How I missed out on a $13,000 bonus at my day job by trading on Robinhood
Why your hours tracking the stock market are better spent in billable hours
2020 was a tragic year, but if you were rich, and had money to burn, the stock market has — on the whole — been good to you. Basically, if you kept money in the market, and ignored everything else, you likely saw a 15 percent return. Not bad.
But I could do better, right?
After all, we read stories this year of average investors making millions on speculative options bets. Sure, a lot of people lost everything, but they were dumb right? And if you went to college, and get a professional degree, you’re hopefully careful.
But that’s also the problem.
$20,000 sounds like a lot of money. It is and it isn’t. Most of my money is in a retirement account that I will never look at for another 30 years. But at the start of the pandemic, we had some savings and we wanted to see what we could do with it.
I made a few guesses on what people needed in a pandemic, and what other investors would put money in. I was right for the most part. I sometimes saw 3,000 percent returns on some of my more speculative bets. But can you really call it a bet if you’re only in for $100? And what about how long you plan on staying in that bet? To know that answer, you need to spend a lot of time getting educated about the stock market, and even when you do, it’s still somewhat of a crapshoot.
Financial advisors have been telling this to people like me for years
As a lawyer, if I wanted to make more money, the surest way to get there would be stick to my day job. That means work longer, or get a better paying job. Of course, to get a better paying job means to promote up — which would also necessitate working longer hours or leaving, and working more at the new job to justify my salary. I won’t go into the details of setting up my own practice, but that too also requires more time — at least on the front end.
That was the devil I knew.
The devil I didn’t know was the stock market and that was the appeal of it all. But the fundamental problem newbie investors, like myself, have is the lack of confidence to make the bets necessary to pay for the time it takes to research those positions.
While everyone was talking about the retail investor wave that Robinhood started, that helped propel equities to all time highs (turns out Softbank and money printed by the US Government helped more), no one really spent time discussing the time it took to hang out at the party.
While the 2020 pandemic gave us all a lot of free time — no commute and no semblance of maintaining appearances below the waist helps — that time was not well spent on trading platforms. I calculated that I spent an average at least 1 hour every trading day reading financial articles and looking up my portfolio.
In my case, my effective hourly rate was a combination of a salary and end of the year bonus. The more hours I billed, the bigger bonus I could expect. I never really knew how these bonuses were calculated, but it generally worked out to $50 per hour above the required hours to meet my salary. In my case, every week I was managing my portfolio, I was giving up $250.
Time is an attorney’s most valuable asset
In hindsight, I should have done the math on the front end and should have committed to managing more than a $20,000 portfolio. But life is a gamble. And you might already know that I documented another spectacularly unsuccessful attempt that started in 2019 and ended in a loss — trying to sell on Amazon FBA. That experience was humbling and led me to be a little too cautious in the stock market game I was playing.
That time I spent reading articles — did seem to help. In the end, my $20,000 investment netted me $7000 in profit, a respectable 35 percent after-tax return, which also exceeded the 15.8 percent after-tax return my retirement account saw during this same timeframe.
But I didn’t realize what I had sacrificed.
That extra hour per weekday cost me $13,000 in income and bonuses from billable hours. So in the end, this experiment cost me another $6,000. But if I was making the median income in America, which in 2019 was $19.33 an hour, that tradeoff would not be so bad. That $7,000 profit, after accounting for was roughly $5025 in possible wages, would still net a $2,000 profit for a person earning $40,000 a year. But who in that position would gamble with $20,000, half their annual income? Gamblers do. But I never have been and never will be a gambler.
Trying new things isn’t gambling if you’re gaining useful experience
People measure success in different ways. For me, the time spent in an activity has a price, so when I say I’ve made a certain amount of money, I also consider whether there was a more efficient and readily available alternative to do the same thing.
But there are two places in my life where I’m not this way. Education and personal enjoyment. With the stock market example, I think I really gained an appreciation for investing in a “once in a hundred years” type event. Hopefully that kind of event doesn’t happen again in my lifetime, but we all know black swans exist and they seem to appear unexpectedly on a fairly regular basis.
Likewise, I don’t keep a clock on time spent with family, friends, or doing errands I enjoy. Call me weird, but I enjoy trips to Costco for the “treasure hunt”. In that regard, I found it fun competing with friends and family who were also buying into Peleton and Zoom. We all felt so smart buying $500 or $1,000 in stock, and selling as soon as we had enough to buy a new PS5.