I eat oatmeal for breakfast. Because I’m lazy, I cook it in the microwave. When I first started doing it, the oatmeal overflowed and made a mess in the microwave.
I found a discussion online on this same problem. People had many different suggestions. Someone said to use water instead of milk. Someone said to cook it at 50% power for a longer time. Someone said to interrupt it in the middle, stir, and continue. Someone said to add a pinch of salt. Finally, someone said,
Just use a bigger bowl.
I bought this bowl from Target for $2. Problem solved.
You don’t have to be precise when the bowl is big enough. It doesn’t matter whether you use milk or water. You can cook at full power. You don’t need to stir and reheat. The big bowl gives you more leeway.
Benjamin Graham talked about the concept of “margin of safety” in the context of investing. When you buy at a wide margin of safety between a stock’s price and its intrinsic value, you’ll still get a good return even when your estimate of the intrinsic value is off a little.
Translating to personal finance, using a bigger bowl means saving and investing more such that you’ll always meet your goal even if you run into unfavorable market conditions. You don’t have to be precise in how much of your savings should go into traditional or Roth accounts. You’ll still be OK if you invested a good chunk in international stocks when international stocks did poorly relative to U.S. stocks.
At retirement, it means having a large portfolio such that you won’t worry about bear markets or high inflation. You spend your time on activities you enjoy, not watching what the Fed will do next. Your retirement success won’t depend on knowing when to harvest tax losses, how much you should convert to Roth, or whether you’ll pay IRMAA.
Big Bowls In Action
I read an interesting discussion on the Bogleheads forum. The poster retired in October 2021 but he had over 80% of his investment portfolio in one stock. As of early June when he posted an update, the value of his investment portfolio dropped 22% in five months. He had plans to reduce exposure to this single stock, but overall he hadn’t felt any undue stress. He was comfortable waiting for his investment thesis to play out.
Besides his confidence in this company as a leader in its field, he didn’t feel stressed because he had a big bowl. His portfolio value was $9 million after the drop and he planned to spend $250k a year in retirement. The planned expenses were less than 3% of the value of his portfolio and I imagine that a large portion is discretionary. It would be quite a different story if his portfolio value was $900k and the planned expenses were basic needs. The bigger bowl allowed him to take risks that are otherwise considered reckless.
I won’t put 80% of my portfolio in one single stock if I have $9 million but I’m not too worried about this person. The bowl is big enough. He can do whatever he wants.
I also read this interview of a retiree on ESI Money blog. He retired 14 months ago. His wife has been a stay-at-home mom for 15 years. Their investment portfolio is 89% in hedge funds plus some small percentages in real estate and other assets. That’s certainly unconventional but he’s not too concerned with not having enough safe assets such as bonds or annuities because they have $13 million in investments while spending $186k a year.
I won’t put 89% of my investments in hedge funds if I have $13 million but I’m not worried about them either. They have a big enough bowl.
If You’ve Won the Game, Stop Playing
Investment advisor and author Dr. William Bernstein famously said:
If you’ve won the game, stop playing.
This suggests reducing risk when you have enough assets to provide an adequate lifetime income stream.
You’ll have to decide whether you truly won the game. If your investments teeter on the edge between enough and not enough, you’ll naturally worry while going through rough patches. This creates great demand for retirement calculators and optimizing orders of withdrawals, Social Security benefits, and Roth conversions. Everyone wants to know whether they have enough to retire.
Ironically, when it’s abundantly clear they’ve won the game (“a big bowl”), as in the two examples above, it doesn’t really matter that much whether they stop playing or not. They can stop playing and convert everything into safe assets. Or they can keep playing and take unnecessary risks as they prefer. They’ll make it either way.
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Scooter says
Nicely stated and I agree with your concept. I’ll have a $80,000 annual pension that will start at 62 (currently 59) and my portfolio is now about $850,000. Since I’ll save about 60% over these next 3 years before I retire, I should have $1.2-1.3M by then. Honestly, my $80,000 will cover 100% of my essential costs until I take Social Security at 70. Being debt-free, owning our home, and receiving retiree healthcare at 62, these two income streams (pension and SS) alone should provide a big enough bowl for my wife and I. Most of our portfolio will be spent on discretionary items.
Though I’d love to have $9M, there’s many different ways to get the big enough bowl.
Thanks for the article and perspective!
Harry Sit says
Thank you for sharing. That’s a big bowl. I bet you’re not stressed either with your pension, retiree healthcare, and Social Security further down the line.
Scooter says
Well, I still wish I had that $9M but I do feel pretty good that my sequence of returns risk is basically eliminated with the pension and the way I’ve structured my portfolio. Today, everything looks good on paper but let’s see how my stress level is on 4/1/25 when I retire. 😉
That pension is like having an additional $1.5M and it is a joint life payout, which will pay at 100% until both my wife and I die. It’s not a COLA pension but it provides an excellent income floor.
Jason says
Absolutely 100% agree with this article. I’m glad somebody posted it. Also, I’m lucky that I have a career that I enjoy that puts me under no extreme compulsion to retire early. That’s another “big bowl” that makes me feel better.
James says
The downside of a large safety margin is less time in retirement. Time is the most valuable resource after all.
Harry Sit says
The first person was 47. The second was 51. They still retired early enough.
John Endicott says
James, that rather depends on how long it takes one to build that large safety margin. Some can do it quickly, others not so much.
5 years ago, the company I worked for let me go because the project I was on was coming to and end and they didn’t have any projects in my state (and I had no desire to relocate to a state where they did). I evaluated where I was in my savings/investing at the time and came to the conclusion that I had a large enough safety margin that I could survive just fine if I didn’t manage to find another place to work (IE I could have literally “retired” right then and there if I wanted to). As it happened, I did get another job, and now my safety margin is even bigger and I still have several years to go before reaching traditional retirement age.
I have the freedom to retire whenever I want because I began building my safety margin from day one of my working career, taking full advantage of pension and 401k plans that my employer offers and setting aside as much of my salary for savings/investments as I could.
Bogleguy says
I always thought about this “big bowl” when I first heard about the Warren Buffett’s AA for his wife after he passes. He said it will be 90/10. There were lots of debate/comments about the low % of bonds in the portfolio but when you have such a huge $$ portfolio (Big bowl) , it really doesn’t matter.
Eloise says
Thanks for this post Harry. This made me realized that my comfort zone has always been having a “big bowl,” when it comes to personal finance. I feel that it’s paying off, now that I’m getting closer to retirement. Unlike that 47 year old who has 80 % of his assets in one pot, I am more more comfortable with a more balanced/diversified portfolio. Everybody is different . I believe do what makes one happy.
Harry Sit says
Absolutely! I wouldn’t put 80% in one stock either. I also prefer a more balanced and diversified portfolio.
Scott says
It makes sense if someone has a lot of money they aren’t stressed about their retirement and they are well prepared for whatever happens financially in their future. Sadly most people are not able to earn enough money or save enough money to be in that ideal situation.
Chris says
I just wanted to comment on one part of your blog post. My problem with “If you’ve won the game, stop playing,” is this: sure, I can go to all cash, or bonds or something that pays 2-3%, but real world inflation is somewhere from 9-20%, depending on a bunch of factors, like where you live. So if I “stop playing the game”, then I’ll actually be guaranteed to lose money every year to inflation. I can buy a limited number of ibonds but with a large portfolio that doesn’t really put a dent in it. Maybe you have a different definition of what it means to “stop playing the game” (I’d like to hear it)… but I at least want to keep up with inflation, which, as far as I can tell, still involves taking some risk.
BTW, I appreciate the great blog you have.
Harry Sit says
TIPS keeps up with the reported national average inflation, at least before tax. See More Inflation Protection with TIPS After Maxing Out I Bonds. “Stop playing” also doesn’t have to be all-or-nothing. You can certainly play less if you prefer.
Horton says
Here’s the question we’re all dying to know:
What do you put in your oatmeal?
😃
Freda S says
Gotta be blueberries – good health and long life. No doubt the photo is no coincidence.
Freda S says
Hi Harry, Just had time to read this June post, because I’ve been busy building my bigger bowl. This is a great perspective and the reason why I value your blog: your perspective always aligns with what makes one’s life easier and better. In 2021, I passed on creating a DAF because the amount I might have put into a DAF from a small ‘windfall’ (sale of vacant land, 1 acre) would have left me with an uncomfortably small bowl. This coming year, I may have built a big enough bowl from a better windfall to take your advice on the tax-advantaged time-shifting that a DAF gives. Asking myself which course of action would give me less stress is a very useful measuring stick! Harry, love your blog and have sent it to a few interested friends. Thanks!
CaptainFI says
Great saying – when you’ve won the game, stop playing. I’m fortunate in that I’ve reached FIRE last year, and actually I’ve been implementing this by adding additional cash buffers (mortgage offset account) and looking into bonds and other forms of defensive investments
FreeBird says
Hi Harry,
Late reading this blog but found it very interesting and the comments made me look closer at my financial comfort level.
I am a married 67 year old recently retired and feeling like l have won the game sorta of!
I have rolled over my 401K of 1.25M to an IRA and presently have ~70% in bonds, CDs, and ~30% in MMF all averaging 5+% at the moment.
DW is 65 and will retire in ~ 2 years and presently has 0.8+M in her 401K.
We each have about 150K presently in our Roth accounts.
In our taxable account about 800K with 45% in treasuries and 20% cash.
Also, sitting in taxable: MF’s of ~280K purchased 30+ years ago.
My overall risk tolerance presently is ~35% equities in tax deferred and taxable accounts.
I am a long time DIY investor and have made my share of mistakes and regrets, but I have learned valuable lessons along away. Today I am comfortable thinking we have won the game with a large enough bowl sprinkling in SSI when I turn 70 in 3 years.
Thanks Harry, I glad I found a forum to read and discuss finance topics and it is much appreciated.
Harry Sit says
Thank you for the note. There’s a lot of noise out there. I hope you’ll find quite the opposite here.