If you have life-changing unrealized profits, listen to me: you need to sell it. This is not just advice; it's a lesson I've learned from painful experiences. Early in my career, I hesitated to take profits, and I regretted every moment of indecision. Nominal wealth may fluctuate as we navigate our trading journeys, but the fundamental principles remain unchanged.
One thing I've gradually come to understand is that selling when the profits are life-changing provides a benefit that cannot be measured in money: a permanent improvement in your life and the lives of those around you. Imagine being able to click 'sell' and instantly improve your life situation. That's wonderful! If you have such an opportunity, I strongly encourage you to seize it.
I know how tempting it is to wait for the perfect selling opportunity: believing that just a little longer will yield more profits. But the truth is: the perfect timing is just a fantasy. The most successful traders I know didn't achieve their success by perfectly timing every peak; they succeeded through consistent profits and maintaining liquidity. They understood early on that selling to cash is a necessary condition for survival in this game.
One of my most liberating realizations is that there are always opportunities. This mindset helps alleviate the fear of missing out that traders often feel when considering selling. Yes, giving up a well-performing position can feel uncomfortable, but remember: holding it out of FOMO will cost you more in the long run.
I often think about what reaching 'escape velocity' means: that is, your financial situation allows you to take planned risks without jeopardizing your life stability. Once you reach that level, that's when you can start playing the game for real and go all in.
How much is enough to retire?
As someone who has always considered retirement, I often wonder: how much is enough? While the media often boasts that it requires an astronomical figure, I believe that for many of us, $1 million to $2 million might be the best choice. Here’s why; let’s first look at it from the perspective of TradFi.
In 2022, the average retirement account balance for individuals aged 65 and over was only $232,710. So, suddenly having $1 million to $2 million isn't a lot, is it? In fact, only about 3.2% of retirees save over $1 million.
Okay, I get it, the likelihood of you reading this being over 65 is low; you want to retire before 65. I was shocked when I first heard that Americans believe they need $1.46 million to retire comfortably. But then I realized one crucial thing: this number is an average. Everyone's needs can vary greatly.
Let's consider the 4% rule, a common guideline for retirement planning. If you have $2 million saved, you can withdraw $80,000 per year. For many people, this is enough to live comfortably. Your retirement needs largely depend on the lifestyle you want. Do you plan to travel the world, or are you content with simpler pleasures? The Bureau of Labor Statistics reported that in 2021, the average annual expenditure for individuals aged 65 and over was $52,141. Savings of $1 million to $2 million can easily cover this expense.
Choosing where to live after retirement will greatly impact how you use your wealth. A $1 million retirement fund may feel tight in New York City but can provide a luxurious lifestyle in a small town or abroad.
Psychological factors
Knowing you have $1 million to $2 million in savings can alleviate a lot of financial pressure and allow you to truly enjoy retirement.
Ultimately, whether $1 million to $2 million is enough for retirement depends on your individual situation. For many of us, it's not just enough money; it’s more than we dreamed of. The key is to start saving early, live within your means, and focus on what truly brings joy to your life. Remember, retirement is not just about money; it’s also about creating a life you love, regardless of whether you have millions in the bank.
I understand what Fiskantes is saying above. Once you have life-changing money saved in the bank or invested in real estate, you can easily participate in the market.
What do I mean by easy? Well, I’m not saying it’s easier to make money; I’m saying your mindset is more relaxed. You can make better decisions calmly, and let the trades come to you. And even if you lose, you won’t lose everything because you already have a safety net.
As Fiskantes said: 'The real fun starts here.' In this sense, this cycle is more interesting to me. If everything goes to zero, at least I have a safe fallback. That said, some people perform better under greater pressure, but I believe that's not the case for most.
