I told you I’d tell you when I sold — and I am a person of my word, so here we go.

STANDARD DISCLAIMER APPLIES:

I AM NOT AN INVESTMENT ADVISER.

THIS IS NOT ADVICE.

THIS IS NOT EVEN A RECOMMENDATION.

THIS IS JUST A TRUE STORY.

On Wednesday, February 17, I redeemed nearly a quarter of a million dollars in Vanguard holdings, turning all non-retirement brokerage holdings into cash and sending everything else to VUSXX (the Vanguard Treasury Money Market Fund, which is as close to a cash equivalent as you can get with retirement accounts). 

Previously I had held the Boglehead-recommended index fund portfolio — a lot of VTSAX, a bit of VBTLX, you get the idea. I began investing with Vanguard in 2018 and at the end of December 2021 had accumulated $167,823.69 in principal and $70,444.13 in potential returns. 

I came out of the transaction with $53,309.31 in returns, which a wise mind will note is less than what it could have been had I sold at the top of the market.

Another mind, also claiming itself wise, may chime in with and if you had waited to sell until the next peak, you could have earned even more!

Why didn’t I wait to sell until the market had restocked my portfolio’s potential?

It’s a fair question.

One answer might be that I am anticipating a bear market, possibly for the next few years, but you can come right back at me with “but investing isn’t about the next few years, it’s about the next few decades.”

One answer might be that I came to a specific conclusion about the long-term risks of index funds before discovering that Michael Burry and John Bogle had both predicted the same thing.

I also asked myself what would happen when there were more people redeeming retirement fund value than adding retirement fund value — a question that Helaine Olen hinted at (but did not answer) in her Washington Post financial column the morning after I sold.

But the real reason I began thinking about the stock market as a money-generator instead of a wealth-builder — that is, as a tool to get in and then get out of — came from a comment made by Felicia Gopaul, a financial planner whom I interviewed for my Haven Life article on how to FIRE during periods of inflation:

“The magic portfolio number is largely fiction,” explains Felicia Gopaul, CFP® and former CFP Board Ambassador who currently runs Financial Control Mastery. “Once you’ve hit your magic number, the market shifts and the number is no longer correct.”

When I shared that comment with L, he said “She’s exactly right. That’s why I don’t put any money in the market.”

We talked about that for a long time — the stock market, as both a concept and a reality, and increasing both your value and your net worth (two different things) without participating in a game that benefits from your contributions while giving you just enough in (unrealized) gains to keep playing.

In many ways, the stock market is like a traditional job. You provide value — in a job, it’s your hours; in the market, it’s your contributions. Someone else takes that value and makes money with it. You get the returns, and let’s hope they’re enough to live on.

At this point I am preparing for a bunch of you to say BUT THERE IS A BUYER FOR EVERY SELLER and/or BUT IT’S A PREDICTION MARKET AND THE PEOPLE WHO MAKE THE BEST PREDICTIONS WIN.

In the first case, that’s not precisely how index funds work. When I put in a redemption request, Vanguard is responsible for buying what I’m selling (they don’t have to find someone else who wants to take over my investment, nor do they have to negotiate an optimal trade; I get the NAV and that’s that), and god help us all if Vanguard doesn’t have the liquidity.

In the second case, well… I predict that I can make more money on my own.

I’m serious about that, too. $1M cash net worth by the time I turn 50. If you take my current cash net worth and subtract what I owe on our mortgage, it leaves me with $770,026.77 to go, which means increasing my cash savings by $6,638 per month (if you count nine years and eight months between now and then). With an annual freelance income in the low six figures and a $25K annual cost of living, it’s a stretch goal but it’s not implausible.

Step one is realizing my stock market gains, which I’ve just done. I’ve made them real.

Step two is making other things real, and making them valuable enough to generate not only income but all of the other wonderful things that come when you create true value — friendship, connection, the opportunity to do real work, the chance to share what you’ve learned, the ability to help other people, and so on. ❤️

More on all of this later this week — and next week, I’ll start breaking down what I hope to do with the money in my Vanguard accounts (probably some Roth conversions, though I’ll have to do the math on that) and why I may not put any more money into any accounts that I can’t access without penalty until I’m 59 1/2, even with the associated tax advantages.