On February 7th, I wrote this on my Investments page:
…if the stock market were to grow 25% in 2019 (unlikely!)…
Wow! I sure blew that call! As of 12/29, the S&P 500 is up about 30%. I was wrong, wrong, wrong.
But, perhaps the picture isn’t so simple…
Our Net Worth
Our net worth (investments and primary home) is up almost $350,000 for the year. It started the year at $2,064,440 and sits at $2,407,916 today:
Out of this $350,000, about $50,000 was from our contributions (401(k) and HSA). I’m thankful that I have the ultimate passive income source, a spouse that works. I’m also thankful that my passion for writing (you’re reading it) throws off some money. I could never have predicted that either of these things would have happened when I started my FIRE journey back in 2013.
And while a $350,000 gain may sound impressive, if I had it all in the S&P 500, it would have been $100,000 more. Here is what went right and what went wrong.
Stocks
While I’m mostly an index investor now, I still own individual stocks. 2019 was a pretty great year. Here are all of my non-index, stock holdings greater than $50,000:
Largest return to smallest:
- Facebook ($259,000): 52% return
- Vanguard Tech – VGT ($61,300): 47% return
- Tesla Motors ($73,000): 38% return
- Alphabet ($97,000): 30% return
- S&P 500: 30% return
- Amazon ($120,000): 20% return
- Berkshire Hathaway ($51,300): 11% return
I’m thrilled that the biggest holding in our portfolio also had the biggest return. I don’t feel great having this much money in a sketchy social media company, so I’ll be paring down my share count in 2020, just as I did at the start of 2019.
Real Estate
About half of our portfolio is in real estate and none of those investments came anywhere close to touching 30%. The trailer park came the closest, earning $23,404 (investment was $170,000).
On the other hand, a couple of my syndication deals have gone bad:
- A Praxis deal in San Antonio was underperforming in 2018, but things really went south in 2019 when it didn’t pay out even one quarterly payment. If I would have had that same $50,000 in the S&P, I’d be up $15,000 for the year. Instead, put a goose egg in the Loser Column. Queue the sad trombone.
- Another deal from Watermark recently skipped a payment due to underperformance.
Syndication deals are tricky business. You can look at the numbers in the prospectus all day long, but in my opinion, the subjective measures which are much harder to evaluate, are much more important. Regarding Praxis, I have two other syndication deals in San Antonio that are both outperforming.
In any case, unless I know the syndicator well, I won’t be investing in any more of these deals.
One Battle Doesn’t Win The War
Allow me to talk about Mr. Market a bit more.
One reason that 2019 looks so good is the unintentional cherry-picking of dates. On paper computer screen, 2019 looks great:
But, if we chart Mr. Market from the start of 2018, we see something interesting:
In September of 2018, the S&P 500 hit 2929. As I write this on 12/26, the index is at 3233 for a gain of 10.4% over that 2018 high watermark. I’ll happily take 10.4%, but it’s not nearly as sexy as 30%. Mr. Market took a beating at the end of 2018 and part of what made 2019 look so great was the rebound. Look at that valley mid-chart!:
None of this matters to the patient, long-term investor. Success should be measured over the course of decades. Move along now.
Mr. Market V. Real Estate
It doesn’t make sense to compare stock market returns to real estate. This is because much of the money from the real estate deals will be made at the end when the properties are sold. This is true of most of the syndication deals (they are value-adds), the coworking space, the trailer park, and even our current home. So:
- Stock prices are a reflection of the economy right now. Lately, Mr. Market has been on fire.
- Real estate income is also a reflection of the economy. If the economy is thriving, we can raise rents at the trailer park and people will sign up for the coworking space.
- Real estate also has the promise of a big payout down the road. If Longmont keeps going bonkers, the property we own on Main Street could be worth much more in a decade. Same for our home. And if the United States continues to prosper, the apartment buildings that we own through syndication deals could be worth much more. Same for the trailer park.
2020
We started off the past two years with big deals. In 2018, we bought a trailer park with two other partners. In 2019, we bought into a coworking space, also with two other partners. At this time, we have no big deals planned for 2020. Instead:
I’ll continue to fix up our current home. Renovations are already underway and we plan to be mostly done at this time next year.
Mindy will execute more deals. Mindy has a real estate license and we enjoy working with buyers and sellers. The deals don’t take up much time and the money is good, so we’ll try to ramp up business in 2020.
Continue to index. I don’t have high hopes for Mr. Market in the near future:
- In the United States, we have a presidential election (I’m NOT going near that!).
- We’re still waiting for our gift from North Korea (I hope that Mr. Kim is sending me a new Tesla!).
- Market valuations continue to be exuberant.
We’ll continue to plug money into index funds. Hell, I was dead wrong about 2019. With any luck, the same will hold true for 2020!
You?
What did your 2019 look like? Do you have any grand plans for 2020? Do you care to make a bold prediction for 2020?
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These are amazing times indeed. As we all wait for the inevitable downturn, we keep getting older and richer. Not a bad place to be!
Dave @ Accidental FIRE recently posted…Driving Around In Your Wealth-Draining Mercedes, An Analysis
I like the “richer” part! I don’t like “older” at all!
30% is a crazy year for sure! We are debating on going big on investments this year or trying to pay off our home. I know what the Carl response is, but I’m still leaning towards paying off the house. I think in under two years we could be completely debt free. That sounds pretty fun.
The “Carl response!” Ha!
Nothing wrong with being completely debt free!
Good call on the markets — when they were down in 2018 I just told myself that I was buying stocks on sale, and now that they went up this year I reaped the rewards of those purchases! It’ll happen again and again over the course of my investing life, and I will maintain that attitude throughout. As the great Wisconsinite YouTuber Charlie Behrens says, Keep ‘er movin’.
I wish I had your confidence in home remodeling. I’m starting a shower wall retiling project today and I admit I am super apprehensive. The cement board is crumbling and tiles are falling off (I think whoever built it did some incorrectly, building the wall all the way down to the tub and not resting on the lip). I know that if push comes to shove I just hire someone to finish it, which I would have to do anyway, but it freaks me out none the less. Well, nothing to do but dive in and face my fears! (After having done copious amounts of research…)
BC | FrugalWheels recently posted…What I learned from my mock-tirement
Tub! You can do it! Let me know if you need any advice!
Usually, the cement board overlaps the lip thing, but I never go all the way down to where it would be touching the tub. If you’re really paranoid, you could also put some RedGard on the cement board, althhough this seems like overkill.
Thanks! I just put the cement board up today. Also learned yesterday that the other wall on the corner is also damaged so it’s a bigger job than I thought. I’m taking it in small steps so that is helping. I watched a ton of Youtube videos which helped.
Once I get the walls reconstructed I think I’m going to use waterproof tape and redguard. I also left it just slightly above the bottom of the tub. Well, the nice thing is I don’t mind taking taking sponge baths in the meantime, so I can take my time finishing it.
Thanks for the encouragement! It’s been nice having the time to work on it during the holiday break. Hopefully this will hold until I hit my FIRE number, and then I can do a whole remodel!
BC | FrugalWheels recently posted…What I learned from my mock-tirement
Congratulations for being rich! 🙂
2019 was a good year for our family as well. We were very conservative in our public portfolio investments but still had a high teens return. I can’t believe everything went up, including bonds.
But I’ve foresee challenging times ahead, and as a result, it’s probably best I get my wife to go back to work as well. So far, after 33 months, I’m having no such luck! All Tips welcome!
Sam
“Congratulations for being rich!”
I must say that having money doesn’t’ suck in any way. Life is good! 🙂
And yeah, a working spouse is the ultimate passive income source!
Excellent work!
Thanks!
Sometimes I kick myself for selling each batch of stock from our ESPP each time we could, as it surely would have beat our bucket of indexes over that time. But I guess that’s the rub (or silver lining) of diversification: we miss on the outliers that overperform, but we miss those that underperform, too.
The bathroom looks sharp and I’m glad the renovations are coming along well, friend. All the best in 2020.
Done by Forty recently posted…A Short Visit to the E.R. on Christmas Eve
Wood Boner! Not sure where you found that reclaimed wood but Front Range Timber in Broomfield has great reclaimed wood. https://www.frontrangetimber.com/
For geographical brewery reference, Front Range Timber is pretty much smack dab in the center of Odd 13, 4 Noses, and 12 Degrees.
My prediction for 2020 is more beer! But seriously 5G seems like the next big tech BOOM. Not sure when that gets rolling but seems like it will open the world to endless possibilities and more S&P 500 gains!
Ha, that is some fake reclaimed wood from an endcap at Lowe’s. Super cheap and looks great with a couple coats of polyurethane.
Whoah, looks like I need to visit Odd 13, 4 Noses, err… I mean Front Range Timber… Those are some stellar breweries.
Tech: When the hell is AR coming?!??
Pearl Jam is using AR for promoting their new album.
https://www.stereogum.com/2069647/pearl-jam-tease-gigaton-in-augmented-reality/news/
Also rumor has it PJ are playing Denver on April 6th. See you there.
Whoah, it’s been a while since I’ve seen Pearl Jam! One of the best shows I ever saw was when I got 13th row at Alpine Valley in Wisconsin. I could see the sweat on Eddie’s face.
Want to go in April?
Please tell me it was this show. This PROSHOT video just came out before Christmas.
https://www.youtube.com/watch?time_continue=2&v=TANVLV1eYBE&feature=emb_logo
I’m definitely going. Dates should be announced very soon. We’ll talk tickets then.
Nope. It was in support of Riot Act: June 21, 2003
And I’d love to see the show! I’m game as long as timing works!
And there it is! 4/9 at the Pepsi Center. Unfortunately, I let my fan club membership lapse.
What say you?
I sent you an email.
I didn’t get it, but just sent you one…
we killed it this year too. i just keep taking a little off the table and keeping the asset allocation where i want it when stocks are going crazy. we even turned 1% of invested funds into goods and services last year. i think people forget the point sometimes to enjoy the fruit your money tree bears.
freddy smidlap recently posted…Holiday Foods to Make Your Guests Think You Really Like Them
Yes, 30% Who would have thought after last December. I’m still torn on going all index funds or DGI so I am doing a little bit of both. Happy New Year!
It has been a fantastic year. We’ve realized some incredible numbers at 30+% via index investing. Real estate has done a decent job for us and like you said, comparing to the market is not a 1:1. Currently debating how to keep investing. Have some money on the side but struggling with the idea of investing in an “exorbitant” market. But again who the hell knows if it really is. More than likely we’ll pour some on paper assets and some on a couple of real estate deals if they happen to be good. Happy holidays my friend and hopefully I’ll see you in the next brewing get together at the MMM HQ
2019 was one of my greatest years yet! Yes, amazing financial gains but multitudes of personal gains in experiences, challenges, meeting new amazing people, and leaning hard into my own values.
2020 is the true beginning of the end. It’s my last year of dumping everything into investments, possibly even depriving myself a bit this year for a cushion. That will lead to maxing out retirement accounts in 2021 and then saving up a years worth of cash and then a bright and early 2022 pull the plug date!
It’s finally coming into view!
I moved a bunch of $ in my TSP out of the C fund (following S&P 500) December 2018, then sat smug that i missed that drop…but then didn’t put it back into the C fund. But I balanced that out (some) with a more aggressive dollar-cost-averaging purchases every paycheck (plus the full match) to buy into the C fund. I’ve also held all my taxed accounts continuously (I’m too cheap to pay taxes just on a “maybe”). Should have bought more stock when it was on sale, but the government was shut down and I wasnt sure how long I’d need my e-fund to last me. Hope you guys have a great New Years!
2019 was definitely different for me. I was let go from an IT job, started a business and blog, and started watching my 1 year-old in the morning. 2020 looks to be more of the same. Life is good.
“sketchy social media company” hehe
Ryan Schlomer recently posted…Be a Millionaire by Age 50
That is truly impressive. We weren’t as exposed to equity as we should have, unfortunately. Hindsight is always 20-20. 😉
Sure is! And it’s only one year. Decades are what counts.
It’s funny how many financial blogs/podcasts predict “this is the year the market drops” only to be wrong at the end of the year. Wash, rinse, repeat.
The key, and why I love reading your blog (besides the dinosaurs), is that even after you said that, you didn’t do anything silly or radically different. You continue to invest in a diversified portfolio at an allocation that is comfortable for your risk tolerance. You stuck to your plan. Because eventually the market will drop, but who knows what year that will be.
Thanks for taking the time to publish great content for a bunch of internet strangers.
Oh wow, what a nice comment to end the decade with. Thank you! And please look me up should you come to Longmont so we’re not strangers anymore!
You’re welcome. And thanks for the picture! It made me laugh harder than it should have.
You are killing it for sure! But you might not live to enjoy it if your wife reads this post. Take it from an old hand at marriage, 41 years and counting, NEVER call your working wife’s income PASSIVE or she might get active all over you!! Yikes! Be careful….
What an incredible year it was in the stock market. Best since 2007? Nice to see your portfolio holdings. Facebook is definitely a “sketchy” social media platform, however Instagram (owned by Facebook) is a super solid platform and will last for years to come!
Jay @ dopedollar.com recently posted…Self Employment: 25 Best Business Ideas To Start 2020
Happy New Year Carl!
It has indeed been a good year for the market returns. I’m in all index funds and have a ‘set it & forget it’ mentality, but it has been fun to watch the net worth in Personal Capital click up. I’ll enjoy it while it lasts and ignore it when it drops.
Best wishes to you, Mindy, and the girls for 2020! Hopefully I can catch up with you all sometime this year.
Cheers
Thank you for not getting political with your post.
Thanks for the update. Love reading your blog. Our trailer park has been very good to us as well. Slow and steady gains in northern Canada. We flipped a unit in our park for a hefty profit and dumped the cash into home reno’s. I am typing this to the sound of my husband is drilling shelves, haha.
And thank you for the kind comment!
I LOVE trailer parks. It may turn out to be the best investment in our portfolio…
Have a wonderful and prosperous 2020!
Hi Carl,
Very interesting you kept FB but sold AAPL.
Curious, how much would it be worth now?
From a privacy and douchiness perspective, I could never pull the trigger on FB. I know my bias cost me lot of money…oh well.
Glad you have TSLA, hopefully you added in 2019.
p.s. I am from Appleton, WI. First time commenter, long time reader. Less recently but still a fan.
Hey BZ!
I love Wisconsin! Such a beautiful state. Good cheese and great people!
I’m not a fan of facebook’s policies and am selling it off slowly to avoid capital gains. I agree with your issues with privacy.
Selling AAPL was probably my worst mistake. It’s at least doubled since I sold it and paid a dividend on top of it. When I sold it, I put some of the money into Google and real estate, both of which have lagged Apple. Apple is a helluva company.
I bought $TSLA a long time ago and while I love the company, I fear the high valuation. Almost every car company in the world is working on an electric. Will Tesla be relevant in 10 years? No clue!
In the interest of openness and transparency, here are my facebook and Tesla holdings:
Hi Carl,
Happy TSLA shareholder day 🙂
According to my spreadsheet, my Elon boy crush started around the same time as yours (2012/09/25) and has continued since. Really difficult to not be outrageously optimistic every time those Falcons first stages come back to earth 🙂
Think we are in pretty good hands long term as long as Musk is at the helm.
You seem to have a good knack for companies. I rely on David Gardner’s (MF) services. My life changing home run is NFLX, held that one since 2007 and added during “Qwikster”.
Best of luck for 2020!
“oy crush started around the same time as yours (2012/09/25) and has continued since. Really difficult to not be outrageously optimistic every time those Falcons first stages come back to earth.”
Hell yeah! I’ll never forget the first Falcon Heavy launch when they both came down almost at the same moment. I’m not ashamed to admit that I shed a tear or two watching that.
NFLX since 2007? Holy hell! Big congrates!
My big winner is GOOG at IPO (8/2004).
Happy New Year!
The strong performance in 2019 didn’t stop with North American equity markets. Most international equity markets performed in a similar fashion. Plus, bond yields fell as did credit spreads, creating a supportive environment for bonds. Even the Canadian Dollar did well, starting 2019 at 73.3 and finishing at 77.0 cents.