My Portfolio of Time
You cannot take time with you.
When your time is up, there is no more time or money to spend. We must spend our time now before it is too late.
Today, some say, is the only day that matters. Because time seems linear, we can’t change yesterday or tomorrow but can only act now.
Think about the thought experiment where your portfolio is only cash: do you buy what you presently have? Now, apply the same principle to your day. Sell all your plans today and bring them back to cash: how you spend your money is similar to your asset allocation of time every day.
The Risk of Today’s Time
The risk of the time you spend today is opportunity cost. Once you spend this second -poof- it is gone, and you can’t have it back. Whatever you did during that second came at the opportunity of doing anything else during that same second. You can only spend your time once!
What are you spending your time on? It certainly depends on what is important to you right now.
You can spend time or invest it, just like income. But it, too, like income, can only be spent once. How much time you have is restricted; a range of probability distributions describes your mortality date.
Like money, you can’t take time with you. You don’t want to be the youngest person in the graveyard, likely nor the oldest.
How you measure risk changes over time as you spend your work and your free time.
The Reward of Today’s Time
While risk is poorly defined in investing (well, it is market volatility or not depending on accumulation vs de-accumulation), reward seems relatively easy.
Expected future returns are a good measure of the returns of the time you spend. Why else would you do something unless it was good for you now or later?
But the reward of today’s time is either time or money. Time is money, or as I say, it is not retirement but a time of life when money is time.
How do you measure risk and reward?
You measure risk and reward differently depending on whether you are in accumulation or de-accumulation
Time in Accumulation
In accumulation, you trade your time for money. Therefore, there is little risk early on in life for either time or money. That is, you have the potential to have large amounts of both!
Risk is market volatility, but the irony is that young people don’t need to fear this risk.
Reward means a long life where you have some spending and some saving all through your life. More at some times and less at others. But you want to turn your time into assets, giving you money that you turn into time during retirement.
Risk is in not accumulating enough assets or not enjoying your life in the process. The reward is getting there, however you do so.
De-Accumulation
In De-accumulation, you trade money for time. The nest egg you accumulated (the assets you intend to use to pay for retirement) is now used to free you from trading time for money.
And reward? You haven’t run out of money yet. Meet your retirement goals and have a grand time doing so. Or at least be as happy as you choose to be given your financial, emotional, and social circumstances.
The point is that how risk and reward are measured changes as we age.
Conclusion — My Portfolio of Time Today: Risk vs. Reward
We spent some time today looking at your time. How do you spend your day?
Your time has a risk vs. reward profile that changes based on your purpose and goals, from accumulation to de-accumulation.
I like to say when you are retired and spending it all down, transform time is money into money is time.
“It,” of course, is complicated. It is your nest egg, your accumulated assets remaining to spend.
If I forced you to cash today, would you buy back the same assets you have currently? How about with your time?
What about if I forced you to do that within the next 10 minutes? Or even the next day. Today is all you have. Right now, in fact.
That’s a thought experiment I will try when I make the time.
