The Case for a Little “Fun Money” in the Stock Market – My $800 Bet That Turned into a Mind-Blowing $43,000!!

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I admit it – I’m a boring guy when it comes to my investment portfolio. Over the years, low-cost broad-based index funds now make up over 77% of our investment portfolio. REITs and bond funds account for another 22%.

So what’s the remaining 1+% invested in? Well, that’s our fun money in the stock market. And that number accounted for a lot more until recently when I cashed in on some gains.

But why have fun money in an investment portfolio? If the average return of index funds is about 10% (let’s say 8% after inflation), what’s the point? You’re already getting a great return on your money over the long run, right?

Well, having a little fun money in the stock market can satiate the craving for something a little less boring if that’s a concern you have. And, if you’re lucky, you might just stumble onto some incredible gains that you wouldn’t be able to maximize so effectively with index funds.

I’ve had some winners and losers with my stock market fun money, but my biggest win by far over the years has been one stock. It’s made me $25,000 in realized gains with another $18,500 and counting in what I haven’t sold yet.

Today, I’ll tell you that story as well as why I think having some fun money in the stock market is something worthwhile for a lot of folks.

Disclaimer: I’m just some guy on the internet. Please don’t take my thoughts on finances as the holy grail. Talk to a financial advisor or other professional before making any decisions on your money that you don’t understand completely and the risks involved.

My path down the road of investing

When I was in my twenties, I didn’t know much about investing. What’s strange though is that I was probably worlds ahead of most of my peers who hadn’t put any of their hard-earned money to work (outside of possibly the 401(k).

Even though I thought I knew some things back then, a look back tells me otherwise. Luckily, I was smart enough to start a Roth IRA and started contributing to that. But my investments were all individual stock picks.

And my rationale on which stocks to buy was just to invest in companies that I liked and thought would probably do well in the long run. No research and no understanding of a company’s financials – I would just pick what interested me.

Over the years, I got somewhat better at my choices, but still not great. I started choosing stocks that were listed as Dividend Aristocrats for the most part. These are stocks that continually increase their dividend every year. I still had no understanding of each company – I just chose the ones I liked from the list instead.

One of the books that really helped me to understand why index funds are so worthwhile is JL Collins’ book, The Simple Path to Wealth. If you haven’t read this book yet, please add it to your list – it’s easy to understand and makes so much sense.

That book was the catalyst to changing my entire investment portfolio. Over the past decade, I’ve sold off almost all of my individual stocks and moved almost everything to low-cost broad-based index funds.

Are they boring? Yes. Do they make sense for almost everyone? Yes. Do you need to understand a company’s financials to properly invest in index funds? Not at all.

Don’t look for the needle in the haystack. Just buy the haystack!

— John C. Bogle, The Little Book of Common Sense Investing

About a year and a half ago, I detailed our entire portfolio in my post, Opening the Books to Our Investment Portfolio. Since then, not too much has changed except I sold off all our individual stocks except for one that I’ll talk about shortly.

The logic is that we already own all of these stocks as part of our index funds. It’s a little redundant to hold Google, for example, when every share of VTI contains pieces of GOOGL and GOOG already. So here’s what our investment portfolio looks like now…

Holding	Percent
AMZN	1.16%
BSCO	3.38%
BSCP	3.30%
BSCQ	3.57%
BSCR	3.49%
FZROX	3.10%
VNQ	4.94%
VTI	77.05%
Cash	0.02%
Total	100%

Note that this is only our investment portfolio and doesn’t count cash on hand such as the year’s worth of cash we keep for living expenses.

As a side note, seeing these numbers across our various investment accounts and different companies is easy with the Empower dashboard. That’s what I use for things like:

• Seeing all our aggregated investment data in one place
• Tracking our net worth
• Testing different withdrawal scenarios for retirement
• Reviewing our asset allocation
• Seeing all the hidden fees in our investments and adjusting accordingly

It’s a fantastic product… and it’s free. If you haven’t set up an account with Empower yet to track your investments, I highly recommend doing so. It’s pretty much a no-brainer since there’s no cost to do so. Being able to see everything in one place is great as it is, but the built-in tools are phenomenal.

Why fun money can be good for your stock market portfolio

As a human, we have a hard time just sitting back and leaving things alone. We feel like we need to tinker with everything… including our investments. That’s a problem and we tend to be our own worst enemies because of it.

But allocating a small sliver of a portfolio to “fun” still gives you a chance to play without hurting the rest of the money that you have “properly” invested in the stock market.

As long as you’re ok with losing that small amount of money, having some fun money to invest and play with can be worthwhile. It gives us a chance to speculate, learn, and possibly outpace some of what the market gains would be.

I have no interest in crypto right now – it’s all speculation. But if this is something that interests you, that could be a good opportunity to put some of your fun money to work and see what happens.

The same goes for artificial intelligence (AI). I just talked to a friend who was telling me that he wants to invest in AI stocks. He knows little to nothing about AI but he has a buddy who made good money with one AI stock. Does that mean he should follow suit on it? Absolutely not. But, if he invests a small sliver of fun money in his portfolio for this, he can learn more.

Both of those examples aren’t great in my book, but you never know. The interesting part is that you might get lucky. You could lose it all, but there’s also no ceiling on how much you could make. If things go right, you could easily swing your stock market portfolio up dramatically faster than index funds alone could have done.

So having a small percentage of fun money can be a way to get that tinkering need out of your system and maybe, just maybe, make some money in the process.

But what about the risks?

Well, let’s be honest – chances are that you’ll do worse with your fun money than you would have done if you just invested it in index funds and called it a day.

If passive index funds beat out active funds that “professional” managers choose more than 93% of the time, what makes you think you’ll do any better at stock picking? Most of the time, you’re not going to come out ahead.

But if you can’t help yourself from tinkering with your portfolio, carving out a small amount to play with could make sense. Even if you lost it all, that small percentage of a portfolio hopefully wouldn’t ruin you (though it wouldn’t be great either!).

That’s why you want to keep the percentage of the money you have in the stock market for this purpose very small. I would say that using 5% of your portfolio as fun money should be the absolute max most of us should ever even consider playing with… and that’s probably pushing it. For most folks, a 2% max might be a better number.

Investing is not supposed to be fun – go on spring break if you’re looking for fun. But if you’re using a small amount of money you’re ok with throwing away (in case it comes down to that) and investing the rest in a well-diversified portfolio, then go to town.

How my $800 stock pick turned into over $43,000!

So how did I end up having such a big win? Stupid luck, I guess.

Back in 2008, I bought just 12 shares of Amazon stock (AMZN). I paid $49/share and with the $9.99 trade fee (things were pricey back then!), I ended up paying $597.99. I later bought one additional share (don’t ask) for $192.60 in 2011. There goes another $9.99 trade fee!

Total cost: $800.58

The stock continued to grow and I decided to take out what I had put in and just play with the house’s money. So I sold one share in 2017 for $1,008.50. The fee was only $6.97 then so the total I got back was $1,001.53.

I was also becoming a little smarter that year and told TD Ameritrade to go pound salt and transferred everything over in-kind to Vanguard.

Amazon stock just continued to grow and it was becoming a bigger percentage of my portfolio. I didn’t like having all my eggs in one basket so I decided to take some more money off the table in 2020. I sold two shares at $3,025.00 each!!! Thanks to Vanguard my fees were only $0.13 so the net I got back was $6,049.87.

Next came the stock split. Amazon did a whopping 20-1 split in 2022. At this point, I went from 10 shares to 200 shares. Although you don’t gain anything directly on a split, that cheaper price became the catalyst for more folks to get into the game and the price continued to grow even more.

Earlier this month, I sold 100 shares at $185/share for a total of $18,500.00. After another gouging $0.15 fee from Vanguard, that left me receiving $18,499.85.

So there you go. I paid $800.58 and have gotten back $25.551.25. The best part is that I still have 100 shares left. The price has been jumping around a little, but at $185/share, those shares are still worth another $18,500. That’s a $43,250.67 gain if I cashed out the remainder now!

That said, I’m keeping those 100 remaining shares as fun money in the stock market for now. If the price continues to go up, I’ll probably continue to sell off in increments like I’ve been doing.

By the way, if you’re thinking I should have just kept all my shares completely… maybe you’re right. But I’d rather take some nice wins over the chance of losing it all. I’ve seen some mighty stocks that have fallen from grace over the years (anyone remember Cisco?) and as this has grown, it was holding too big of a percentage of my portfolio to feel comfortable.

Potentially ending with $43,000 or more is one heckuva win!

Bear in mind though, when I was picking individual stocks, I had some losers, too. I bought a bunch of shares of GM as a longshot shortly before they declared bankruptcy… oops. That was money burnt.

On the flip side, I did well with Google and bought a couple of GOOG Class A shares in 2007 for $664 each. That was all I could afford at the time! 🙂 But those two shares grew, then split in 2014 and gave me an additional 2 shares of GOOGL Class C shares. Then there was an odd compensation split in 2015 for the GOOGL shares which awarded 2.7455 shares for every 1000. And finally, there was a 20-for-1 stock split in 2022.

I started with two lousy shares that I actually thought were overpriced at the time. When all was said and done, I sold them all a few months ago for over $12,000… not too shabby!

In other words, fun money gave me some wins and some losses – and a lot of shares that just did ok.

Now I don’t have any individual shares of anything except for the 100 shares of Amazon. Maybe someday I’ll have the desire to put some more fun money to work again, but for now, I’m sticking with the boring old index funds to keep making me money while I sleep.

If you enjoyed this post, consider jumping on my email list. I’ll keep you in the loop with the latest posts I have coming out as well as some things I don’t put in my posts. I’ll even send you some useful spreadsheet freebies that’ll make it worth your while!

Plan well, take action, and live your best life!

Thanks for reading!!

— Jim