US can best be described as "uncertain". Valuations are down because the market doesn't like uncertainty, but it doesn't necessarily translate into a future recession -- many of the economic indicators in the US are very positive.
OTOH, Europe is facing a hard winter unless an energy miracle appears.
The market is down 20% on the year, so that means that a lot of people are underwater on their options, so that the fact that yours still has some value means that you are doing better than many.
The most predictive indicator is the unemployment ratio, and it's very low right now.
Perhaps inflation is a better predictive indicator, but we really don't know since we haven't had any for ~40 years. As I said, it's the uncertainty depressing markets IMO, not necessarily the outlook.
That's a lot of people not working that simply aren't in the market anymore, unemployment would look a lot worse if they were included.
https://fred.stlouisfed.org/series/CIVPART
If you don't know this then you shouldn't have traded, and were misinformed. They're considered complex instruments for a reason, and the ease with which the masses trade them is something of a tragedy.
This has happened multiple times in the past and will happen many times again, as there's nothing new under the sun (from Livermore, one of the greatest speculators).
A fun little book that I like to recommend: "Confusion of confusions". It was written by a Jewish trader working with the 1600s Amsterdam stock and bond exchanges. It is a good proof of how little things have changed, you'll understand pretty much everything once you map the terms and concepts to their modern equivalents.
EDIT: From the down voters I would appreciate some substantiated reply as to why this isn't true. Don't get me wrong, if I had taken such a deal and was now under I'd be miserable as well, especially if I counted on that money and maybe bought something on credit expecting a windfall later. Such as getting a huge mortgage I thought I'd be able to pay off very fast soon. I took the opposite deal. I rejected offers that wanted to give me a lot of variable renumeration and a small base salary and was laughed out of the room.
If that sentiment has somehow reversed… well, you picked a bad time to do so!
If you work for a startup and reject variable comp, you are wasting your time. Go get a safer, easier, better-salaried position.
If you aren’t working for a startup, you’re in no position to comment on the validity of the approach people take there working with variable comp.
You just walked into a funeral for people who got hit by a train and said “what’s the big deal? I never cross train tracks, they’re too risky.”
If you work for a startup, like you say, there's usually no option to get more base comp. Absolutely understood. You do that when you are young and take a chance to hit it big. Don't complain if you don't hit it big though.
I never said I applied at a startup though and the example I made is more indicative of Amazon or Google.
The way I see the parents example the appropriate analogy would be a funeral for people that liked standing on the train tracks knowing a train was coming and trying to jump before it hit them and I wonder why everyone is surprised that it happened.
And even if the funeral is as you describe, my point is that people don’t usually want to be told at a funeral why the deceased was wrong. It’s for emotional support. Like this post.
And again fair enough that in this situation it is very easy to not apply this to the original poster's question and situation (which analogy wise would be shouting at the entire group of people gathered at the funeral that it's this guy's fault for crossing the tracks vs. having a side conversation w/ someone who posited that maybe the guy was one of the ones that actually stands on tracks for thrill when he knows the train's about to be there ;))
If you are not retired, then markets being down are a good thing, because everything is "on sale" / at 'discounted' prices. At least for the US† (S&P 500, NASDAQ, Russel 2000), the historical 1-, 3-, 5-, and 10-year returns after a 25% drop are quite good:
* https://awealthofcommonsense.com/2022/10/getting-long-term-b...
If you've been foolish enough to cash out—which should really never been done by 'retail investors':
* https://awealthofcommonsense.com/2014/02/worlds-worst-market...
You should really start making regular contributions to get back in. You should always be fully invested: having cash on the side long-term is generally not a good investment. Even if you new ahead of time when the dips in the market would occur—which is impossible—it's still better to do regular contributions:
* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
If you try to be clever and skip the worst days in the market, you also tend miss the best days:
* https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...
At the end of the, there is only one piece of advice that average retail investors (saving for retirement) should follow:
* https://ofdollarsanddata.com/just-keep-buying/
As for myself: I have no idea if I'm down, or by how much, since I haven't logged into my brokerage/trading account since January when I topped it up for the new year; almost all of my investments are automated so I don't need to see/touch things. I have several decades until retirement, so why worry about what happens of the course of a single year?
† I'm in Canada.
* https://awealthofcommonsense.com/2018/10/the-psychology-of-s...
By sitting in cash you're also losing money through inflation:
* https://ofdollarsanddata.com/the-cost-of-waiting/
At the end of the day you should always be invested, and if you're worried about market undulations then you should own some bonds. And besides reducing gyrations, bonds give another advantage: a source of 'dry powder'.
If stocks get "too high" you rebalance by selling off some equities and buying bonds to 'lock in' the returns. When stocks drop you rebalance again by selling off bonds and 'buying low' in equities. Bonds/diversification can really help returns:
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
At least in Canada you can get "all-in-one" ETFs that do this rebalancing automatically:
* https://www.youngandthrifty.ca/picking-the-best-all-in-one-e...
Also by sitting in Stocks, you not only lost 20% this year, but also 9% due to inflation for a total loss of ~30%+.
Cash is cash. It gets the job done. I'm not saying go 100% cash btw, but it has its place in this time of uncertainty. You cannot buy the dip if you're 100% invested, you have to be holding cash.
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I suggest holding 10% cash and rebalancing as needed. As the market goes up, you naturally sell stocks for more cash. As the market goes down, you naturally sell cash to buy more stock. This stabilizes the portfolio significantly.
But if you sold the stocks, you would have taken an immediate tax hit of ~20-35%, and you would have to time the bottom to get back in.
So, it's not at all clear that getting out makes sense. Depends on the depth of the decline, and that is unknowable.
> you would have to time the bottom to get back in.
Nah, you just rebalance at 10%.
People tout the "cash loses to inflation" mantra as an absolute - they forget that in large market downturns, cash availability compresses while assets become in greatly less demand. So cash being available when everyone desperately needs it, but few have it, gives cash a value explodes on a opportunity basis for a window of time.
* https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...
* https://aaiila.org/wp-content/uploads/2020/05/Tuchman-Best-a...
* https://www.capitalgroup.com/individual/planning/investing-f...
* https://www.cnbc.com/2021/03/24/this-chart-shows-why-investo...
I think a lot of the personal finance investing advice given to people in the vein of “solid advice for 90% of people to follow without too much expertise” is becoming some weird dogmatic religion. You must never time the market (even at a loose monetary policy induced bubble), you must always hold total market/sp500 ETFs (even when they’re filled with overpriced companies), you should diversify into bonds (the most garbage asset class available for the past 20 years, until the last 6 months, when they became only partially garbage).
This advice has gone from being labeled as generalist advice with asterisks, through many rounds of telephone, to now being something that invites angry replies if you disagree with it.
By holding stocks and not selling you have lost nothing:
* https://awealthofcommonsense.com/2014/02/worlds-worst-market...
"Losses" only occur when you lock them in. If your trading account is down now you have lost nothing—just like you haven't made money until you sell your holdings for cash.
* https://www.investopedia.com/terms/c/crystallization.asp
Marking to market (looking at unrealized losses or gains, ie. the value of your portfolio before you sell) is useful if you trade on margin, use this as a collateral (borrowed against it), or plan to sell soon.
In all these cases, this is because you need to sell (directly or indirectly) and thus lock in whatever the current value is.
But until you sell, you have no actual (realized) loss (or gain).
Or the Warren Buffett philosophy[2] is, don't make a number be the source of your happiness or sadness. Play with your kids, enjoy life, even if that number is horrible, will you be fine? Probably yes...
[1] https://www.npr.org/2022/09/28/1125656030/the-markets-are-do... [2] https://www.cnbc.com/2018/03/20/warren-buffett-doubling-your...
I have lost about 95% of my liquid net worth this year, due to hubris, basically. The first half of 2022 for me was waking up every morning and feeling like puking a little as I get more under water, closer to that margin call, plunging through my stops.
After almost a year of this, I have found a perspective that is helpful for me and may be helpful for you.
It is my firm belief that you are meant to learn certain things in life, and your subconscious very carefully and meticulously arranges your life circumstances to learn these things. This is why you often find yourself shaking your head and saying "I got myself into this".
It may be different for you, but I have realized that the thing I needed to learn is that my net worth is not my self-worth. I realized that I've desperately been trying to make money my whole life so that people will like me and I can avoid the pain that I saw caused by poverty when I grew up.
I have been blessed to have money and realize that neither one of those things are true, and then I guess I have been blessed to be tested on what I learned the first time around by losing it.
I have also come to realize that I don't need all that much money to live a comfortable life.
These are the things that I learned. They may not be what you are intended to learn.
So, take it easy on yourself. What happened may have been completely out of your control, or it might have been something that you contributed to. Either way, it's done.
Take some time to feel shitty, because you will, but consider changing perspectives and start looking at what you can learn from this and maybe even what opportunities have opened up because of it.
It always worked for me before. My investing history is a long string of huge successes beginning in 2014.
I've always invested in companies I believed in and that had solid fundamentals.
It appears the market doesn't give a shit about company fundamentals right now. Most small growth companies are down ~80%. The two companies I lost everything in are currently priced below liquidation value.
Yeah, I bought on margin, so that gave me 2x leverage, so if it goes down 50% you get margin called.
Like I said. I have learned lots.
@jeremyt care to elaborate on this thesis and wondering how you came to this conclusion, was it a self journey
I believe that my soul chose this life to learn what I'm learning. And whether I'm conscious of it or not, the "higher self" part of me hangs around in the background to ensure that I learn what I need to. This isn't typically what one would expect from what other religions would call a "guardian angel", but that's kind of how I see it.
Like, sometimes I can't take losses. That's deep family karma from being afraid of being poor. However, being unable to take losses means that you make poor decisions. Not being able to make good financial decisions makes people poor, and just continues the intergenerational cycle of poverty.
So, my unconscious "higher self" carefully arranges events such that I encounter maximum pain for going along with this karmic thing I'm supposed to transcend. The pain facilitates the learning, and thus the freedom from the karma.
Ultimately, the point of existence is to experience everything that can be experienced in every lifetime and learn everything that can be learned, resulting in ultimate freedom from karma and liberation from the cycle of birth and death.
Or, you can just meditate a lot, and I guess I'm working on that.
Strategies that result in 95 % drawdowns are not in the "making you money" bucket.
Since growth is compounding[1], the most important property of a money-making strategy is to keep drawdowns at at optimal level. This optimal level is a thrill ride on its own, but 95 % is plain overbetting and will never make you money in the long run.
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[1]: If you draw down from 100 to 10, it takes as long to go back to 100 as it would have taken to go to 800 had you only drawn to 80.
As long as you're betting with +ev after fees are taken into account then they certainly can make you money. Low sharpe / high vol != unprofitable.
Once you look at a long sequence of large bets (where 95 % drawdown absolutely indicates a large bet), you'll find that those where big drawdown can happen grow slower because a big drawdown simply sets you back too far. It's worth earning a little less for each bet if none will cost you a huge loss.
Like, just my pov - but their years of growth are done and the competition is in.
And as long as you truly learned things, and apply them later[0], then it is not money wasted. I graduated from Wall Street University about fifteen years ago, and paid some steep tuition fees, but I came out a better investor for it with consistent returns. (For clarity, WSU is not a real university, but a metaphor for “blew a lot of money in the stock market”.) Take those lessons learned, and go make even more than you originally lost.
[0] Examples including, keeping emotions in check or out of the decision-making process, disciplined stop limits/losses, and, umm, staying away from margin unless you have reasons beyond “margin let’s me buy more shares”. But these are my personal examples, go find your own. :-)
I don't think it ever did. I think it's all about the free money pouring into the economy due to low interest rates set by the federal reserve. They turned off that tap, the flow stopped and the economy screeched into a halt.
Fundamentals have never mattered all that much. Stock prices are based on demand for the stock itself, which is largely dependent on economic conditions. When the Fed was increasing the money supply a lot of that excess pumped up stocks because there was nowhere else for it to go, now that money is drying up causing the market correction.
Fundamentals matter over long periods, but in short time spans it is, as you say, about demand for the stock which can have nothing to do with fundamentals.
What price did you pay for those businesses? When you say they had solid fundamentals what does that mean? A pretty common mistake is to overpay for a business with good potential. Unless you have some unique insight everyone already knows the business has potential and it's priced that way. The market as a whole had crazy crazy multiples which means it was overpriced even including the growth prospects. Sure, if you think Tesla can get to a point where it's selling all the cars in the world then you definitely should buy that stock at the price it was trading at.
Overpaying on margin is just compounding your problems. I never ever buy stocks on margin (and generally I avoid borrowing money for anything but the most solid investment, like buying a house). You have to always think about the worse case scenario and be willing to live with it. Ofcourse gambling a lot of money can lead to making a lot of money- it's just that the expected value is negative.
The other thing you always need to consider is how the company you're investing in will perform in an economic downturn. Recessions aren't an if, they're a when. There's a certain chance of recession every year. If you believe the company has strong enough fundamentals to survive a recession and strong enough management/leadership to steer it through difficult times then just hold on. Presumably you have a mix of those so on the aggregate you should do ok. If these great companies are below book price then double down on them but keep in mind the market is disagreeing with your evaluation. Otherwise you've miscalculated the expected value of your investments i.e. your belief in the companies and their fundamentals was incorrect.
The path you took was not an advisable one. The wins of the past decade were way past normal. The game seemed too easy.
Now that you have the experience, go read bogleheads.org and begin to learn a more sustainable path to wealth. (It's still very much attainable, especially for the typical HN reader.)
Good luck.
This is a really important point. I’m not a native English speaker. When I first heard an American use the expression “he’s worth X dollars”, it felt extremely wrong. Someone’s worth should never be attached to a dollar value!
I’ve got used to it by now, but I still wish Americans would come up with a more constructive way of talking about wealth than “personal worth.”
Money themselves have zero value and certainly shouldn't be viewed from that perspective. Their only value as a tool to get things done or buy something. Nothing more.
If you can buy more, and you have confidence in the company, that’s what I would do.
They make more when you trade often.
It's only wise to buy stocks when the Federal Reserve is printing money or you know that they will print money.
This time will prepare you for the next one where you can buy at a discount to build wealth faster.
From May to September as tech indexes got cheaper I began buying them up in my rollover IRA. Two and a half weeks ago I started loading up on tech indexes with my spare liquid assets - I am down about 2.3% on that right now.
I still have some spare liquid assets, but it's easily possible the market can go down more. IYW is down over 35% YTD, IGV is down 34.71% YTD. Then again, if conditions are rosy, you're not going to get to buy Google, Salesforce etc. at such discounts off their highs.
The price of tech stocks has been too high for me for a long time, so I have had a lot of cash. The past two and a half weeks I piled most of my spare liquid cash into the market. I still have a little bit more I can put in, but more than that and I start tapping into my rainy day fund. Any how, I don't think I would buy more on a small dip at this point, it would have to be a bigger dip for me to buy more tech indexes now.
I don't even like buying stocks, but it's hard to resist buying the tech stocks at such a discount off their peak at the end of last year.
If you want to be wealthy stay in it and wait 30, 40, or 50 years. It isn't a get rich quick scheme.
It just had to end very quickly with a market crash after all what happened in the last two years.
[0] https://news.ycombinator.com/item?id=29508238
Otherwise, you don't need to look at the value of your options.
... recognise and learn from the mistakes in your investing strategy?
... reorganise a life based on having less money?
... deal with the emotional turmoil of losing lots of money?
... deal with the emotional turmoil of uncertainty?
... cope with facing an imminent retirement where you don't have the funds to live comfortably?
This post isn't really answerable because it is too vague. Even as a comment on hard times, there isn't much to go on here.
"the important thing about options is that they should be 2-ply"
You don't have to buy options that are underwater, or that you're not sure will go back up. You might choose to buy some anyway for Reasons (in both my cases I did do modest purchases, and nothing has come of them), or you might decide to go put your money elsewhere.
My advice to you: particularly if it's early in your career, don't put all your eggs in one basket, and don't have only one iron in the fire. Find other ways to squirrel money away. Diversify your holdings over time. Consider all the investment vehicles your company may offer: US companies I've worked for also offer ESPP, 401(k) contributions and matching, and RSUs (which unlike options are actual shares given to you), for example.
Finally, go talk to a financial advisor if you haven't already and come up with a long-term plan that makes sense to you. That should give you some peace of mind!
- Remember that money exists to be spent on useful things, it's not a video game score
- Understand your monthly spending and monthly take-home. If you're in a role that grants equity, I bet you've got a healthy surplus. If not, I bet you could make some lifestyle changes to achieve that.
- Take a moment to really accept that you are fine. You are not in danger, and shouldn't carry a fight or flight anxiety.
- Then think about your future. Can't sugarcoat it, you might have had more vacations or whatever if your options didn't decline, but I bet that you can chart a course to a decent retirement. Use an online calculator. Again, your future is fine. Not great, but fine.
- Think about what your future looked like when you graduated high school (or equivalent, wherever you did it). Did it definitely include being rich? If not, then you have lost nothing relative to that. And it's possible that on this company, the next one, or the one after that, you'll end up there anyway.
- Finally, spend a little money on something you like, and cut a little money on something you hadn't gotten around to canceling (streaming service, routine meals out, etc) You have so much control over your life.
I used to think that if I had enough money I’d travel. We have savings now that would support living abroad, and I can work anywhere, but after doing a bunch of traveling I find I’m always happy to be back home. I like cooking my own food, seeing family and friends, sticking with my familiar routines, and so on.
I recognize that sometimes funds are needed for things that would truly make a material difference to happiness, such as being able to sponsor family to immigrate or pay for a child’s education. If your decline in wealth impacts those things, then you (OP) have my sympathy, and I hope if you are patient then these things will still be possible for you. But if that is not the situation, the old aphorism that money does not buy happiness is very true. We don’t often live like it is, but it is.
Thank you so much for sharing.