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My All Time Investment Performance January 2023

My All Time Investment Performance January 2023

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.

MFJ Returns By Year

YearSP500MFJ NesteggMFJ StocksMFJ Investment GainsBeat SP500

MFJ Cumulative Returns By Year

YearSP500MFJ NesteggMFJ Stocks

Annualized Returns since 2006

SP500 +7.89%
MFJ Nestegg +10.52%
MFJ Stocks +15.33%

My Best and Worst Stocks in 2022

My Best and Worst Stocks in 2022

In annual tradition I will list my best and worst individual stock performers for 2022.

My best performers
Starbucks -14.98%
Chipotle -17.93%
Vanguard Institutional Index Fund -21.25%
Vanguard PrimeCap Fund -23.59%
Brookfield Infrastructure Partners -23.91%

Well obviously it was a rough year if I have to celebrate the investment holdings that didn’t lose more than a quarter of their value in the year. I really only had 3 investments hold up better than the market and overall it was a brutal year, but not to be unexpected

My worst performers
Upstart -90.86%
Fubo -89.26%
Shopify -74.54%
Tesla -69.20%

Now this list is equally brutal and to make matters worse Shopify and Tesla are on the list and going into this year just those two stocks accounted for 47% of my nestegg. Definitely hurts, but it is the price of admission. Also while it makes sense for me to do this in annual tradition, I do not buy investments with a holding period of 12 months. So while it might be terrifying to some to see ever investment you own lose money and your largest investment drop by 69%, I tend to take a longer term view and am not changing anything because of this 12 month period the results were horrible. I held Tesla through many down years and again if we take a step back and zoom out just a tad bit things look pretty darn good.

Even if I only zoom out to 3 years Tesla has returned 329.50% during that time and if we go back 10 years we are looking at 5209.48%. Despite everything you see in the news and from the financial media, investing is a marathon and not a sprint and the ability to ignore the noise is what separates people who make money and who don’t. I look like the worst investor in the world if you only look at 2022, but I think if you come back and see how I’m doing in 2032, 2022 won’t even be a blip on the radar.

Investment Holdings January 2023

Investment Holdings January 2023

In annual tradition I list all of my investment holdings. I do not do much buying or selling, but the percentages have changed quite a bit in the last year due to market fluctuations. Last year TSLA accounted for almost 40% of my nestegg and now it only accounts for 24% and earlier this year it was over 50%!! As a result I have become much more diversified and well poorer 🙂

The other big change I would say in the last year is the amount of cash I have on hand. Now this is not primarily cash from selling – though I did take advantage of some tax loss harvesting at the end of the year, the vast majority of this money is money from a side business I started, some inheritance, and some crypto cash that I have as a start to my cash cushion. It’s very hard not to invest it given that many of my stocks are down 70%, but it is money that can be used for short term security or other short term needs. Historically this is money I would have never counted in my nestegg, but I think at this point in my life is something that I should track as it is something I would potentially leverage should I decide to stop working.

The other item I have not included in this list is in the last year I did invest $90,000 into a commercial real estate purchase with some other investors purely with the intention to learn. Now I hope I make money on the deal, but real estate is so hard to value that I will consider this money a 100% loss until some day when it sells. With leverage I personally view RE as a huge liability as if shit hits the fan you can lose like 5x your original investment where as the worst stock can only lose you 100%, but again I know there are tons of tax advantages and other benefits to real estate and while I’ve flirted it with it my entire career, I’ve always shied away because of the effort involved and the difficulty accessing the equity. I am not sure if this investment is going to change those opinions, but I was in a position in my life where I decided to give it a try.

I lost $2 million dollars

I lost $2 million dollars

Well every goal I set for myself on this blog I not only met, but in many cases vastly over achieved. As you can see from my last post I brought up that I made the comment in my 2018 report that

My goal some day is to lose $1 million dollars in portfolio value.

Well in January of this year I made a post letting everyone know that I had indeed accomplished that goal and now in the same year I’ve now managed to lose a second million dollars in portfolio value!

My portfolio had grown at absolutely insane rates the last couple of years and now it’s going the other direction having lost two million dollars over the last 12 months.

In some ways thats almost mind boggling as it took me 41 years to amass $2M and then just two years later I’ve lost more than $2M. This would be absolutely devastating for me if I hadn’t also hit $3M and $4M shortly after I hit $2M so basically where I sit now I am back to where I was 2 years ago. Easy come / Easy go and also where I was 2 years ago was absolutely incredible and mind boggling.

My absolute stretch goal for my nestegg set when I was just starting out was to hit $1M in nestegg value before I turned 40. Not only did I hit that goal 1.5 years early I was then able to run my portfolio well above $4M in the next 3-4 years. Compounding is powerful big numbers get bigger and the flip side can be said – big numbers drop bigly when the portfolio shrinks. It’s best to think in terms of percentages as dollar amounts can mess with your mind when numbers get big as those dollar amounts are mind boggling. The other thing to remember is the price to pay for those returns is risk & volatility. It cannot be avoided so it’s best not to get too high or too low. This is a long term game and the short term fluctuations don’t mean anything in the grand scheme of things. Draw downs like this will happen all of the time, and while it hurts to be down 50% from some arbitrary all time high, if I zoom out and look at where I have come from I am still incredibly proud of where I am.

I also know that with such a big draw down, the level of risk of further massive drops likely becomes less likely and there will be good days again in the future.

Now one thing I have learned from this draw down was that despite my constant insistence that being 100% invested in stocks all of the time is clearly the only smart play long term as it guarantees the largest long term gains and that volatility does not matter as long as you have a large enough margin of safety. Now I still logically believe this, I do think the idea of having a cushion of stable investments makes a little more sense to me now and I’ll try to explain why.
I have not ever touched any of my investments as I am young and do not rely on them to pay bills or make purchases. I am however constantly moving closer and closer to a day when I will likely start tapping into this huge pile of money for the freedom that it can provide. While I know I will have a large margin of safety built in when I do this, I do realize that the optimizer in me would have a hard time pulling money from the market when things have fallen so much as I know in the next couple of years todays prices will be extremely attractive and I would be dumb to sell. This is why I need to get better at building a large cash reserve when things are going extremely well. Yes I will cost myself somewhat in performance, but I will greatly increase the freedom buying power of that money. Meaning I can basically do whatever I want whenever I want with my money and whether the market is up a lot or down a lot will not affect those plans in any meaningful way.

To to this I’ve arbitrarily decided that I would need about 5 years of spending money with a good margin of safety and that in that case I would almost always be set regardless of what the market is doing or what my needs will be met and I would have cash on the sideline to take advantage of any major discounts. I am not sure if this goal should be a percentage or dollar amount as my spending would be a set dollar amount, but it probably makes sense to have a percentage of my portfolio. I think somewhere around 10-20% makes sense with maybe a cap on the dollar amount. Obviously it doesn’t make sense to raise cash now with the markets down, but as the market recovers and we get back to previous highs or close to it I think it makes senes for me once or twice a year look at my portfolio and raise some cash off of it – kind of like a self imposed dividend. This would give me my 5 years of cash that I would never touch and as the market continued to rise I could pull some additional off up to 20% and then when things fell I would have an additional margin of safety and could reinvest some of that money.

For those that knew TomE from the Motley Fool this is how he ran his portfolio. Like I said I was always invested and always in full growth mode, so I never saw the point and considered it at some level trying to time the market, but I now see the potential benefits for someone like myself. The additional financial gains really arnen’t that life altering at this point, but the loss of freedom of not having enough cash/safety and not wanting to touch depressed stocks to raise it is way worse than having a few less dollars total in the nestegg.

I lost $1 million dollars

I lost $1 million dollars

Well this is another goal of mine which sounds counterintuitive, but in my October 2018 Retirement Nestegg Report I was commenting about how losing $100k in a month was a non event for me and then made this statement

My goal some day is to lose $1 million dollars in portfolio value.

Well today after a few weeks of carnage it occurred to me that I may have lost about $1 million dollars on paper and sure enough my portfolio set an all-time high on Nov 4th of 2021 and now today just 79 days later my portfolio has fallen more than $1 million dollars below that ATH. Mission Accomplished!!

A couple of thoughts on this.

I originally made that statement because in order to lose a million dollars you have to have a fairly large sum of money – hopefully quite a bit more than $1 million, but at least $1 million. So if someday I lost $1 million dollars that probably meant that I was doing pretty good and was in pretty good shape and the $1 million dollars was not going to be as devastating as it sounds. Percentages of big numbers are big numbers. They can work for you and against you and while I lost $1M in 79 days I gained more than $1M 64 days to hit that all-time high.

I also lost $1M and to be honest it really has added zero stress to my life. Like I mentioned I lost $1M and am back to the same portfolio I had in September. Easy come, easy go. Volatility and fluctuations in the market are normal and the price you pay for the performance. I never in my wildest dreams expected to be hitting the numbers that I have hit the last few years and so taking things down a few notches really doesn’t make me feel like I’m somehow behind schedule, in fact I’m still currently wildly ahead of schedule and have a sum of money that has me in great shape for the rest of my life.

Nothing has changed. I still own all of the same businesses I did 79 days ago and their business prospects have not materially changed. All of the factors outside of their control and my control have changed. Investor sentiment is a very fickle thing that swings wildly out of control in either direction, but at the end of the day it affects absolutely nothing other than the short term prices. Case in point for much of Tesla’s existence and them building up their company to one of the best business models in the world, investor sentiment was very much against their company and their CEO. None of that however affected what the underlying company was doing and the profits that they would be making in the future. Same with my portfolio. I feel very good about the prospects of my individual companies I own and the health of the largest companies that drive my index fund performance and over a 5 or 10 year period I will not even be able to pick out this spot on the chart of where I lost $1M. Just like the great recession does not show up on a long term chart of my nestegg growth.

Also while I am starting to tap into some of my nestegg for early retirement, do not need the vast majority of these funds for many years so the fact that my portfolio is up or down and hit a certain number today doesn’t mean anything to my future prospects unless I let it dictate my emotions and do something stupid and change my course. Just like no single day, month, or year made one iota of difference of where my portfolio is today. This is a long term game and while it’s nice to check in on progress from time to time you need to stay focused on the big picture and just keep doing the same small daily habits that have huge effects on your long term future.

I feel like I’ve made some crazy predictions on this blog and every single one of them have come true much faster than I ever could have imagined. I probably should make some grand prediction about how I can’t wait to have $10M or $100M dollars some day, but to be honest that would not change my life in any meaningful way. It’s funny how important financial metrics/numbers were to me or how important I thought they were, but as I’ve now hit that area of Financial Independence I realize that things like your time and doing things you enjoy with people you love is the only thing that matters. The numbers and metrics give you that freedom and once you have that freedom the additional dollars do not affect your life in any meaningful way. The sooner you can get to that number the greater the compounding affect it has on your life, but once you are there money becomes such a minor part of the equation.

If you are still on your journey to FI, use these short term dips as opportunities. I have no idea when the market will bottom out and neither does anyone else, I very well could be writing about losing $2M, but in the meantime I will continue to enjoy the things in life that matter.

Investment Holdings January 2022

Investment Holdings January 2022

In annual tradition I list all of my investment holdings. These do not change much during the year and I am really not contributing too much to my retirement accounts anymore and I rarely sell. That being said some of my largest holdings have grown quite a bit. Tesla now accounts for nearly 40% of my retirement nestegg which I guess is what it is. It’s not something I would feel comfortable trimming at this point in time.

Early Retirement Congratulations

Early Retirement Congratulations

This morning I got great news that a very close friend of mine just put in his retirement resignation at the ripe age of 42. My friend Berny and I have worked together for many years across multiple companies and Berny was actually the first person to somehow come across my blog many many years ago and find out my secret identity.

He kept it to himself but eventually revealed to me that he knew my secret and had been following my blog. We shared a mutual interest in investing and personal finance and were able to freely bounce ideas off each other, share information, and have friendly competitions with our portfolio size and performance. I can’t tell you how invaluable it is to have someone that shares similar ideas and goals that you can have conversations with about money.

Now 14 years after outing me, Berny has decided showing up to work each day is not the best use of his time anymore. He can make that decision without any affect on his or his family of five’s well being. That is so awesome and so powerful.

How did Berny get to this point in his life? By doing the exact same thing I’ve done. Living below his means, investing his money, and letting time work its magic. What’s crazy or not crazy is we have another close friend that we talk about money with who we also worked with 15 years ago and all 3 of us are financially independent and Berny is the oldest one at 42. I’m 41 and our 3rd friend is in his 30s and all of us have portfolios within 10% of each other. We all invested in different investments, we all saved at different rates, we all lived below our means in different ways, and yet none of us were able to drastically change the outcome of compounding and time.Until the invention of NFTs

Part of the reason I started this blog was to document the simple process of how I became financially independent at a relatively young age and how straightforward and simple that was and for the most part I think I have accomplished that. This would be a tool for my children or close friends to see that yes it can be done and here is how he did it. I think the story of 2 of my closest friends being able to achieve the exact same results over the exact same time frame all with loads of different variables to me gives even more credence to the fact that anyone can do this by following these same simple steps.

I think it also is eye opening for me to look at all of the other people who we worked with some of whom even understood the power of saving and investing and how they for some reason fell off the wagon, whether it was fear during a crash of 08-09 or the decision to spend the money on something else they needed and how many of them will never retire early or have the financial peace of mind that comes from FU money.

As with being successful in anything in life – it’s not so much about making the perfect best timed decision and hitting it big. It’s about making the pretty good decision and making that same same decision every day over many years that you see the absolute mind boggling power of compound improvement. Consistency of doing the same simple boring relatively easy minimal short term impact thing every single day is the secret sauce and to me you will only have the discipline to stick with it if you have a long term goal or vision for your future.

To me that has always been being able to spend as much quality time with my wife and children as possible while they are growing up. Being able to predict my future of being 80 years old and looking back on my life it was so obvious to me that looking back on my life and being given the decision between driving a fancier car or spending summers off with my kids traveling the country/world would be a laughable decision. So it was so easy for me to drive a POS Japanese economy shit box and thank goodness it was unique enough for my friend to recognize it on my blog and out me.

To Berny I am so happy for you and thanks for everything you have done to speed up my financial journey. Now enjoy your time with your family and Go F*ck Yourself! **