My Financial Journey

Time sure flies and I not have 19 full years of investing under my belt. Things have turned out better than I could have ever imagined and I’ve blown through every single goal I set for myself. I did the hard part of starting early, living well below my means, and consistently investing without freaking out and doing something stupid. The vast majority of my money went into SP 500 index funds and I experimented with a small portfolio of individual stocks with some of our IRA contributions.

That small amount of individual stocks has grown to something almost unfathomable as I’ve now averaged over 19% annualized returns over 19 years. Meaning that $10k over that period of time has grown 30x in value to $300k. I always viewed this as more of a fun experiment and never put in a significant amount of money and never jeopardized our normal index fund plans. If this portfolio went to $0 I was still going to be ok.

Luckily for me I’ve now owned some of the best companies in the market in some cases for almost two decades and have gotten outsized returns. I’ve owned Netflix since 2005 ($3.75), Starbucks ($12.41) since 2007, Chipotle ($0.85) since 2008, Amazon ($5.87) since 2010, Apple ($11.45) since 2011, Tesla ($2.50) since 2013, and Shopify ($3.20) since 2016. Buying great companies, led by amazing founders, and held for decades has turned out to be a good recipe for success. That being said I still feel luck played a large role in this and this is why probably 90% of my contributions have been into index funds.

In annual tradition I will list my best and worst individual stock performers for 2024.

Best Perfomers
Netflix +90.25%
Tesla +62.56%
Amazon +46.33%
Shopify +44.02%
Cloudflare +35.70%
Apple +34.90%
Chipotle +34.30%

My worst performing stock
DataDog +24.17%

Well what a weird year when the worst stock in my portfolio actually returned 24% and every single stock in my portfolio bested the SP500 for the year.

In annual tradition I list all of my investment holdings. This is a fairly static list as I only make a few trades per year and in some years have actually not made a single trade. That being said I did make a handful of trades earlier this year where I got rid of a few stocks (Starbucks, Brookfield Infrastructure Partners,Monday.com, and Crowdstrike) and all of that money plus some additional money went into Tesla.

Clearly I have had strong conviction about Tesla and it has rewarded me handsomely. That being said there is risk that it accounts for over 41% of my retirement nestegg. I am ok with this, but this is something that I plan to possibly mitigate as I completely stop working as the risk/reward profile probably doesn’t make sense as it will always be a volatile stock. I also already sold over 9% of my Tesla holdings in late December to fund a few years of my early retirement fund so as of right now I have 4 years of early retirement funds where I don’t need to worry about fluctuations in my portfolio as much.

Another item I added as 400 North which is a Commercial Real Estate property I bought 2 years ago to learn a little bit about real estate. I never included it before as I’ve never included real estate I own in any of my networth calculations as I don’t view real estate as something that is easy to sell or would be sold in many cases.

That being said after owning the property for 2 years me and my partners actually have it under contract to sell in a few months so I’ve included my initial investment amount in my retirement nestegg as it seems like we will make money on this property. It’s actually selling for an amount where I will make nearly 5x my initial investment, but for now to be safe I will leave it as if it’s only worth my initial investment as the deal could fall apart and I’m not sure I plan to use this money for my retirement nestegg. I will actually walk away with almost 9% of my nestegg in cash at closing before taxes, but I might roll that over via 1031 into another property so we’ll see how I decide to value it or not.

The smart thing would be to take that money and pay taxes on it and fund another 3 years of retirement, but I might continue to try to learn about real estate and purchase a property on my own that could be used for other ways in retirement.

Really at this point going forward I will probably no longer do much buying and slowly trim down the portfolio to keep my cash savings at 3-5 years of cash and trim down for various purchases. In fact this year alone we withdrew and SPENT 8% of our nestegg with some longer term projects (solar panels, vacation land, backyard patio, vehicles). This is almost shocking to type and is the hardest part about early retirement is that I’ve spent my entire working career saving money, buying investments, and living very frugally and now I’m to the point in my life where I need to start figuring out how to spend the money to bring me and my family the most enjoyment and it goes against every gut feeling I’ve acquired over the years that got me to where I am today. Selling great investments to spend the money has required some mental gymnastics on my part. I’ve always treated our investment accounts as one way roads where the money goes in and grows and almost feel like I’m breaking the law now that I’ve tapped into them for the first time in my life.

Well a bit of a bounce back this year after last years pullback that halved our nestegg. We greatly exceeded the performance on the SP500 this year which is the 11th time in 17 years and the 6th time in the last 7 years we’ve accomplished that. Overall any individual years performance is nothing to get too excited about, but we now have a 17 year track record to look back on. Long term performance is greatly skewed by recent performance, but we have now exceeded the total return of the SP500 by 375% over 17 years and this is entirely driven by the outperformance of our individual stock portfolio that has now exceeded the SP500 by over 1400%!!

We still however are not at all-time highs as our nestegg lost 45% of its value last year and while 50% plus returns are amazing – we needed closer to 100% returns to get back to what we gave back last year. This is why looking at anything in a short time window of a few years really isn’t really going to tell you much.

Also despite our insane outperformance by picking individual stocks we continue to contribute 100% of our money to index funds and high yield stable securities and have done so now for close to 10 years. I feel like we have gotten very lucky with our individual stock investments and I’m not convinced I’m the second coming of Warren Buffett so we continue to follow the original plan of having the vast majority of our investments be in index funds which is what I would recommend to anyone.

We do however currently have 60% of our money in individual stocks and this simply due to the fact that our stock portfolio has now averaged 17.75% annualized returns over 17 years which has turned a relatively small amount of investment into an insane amount of value. We will continue to let these investments do the bulk of the heavy lifting and over time I do see more and more of this money being converted over to index funds, but for now I still feel very confident about our long term investments and will let them run for the foreseeable future.

I also realize at this point the only meaningful thing I can do to our portfolio is to screw it up by thinking I’m smart and taking risks that if they pan out wouldn’t meaningfully change our lives anyway. With this being said if all of our individual stocks went to $0 we would still be doing pretty ok. Also almost all of our individual stocks are actually now pretty big household name companies with many sources of revenue and global reach so I feel like as time goes on our individual stocks are becoming more and more stable (if you totally ignore last years 68% drop for our stock portfolio 😛 )

In annual tradition I will list my best and worst individual stock performers for 2023.

My Best Performers
Bitcoin +154.96%
Crowdstrike +147.21%
Tesla +129.86%
Shopify +118.33%
Cloudflare +93.54%
Ethereum +92.82%
Amazon +77.04%
DataDog +68.37%
Chipotle +66.79%
Netflix +65.07%
Monday +57.26%
Apple +53.94%

Obviously a very good year overall for the entire market and a great year for some of my larger positions. I do have a few newish positions (only 3 years old) that had some strong performance with the cloud stocks (crowdstrike,datadog,cloudflare, monday) and the crypto that were high fliers this year, but what is even more telling for me is the massive performance by stocks I have literally held for over a decade in Tesla, Shopify, Amazon, Chipotle, Netflix, and Apple all coming in with 50% to 130% returns. Many of these are huge companies who have been growing rapidly forever and have made me loads of money already and here they are still in some cases almost 20 years after I bought them still propelling me rapidly to new nearly new highs.

This year will be the 20th anniversary of my first Netflix purchase and I’ve owned most of this bunch since the 2000s decade and some of them have gone up more than 100x in value from my original purchase. The only thing I had to do was do nothing. This is harder than it sounds as clearly we have to be staying up to date and listening to pundits and doing all kind of hard research in order to pick the best stocks and clearly the smart thing is to take profits off the table when a stock has had a huge run and companies can’t grow forever and it’s best to take money from those companies and invest in the next batch of up and comers and yeah……doing nothing is the hard part or at least it is initially.

I feel confident in the companies I’ve invested in and the leaders who run them. Picking out the best companies in the world is honestly not all that difficult. Great leaders running companies who only focus on making great products. You know those products when you use them. The first time you touched an iPhone, drove a Tesla, signed up for Netflix, ordered your first Amazon package, you knew deep down this was something at a completely different level that was going to change the world. Buy those companies and hold onto them forever – it will change your life.

My Worst Performers
Starbucks -4.78%

Starbucks is the only company who lost me money this year. Ironically after my sermon above I have never had a Starbucks coffee and don’t drink coffee so hard to get a strong conviction on this one other than I’m probably the only weirdo who doesn’t drink coffee and frequent Starbucks. I’ve also owned Starbucks since 2007 and it’s been a great performer for me over that time span.

As I mentioned in last years review, I really came to realize that all-time investment performance is heavily dictated by the most recent years performance. It’s just the nature of compounding. A really good or really bad year now will greatly influence my all-time performance, just because I am now dealing with much larger numbers. A 50% swing one way or another when your portfolio is worth $1M vs $10,000 moves the needle a ton and dwarfs all of the moves that were made in all of the years leading up to it. So bottom line one shouldn’t get too confidence or discouraged looking at long term annualized result as its greatly influenced by recent returns, which is kind of goofy.

So in that vein my all-time annualized stock return fell from 22.65% to 15.33% – which honestly is still quite spectacular and honestly higher than I had expected. The calculated risks that I talked about last year have at least in this short period of time looked like dumb decisions – keeping nearly half of my nestegg in a stock that is down 69% in the last year. Trust me I would love to have the few extra million that I had on paper last year, but this is a marathon and not a sprint and I still feel like long term I will outperform the market with these calculated risks.

I do however and have always acknowledged that I think I am probably more lucky than skilled and going through another one of these downturns will probably make me re-evaluate my investment allocations going forward. Not so much because I think that the approach is wrong from a profit maximizing standpoint, but from a risk/reward standpoint taking added risks and them paying off does not meaningfully affect my life where as if it turns out I am indeed just a lucky moron and I am completely wrong on most things going forward it can affect my life.