Man oh man do us addicts waste a ton of money on our addiction(s)! Even if we haven’t hit rock bottom, often the amount of money we ‘invest’ in getting high and drunk can be utterly stunning. In my first sober investing installment, The Amazingly Simple Art of Saving Money In Sobriety, I introduce my Sober Investment portfolio. (keep reading to see how I plan to turn this into $356K).
Recapping what I discovered in early sobriety:
To figure out how much money my sobriety was saving me, I took an average of my monthly beer savings ($250) and added that to my monthly pot outlay ($100). This netted me a monthly savings of $350,not counting drinking alcohol in restaurants.
Since I generally only bought pot quarterly (once every three months), I thought it made sense to translate the money I was saving in sobriety into a quarterly number. The number I arrived at was $1,050 or$4,200 a year!Again, this numberdoesnotincludeexpensive drinks purchased in restaurants and bars. If I throw that in, the annual savings would likely be a couple thousand dollars higher!
– Dominic Yarborough
Of course, it’s one thing to talk about sober investment portfolios. It’s quite another to open and manage one. So, how am I doing?
Q2 2023 Sober Investment Portfolio Update – Up 24%!
In my original sober investing post, my assets totaled $2,234.51 and had earned me a 7.7% return on my money in the first three months.
For Q2 2023, I added another $1,050 in sober savings to the portfolio for a grand total to date of $3,150. As of the publication of this post, my total sober portfolio value is $3,384.46. This is $234.45 or 7.4% HIGHER than the principal invested.
This $246.45 was earned on the initial $2,050, in other words BEFORE I added the latest sober savings. So my sober investing yielded a 12% return in the first six months or an annualized return of 24%!
You can see from the screenshot above the total portfolio value in the upper left, follow by my cash position, and at the bottom the basket of stocks and REITs (Real Estate Investment Trusts) I’ve invested in. You’ll also notice in the bottom right (Gains) that some investments have panned out better than others. Yet overall, I’ve done pretty well.
Sober Investing & The House’s Money
That’s the way investing works. Some investments do well over time, others tread water, while a certain percentage will inevitably perform poorly or go belly up. You’ve probably heard the word Diversification tossed around quite a bit in investment circles.
In a nutshell, depending on a number of factors (time, risk tolerance, business cycles, etc) you spread your money around and don’t make any unnecessarily BIG bets on any one thing. Why? Other than for the obvious reasons, losing money hurts a lot more than making money feels good. Period.
This brings us to the concept of The House’s Money. In Vegas, when you’re “playing with the house’s money”, you’re restricting your betting only to the money you’ve already made – in other words, your winnings. It’s a very conservative betting strategy that keeps you from going home broke and gives you the potential to win a lot more money in the process.
Investing sober savings is a lot like playing with the house’s money. Since I was, conservatively, spending $4,200 a year on alcohol and marijuana in the time leading up to embarking on my sobriety journey, I was literally and figuratively pissing away all of this money and more (if you count bars, pubs, and restaurants).
My perspective is that by pivoting my binge drinking and pot smoking spending into a sober investment portfolio, I’ve recaptured wasted and lost ‘house’ money and taken it into the casino of the stock market for the purpose of placing some bets.
The Safety Of Investing The House’s Money
I’m incredibly stoked that my sober savings has netted me an annualized return of 24%, but if my luck hadn’t been so good it might have lost me 24% over the same period. But you know, So What!
The simple fact is that even if I lost 24% of my money, I’d still be ahead $2,394! That’s right. I’d still be way ahead of the game because I was previously pissing all of this money away. And all I would have had to show for it was a fat stomach, a smoker’s cough, and droopy tired eyes.
Still, it’s not like I’ve taken this money to Vegas and bet it all on a single hand of black jack. Of course, even if I did this the result could be no worse than what I had before: nothing, and at best, I could win many times my money. But replacing substance addiction with gambling addiction doesn’t seem like a wise strategy, so I’ve decided to go with something a bit more conservative.
The investments I’ve chosen have a little speculation (Palantir) for the potential Big Win, but mostly consist of dividend payers like AT&T, MPW, and Hercules Capital that offer a blend of income and growth or FAANG stocks like Amazon. I’m also keeping a little cash available to take advantage of any stocks that go on ‘sale’. Having dry powder (cash) is always a good idea because the best opportunities often come around when you least expect them.
You can see that I’m not ‘betting the farm’ on anything. As my sober investment assets grow over time, I will continue to diversify them, taking advantage of any deals that present themselves along the way.
Time & Consistency Are What Matter
If you’re planning to remain sober for the rest of your life, I have terrific news! Sober investing is for you!
The first step is to determine how much money you won’t be spending on alcohol and other addiction(s). Once you arrive at that number, divide it up into installments. I choose to invest quarterly, but you might invest monthly or even weekly.
What matters most is how consistent you are with your strategy. The more consistent you are, the more you are able to take advantage of things like dollar cost averaging and compound growth, the latter of which grows more powerful over time as you will soon see.
My sober investment strategy consists of saving $1,050 each quarter or $350 per month and investing those sober savings quarterly. In just over six months, I’ve managed to amass $3,384.46. For some, this may not seem like a lot of money while for others, it can be incredibly meaningful.
Consider this: 56% of Americans don’t have enough saved to cover an emergency of $1,000 or more! Think about that for a minute. Are you one of these unfortunate souls?
And with that startling statistic fresh in your mind, let’s look down the road a few years….
20 Years Into The Future
Let me begin this section by saying there are no guarantees in life. But looking out 20 years into the future at two scenarios, what might investing sober savings of $4,200 per year look like?
While my 24% annualized return is beyond my wildest expectations, I don’t expect this to be the baseline or average return over the next several decades. Afterall, I’m no Warren Buffett. So let’s first look at a more reasonable return of 7% annually:
As you can see from this investment calculator, if I keep my sober investment discipline up for the next 20 years, my $4,200 sober savings compounded at 7% annually becomes $192,889.79!! I’ve invested the $84,000 ($4,200 x 20 years) I saved and earned $107,889.79 in interest, dividends, and growth. Holy sh*t! Sobriety really pays!
In the second scenario, we’ll benchmark the S&P 500. If take my sober savings and invest it in an S&P 500 index fund, over the next 20 years, this is what it could look like:
Since the S&P has averaged a ~12% return, our $4,200 saved and invested annually becomes a whopping $356,431.15. That, my friends, is the power of consistency and compounding!
So, to recap. I was binge drinking and pot smoking away a conservative $4,200 a year. Then I sobered up. Now I’m taking that $4,200 in sober savings and investing it in my sober investment portfolio. And I already have a few thousand dollars stashed away in a very short time.
If I’m able to keep this up for 20 years and match the S&P 500 benchmark, I’ll turn $0 into $84,000 and $84,000 into $356,431.15.
If that’s not motivation to stop drinking I don’t know what is!
Want to see how I did in my first full year of sober investing? Please see: Sobriety Pays Portfolio Full Year Update.
