My main goal was to build an investment and cash portfolio of $1,120,000* in 1500 days**, starting from 1/1/2013 and ending in February of 2017. I made my goal last year and my 1500 Days are over, but in the interest of openness, I’ll continue to share my numbers.
Why I’ve Outperformed the Markets
I’m a geek at heart and have always been obsessed with technology. When I started my first job way back in 1998, I started buying tech stocks. I got burned in the dot-com crash of 2000, but that didn’t phase me.
Today, four stocks make up almost $500,000 worth of my portfolio: Google, Amazon, Facebook and Tesla. I bought Google in 2004 (IPO) and the rest in 2012.
Traditional companies like Walmart or Exxon are easy to understand. The former is a retailer and the latter is an oil company. Easy. No further information required.
Technology companies are often complex and misunderstood. Consider my four holdings:
- Google: You know it as a search engine, but it’s really an advertising company. Google also has the most popular phone operating system in the world (Android), Maps, Gmail, YouTube, a browser (Chrome) and computers with a chrome based operating system (Chromebooks). All of these products help drive ad sales. And if that isn’t confusing enough, Google is also working on autonomous cars and conquering death.
- Amazon: Does anyone shop anywhere else online? No. But Amazon also offers market leading cloud services in Amazon Web Services, The company is expanding into delivery (some of it with drones), and even retail stores (gasp!).
- Facebook: This is a social network on the surface, but similar to Google, an advertising company underneath.
- Tesla: On the surface, Tesla is an auto and energy company. Under the covers, it’s a battery business and software (autonomous driving and battery management) technology are its real assets.
Technology companies are different from others in their potential to disrupt traditional businesses. One needs to look no further than the empty malls all over the United States to see the monster that Amazon has become. Google and Facebook are taking advertising dollars from TV and print. Tesla is disrupting traditional automotive and energy companies simultaneously.
All of this has worked out very well for me. Here are how my picks have performed since I started the blog in 2013:
- Tesla: >1000%
- Facebook: >500%
- Amazon: 301%
- Google: 171%
For comparison, the S&P 500 has returned about 72% with dividend reinvestment.
Why I’m an Index Investor Now
Don’t take this to mean that I support stock picking because I don’t. Technology is volatile and today’s disruptors will be disrupted tomorrow. Nokia? Nortel?? RIM??? I’ve been successful for less than two decades, but I plan on living for at least five more decades. Will anyone know Google or Facebook is in 40 years? Or even 20?
No empire lasts forever. And while it was easy for me to see what these companies had loads of potential, it’s much more difficult to predict when they’ll fall. It will be obvious after it happens, but almost impossible to predict beforehand. The person with the product idea that will bring Facebook or Tesla down has already been born.
And while these four stocks have done well, I’m far less than perfect. I sold my Apple stock right before a huge run-up. Ooops. But remember that Apple too will be disrupted. The technology that will replace phones (Apple’s biggest profit driver) is augmented reality (AR) and you will all experience it before the decade is out. Apple knows this and may lead in AR. But maybe it won’t.
I’m a big believer in index funds now, but I still hold most of my individual stocks. The main reason is that I’d be hit with a big tax bill if I sold. I’ll sell a little off every year and then sell more aggressively when my income is lower and I don’t have to pay capital gains. I feel like I’m playing a dangerous game of chicken with Mr. Market, but life is more interesting with a little drama!
Performance Update: July
July was a great month. Our portfolio started at $1,404,233 and ended at $1,439,455 for a gain of $35,222:
2017 (as of 8/1/2017)
- Days elapsed: 202 (Wait, summer is over already? Damnit!!! )
- 2017 gains: $182,327 (including 401(k) contributions of $44,000 and car purchase of -$45,000)
Since the start (1/1/2013)
- Days elapsed: 1672
- Portfolio gains since 1/1/2013: $853,412
- Needed to quit work ($1,120,000 in investments): Mission accomplished!
- Net worth****: $1,894,455 which includes:
Other Stuff I’m Tracking
Here is what else I track:
In addition to blowing up my gut, the vacations blew our normal spending out of the water. It is painful to write this, but we blew threw $4,657 in July. Add in our mortgage payment of $1,246 and we’re up to:
Oh wow, it’s painful typing that. That’s a horrible number. August will be just as bad, but we’ll be back on track in September as life settles down. Summer months are always the most most expensive for us.
One more Thing about Stocks
And just because I don’t buy individual stocks much anymore doesn’t mean that I don’t think about them. I love studying business. And I’ve realized one important thing recently:
Software is where it’s at.
The companies that create the best software are going to be the leaders. I already mentioned how important software is to Tesla. Google is a behemoth because it hires the best software developers on the planet. SpaceX can land rockets on floating platforms in the middle of the ocean because of software. Amazon is killing shopping malls near you because of software. Need more examples? Here are two more software companies disrupting old businesses:
- Uber (the most valuable non-public company in the world)
Don’t underestimate the importance of software.
*My goal wasn’t to have $1,120,000 at the end of 1500 days, but at any time before the day count was up. Why? It all goes back to the 4% Rule. Remember that our little friend, Mr. 4%, is nothing more than the most conservative safe withdrawal rate. So, if I were to quit my job now, I could spend about $48,000 in my first year of retirement. I’d stick very close to that number too because market valuations are ambitious. Let’s say that Mr. Market caught a cold tomorrow and my portfolio dropped down to $800,000. No big deal. This would mean I’d be safer stretching my spending a little north of 4%.
**My original goal was $1,000,000 and no debt, I later raised the goal by $120,000 to $1,120,000 because I will have debt in the form of a mortgage and I firmly believe in not paying it off. My compromise is to have enough money put away to cover the mortgage at the time of retirement. So, to retire today, I would need about $1,120,000.
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****My 401(k) contributions include my own, Mrs. 15oo’s, and the contributions from my corporation. Self-employment with a solo 401(k) is a very powerful savings tool. I should have done this years ago.
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