Ask The Compound — “How to Recover From a 50% Loss”
November 19, 2025
Hosts: Ben Carlson, Duncan Hill
Guest: Bill Sweet

Episode Overview

In this episode of Ask The Compound, Ben Carlson, Duncan Hill, and financial planner Bill Sweet field a range of listener questions on personal finance, focusing especially on risk management after large portfolio losses. Topics include: recovering from YOLO trading gone wrong, managing concentrated tech-stock positions for retirement, leveraging Roth 401(k)s, funding home renovations with equity, maximizing HSA use, and creative strategies to pay minimal taxes in retirement.

Throughout, the hosts maintain their signature blend of humor, relatability, and actionable advice – acknowledging both the emotional side of investing blunders and the practical tactics for navigating back to financial health.

Key Discussion Points & Insights

1. Recovering From a 50% Portfolio Loss (YOLO Trading Gone Bad)

Timestamps: 02:42 – 11:45

• Listener Scenario: A “brother” went all-in (using margin) on MicroStrategy during a hot streak, only to lose 50% of his net worth now needed for a house down payment.
• Ben Carlson's Analysis:
  • Huge risks in leveraged, concentrated bets, especially with money earmarked for near-term life goals.
  • “It’s hard to see when you’ve morphed from 'aggressive investor' to 'degenerate gambler'—when you’re making money, you don’t realize you’ve become a degen.” (Ben, 04:01)
  • MicroStrategy exemplifies high-volatility stocks with massive drawdowns, yet incredible long-term returns for only a select few who didn’t buy at the top.
  • Losing 50% means needing a 100% gain to break even—“don’t revenge trade.” (09:19)
• Advice:
  • Don’t try to chase losses with higher-risk trades.
  • Seek intervention; hand over portfolio control if necessary, especially with high-stakes, short-term financial needs.
  • Ben’s perspective: Some people have to “learn the hard way,” and not every crisis can be solved with sensible advice alone.

2. Managing a Concentrated Tech Stock Position for Retirement

Timestamps: 12:05 – 20:22

• Listener Scenario: A longtime tech employee (female, 55) amassed ~$1M in two big tech stocks with low cost basis, reluctant to sell due to taxes, and approaching retirement.
• Key Issues:
  • How to unwind the concentrated position with minimal tax impact?
  • Could she realize capital gains at a 0% tax rate after retirement?
• Bill Sweet’s Framework:
  • Moving from accumulation to distribution is a process, not an event. Plan over 5–10 years, ideally with a financial planner and tax professional.
  • “If you’ve been successful investing, taxes are the fruit of that labor. You’re going to have to trim that tree eventually.” (Bill, 15:04)
  • Take advantage of years with little income post-retirement to realize up to ~$130K in capital gains (for joint filers) potentially at 0% tax, but filing status matters.
  • Diversification is worth paying taxes for, especially after a bull run, rather than waiting for a forced sell in a crash.
  • Consider advanced strategies: options for hedging, exchange funds for diversification, or gradual tax-loss harvesting.
  • Chat Humor: “She should just marry the MicroStrategy guy” to offset losses with gains (17:46).

3. Roth 401(k) vs. Traditional 401(k) Contributions

Timestamps: 21:06 – 26:16

• Listener Scenario: New Roth 401(k) option at work; is it wise to continue matching in the traditional 401(k) and allocate the rest to Roth to maximize future tax-free withdrawals?
• Analysis & Charts:
  • Bill Sweet breaks down a 20-year projection: $21K/yr contributions grow to ~$1M tax-free in Roth versus ~$715K after-tax in a taxable account—a 30% advantage.
  • “Is 30% tax savings worth it for Eric? Pretty good to me.” (Ben, 23:41)
• Takeaways:
  • Roth 401(k) is a powerful tool, especially if your current IRA balance is 'light' on Roth dollars.
  • Roth 401(k)s allow more after-tax dollars to be contributed versus IRAs (annual limit is now $24,500, even higher for those 50+).

4. Home Renovation: HELOC vs. Cash-Out Refinance

Timestamps: 26:19 – 31:03

• Listener Scenario: $45K remains on a 2.875% mortgage, wants to tap ~$250K in home equity for renovations; is a cash-out refi at 5% better than a 7.25% HELOC?
• Discussion:
  • A cash-out refi locks in a reasonable rate and fixed payment; a HELOC is more flexible but rates can rise/fall.
  • “If you’re putting this much money in, hopefully you’re increasing the value of the home...” (Ben, 29:58)
  • Home equity is a valuable, low-risk source for financing large projects, especially with very low existing leverage.
  • Consider cash flow: 15-year vs. 30-year loans offer different payments and total interest.
  • Flexibility: Start with a HELOC, then consider rolling into a fixed loan if rates drop.

5. Cracking the Roth Conversion Code in Retirement

Timestamps: 31:40 – 35:12

• Listener Scenario: Surgeon couple with significant Roth and tax-deferred assets devises a plan to live off Roth accounts in early retirement, then perform tax-efficient conversions from traditional IRAs up to standard deduction/low brackets, “rinse and repeat” until RMDs or Social Security.
• Expert Analysis:
  • Bill: “I don’t like this idea—I LOVE this idea. This is brilliant. This is winning the game.” (Bill, 33:13)
  • The strategy works because early retirement years offer low ordinary income, letting you fill low tax brackets with Roth conversions, minimizing tax drag. Standard deductions increase the effectiveness.
  • State residency matters: e.g., Illinois doesn’t tax retirement distributions, amplifying benefits.
• Ben’s Reaction: “He cracked the code.”

6. How Much is Too Much in an HSA?

Timestamps: 35:26 – 39:11

• Listener Scenario: High-income couple with $74K in HSA, expecting a million by retirement given compounding and continued contributions—when is it “too much”?
• Advice:
  • “I don’t see the problem with building up a bucket... At 65, the HSA effectively becomes your traditional IRA.” (Bill, 36:46)
  • Maximizing an HSA means tax-free growth and highly flexible withdrawals (qualified expenses can be reimbursed many years after incurring them—just save the receipts).
  • “Market paid half your orthodontist bill in the future.” (Bill, 38:00)
• Practical Tip:
  • You’re not locked into a high-fee HSA for life—ask your employer if you can roll to a lower-fee provider.

Notable Quotes & Memorable Moments

• On Speculative Investing & Losses:
  • “It’s hard to see when you’ve morphed from 'aggressive investor' to 'degenerate gambler.'” (Ben, 04:01)
  • “Don’t revenge trade and go like, 'once I break even, then I’ll chill out.'” (Ben, 09:19)
• On Tax Efficient Planning:
  • “If you’ve been successful investing, taxes are the fruit of that labor... you’re going to have to trim that tree eventually.” (Bill, 15:04)
• On Portfolio Concentration:
  • “Take 10% of your portfolio and speculate your face off. I don’t care. But 50% of your net worth? And on margin?” (Ben, 10:33)
• On Roth Vehicles:
  • “[A Roth 401(k)] is a huge opportunity to get funds into this space.” (Bill, 23:42)
  • “Is 30% tax savings worth it for Eric? Pretty good to me.” (Ben, 23:41)
• On Roth Conversions in Retirement:
  • “This is brilliant. This is winning the game.” (Bill, 33:13)
• On HSAs:
  • “I don’t see any problem having that amount of assets in an HSA. I’d be in no hurry to wind it down.” (Bill, 36:46)
• Humor:
  • “She should just marry the MicroStrategy guy—he’s going to have the losses, she’s got the gains. Could be a CNBC dating show!” (Ben, 17:46)

Highlighted Timestamps

• 02:42 — Dealing with YOLO trading losses, intervention, and margin dangers
• 04:10 — How risk taking in markets can morph into degenerate speculation
• 06:25 — MicroStrategy’s wild drawdowns (stock down 60%+ from highs in months)
• 12:05 — Unwinding concentrated tech stock for a soon-to-retire big tech worker
• 15:04 — “Taxes are the fruit of [investment] labor. You have to trim that tree.”
• 23:41 — Roth 401(k) vs. Taxable: 30% better net wealth after 20 years
• 26:51 — Options for using home equity for big renovations
• 33:13 — Advanced Roth conversion strategies in early retirement (“Winning the game”)
• 36:46 — No such thing as “too much” in an HSA
• 38:00 — The hack where market growth pays for future health expenses
• 17:46 / 18:44 — Humorous matchmaking of gain/loss investors for tax purposes

Tone and Style

The hosts mix practical advice with wit and candid discussion of real investor behavior (“This is like intervention level stuff” / “Don’t be an idiot”). Financial complexities are broken down in plain language, and listener questions—sometimes involving large sums of money—are handled with both seriousness and dry humor.

For listeners feeling intimidated by the dollar figures discussed, Ben and Bill underscore that the principles apply whether you have $10,000 or $1M: “It’s just a couple extra zeros. The building blocks are still the same.” (20:41)

Bottom Line:
This episode provides a masterclass in recovering from portfolio setbacks, unwinding concentrated positions thoughtfully, using tax-advantaged accounts, and keeping your sense of humor—all while reinforcing the timeless tenets of risk management, diversification, and the importance of planning around both psychology and tax math.