The renewed global economic uncertainty and ensuing stock market "correction" dealt a big blow to our portfolio. Our net worth retreated to 6-figure with a monthly drop of 4.5%.
Most damage was done to our vested employee stock option positions, which behave disproportionately to the change in the underlying company stock. Our partial hedge helped, but not much. On the other hand, our continued "light" exposure in equity positions spared us from more severe damage.
So, how does it feel as a millionaire club drop-out?
Actually, I feel very good. Why? Since the beginning of the year, we chose to be very risk-reverse with the belief that the bull market had grown teeth and politicians cannot solve a debt problem by issuing more debt. During the same period, we have steadily lowered our equity exposure from over 30% to less than 18% at the end of May. With over $600k cash at hand and another $150k+ in low-risk fixed income funds, all we can pray for is for the market to take another skydive and present much more valuation opportunities.
So, it doesn't bother us much that our net worth dropped from 7-figure to 6-figure. With a solidly growing career, our saver's mentality that preserves 50% of our after-tax income, and the void of any debt obligations, whatever the market can do to our net worth now won't affect how we live our lives in the next decade. Yes, we are in it for the long run.
1) We redeemed about $42k of equity funds in the middle of May amid the global sell-off. We continued to add to our fixed-income holdings, primarily in inflation-protected bonds (thru a Vanguard fund).
2) Our employee stock options will expire between 2011 and 2013. All options with 2011 maturity have been properly hedged.
3) Summer is coming and the family will have vacation in NYC and Orlando in late June and early July. I always enjoy the time to research and arrange the next trip and this time is no exception. Cannot wait to relax after a busy spring.