FS Year in Review 2021 Investments, Family and Writing Insights

As the year draws to a close, it's natural to reflect on the past months and assess our achievements, challenges, and growth. For many, this exercise isn't just about tracking success; it's an opportunity to evaluate life priorities. In this article, we will explore key insights from 2021, focusing on investments, family moments, and the art of writing, all of which play crucial roles in shaping our lives.

Each of these categories offers unique lessons and reflections that can guide us in the year ahead. Let's delve into these themes and uncover the insights that 2021 has provided us.

Investment Performance Overview

Despite the myriad challenges presented by the ongoing pandemic, 2021 proved to be a remarkable year for investment growth. My mixed portfolio, composed of both stocks and bonds with an approximate allocation of 85% in stocks and 15% in bonds, experienced a notable increase of 24.58%. Although this fell short of the S&P 500's performance by 2%, it still exceeded the returns of a traditional 60/40 portfolio by an impressive 11.8%.

The stock market in 2021 witnessed exceptional returns, largely driven by economic recovery and robust corporate earnings. My stock portfolio had already shown a significant 40% increase in 2020, outperforming the S&P 500 by over 25%. This consistency in performance underscores the importance of a well-thought-out investment strategy.

Managing 14 investment portfolios can be complex. These include:

• Multiple taxable accounts
• Tax-advantaged accounts like Solo 401(k), SEP IRA, and Rollover IRA
• Two 529 college savings plans for my children
• Custodial investment accounts for my kids

The balances of these portfolios vary widely, from $15,000 to $2.75 million. This diversity requires careful tracking, which is why I rely on Personal Capital to streamline management.

Setting Investment Goals

Since my retirement in 2012, I've established a minimum investment return target of three times the risk-free rate, with an ideal target of 10%. With a current 10-year bond yield of approximately 1.5%, my minimum return target stands at around 4.5%. Fortunately, the ongoing bull market has allowed my investment returns to exceed these expectations.

As my investment balances have grown, I’ve become increasingly aware of how fluctuations in the market can evoke anxiety. For instance, a $1 million loss on a $5 million portfolio can feel significantly more daunting than a $100,000 loss on a $500,000 portfolio.

To mitigate such fears, consider these strategies:

• Adopt an appropriate asset allocation strategy
• Maintain discipline in your investment approach
• Minimize investment fees wherever possible

Market timing often proves ineffective in the long term. Despite my attempts to time the market in the past, I find that maintaining a steady course yields the best results.

Real Estate Investments in 2021

Real estate has continued to thrive, with the median home price rising approximately 18% year-over-year. If you purchased property a year ago with a 20% down payment, your cash-on-cash return could be as high as 90%. This is especially impressive, even after accounting for insurance, maintenance, and other costs.

For instance, the Case-Shiller 20-City Composite Home Price Index reflects a dynamic market, with prices steadily increasing since mid-2020. However, my personal real estate portfolio, predominantly located in San Francisco, faced scrutiny due to claims of a mass exodus from the city. Despite these narratives, the data shows that single-family home prices in San Francisco increased by around 22% from January to November 2021, with condos seeing a rise of roughly 21%.

My decision to purchase a home during the pandemic turned out to be fortuitous. After researching buying strategies, I successfully closed on a property in mid-2020, which has since served as a sanctuary for my family during these challenging times. The ability to enjoy our investment is a primary reason I value real estate.

Diving into Real Estate Crowdfunding

After a tumultuous 2020, the real estate crowdfunding market rebounded in 2021, yielding distributions to investors. In fact, I received a distribution of $46,106.09 from one of my primary funds, culminating in total distributions of $53,545.69 for the year. This is a strong return, considering the capital invested was about $400,000.

The passive nature of real estate crowdfunding is appealing, especially as I diversify away from more expensive areas like San Francisco and Lake Tahoe. As demographic trends shift towards more affordable regions, this investment strategy seems prudent.

When engaging in private real estate deals, understanding the capital stack and your position within it is crucial. Investing in diversified funds, such as those offered by Fundrise, provides a balanced approach to real estate exposure.

Exploring Alternative Investments

My investment strategy also includes approximately 10% allocation in alternative assets, including venture debt, venture capital, and cryptocurrencies. These speculative investments have historically led to significant returns, though they inherently carry higher risks.

One of my most speculative investments in 2021 was in HUT, an Ethereum mining company. Despite the volatility, my early investment yielded a substantial return before fluctuating significantly. Additionally, my venture debt funds have proven to be more stable, with mid-teen returns that consistently provide passive income.

For those considering similar investments, here are some insights:

• Consider diversifying across multiple funds
• Evaluate the fund manager's experience and network
• Be prepared for potential capital calls in venture capital funds

By allocating capital carefully in these areas, you can create a balanced investment portfolio that mitigates risks while capitalizing on growth opportunities.

Reflections on Family Life

Family remains my greatest priority. Throughout the pandemic, my connection with my wife and children deepened. We explored parks, beaches, and museums together, creating cherished memories that reinforced our family bond.

In 2021, we also faced the challenge of securing a spot for our son in preschool after many months of homeschooling. His excitement during the first week of school was a proud moment for me, signaling a successful transition into a new environment.

School Transition and Family Milestones

As our son adjusted to preschool, we looked ahead to the future for our daughter, who will begin her educational journey in 2023. The preschool admissions process in San Francisco can be daunting, but we remain hopeful as we apply for programs that fit our family's needs.

Additionally, this year allowed me to reconnect with my parents after nearly two years apart. Despite a brief illness following my booster shot, I seized the opportunity to visit them and address various needs around their home, fostering a sense of security for my family.

Writing Journey in 2021

In 2021, I dedicated significant time to writing, producing over 310,000 words across more than 160 posts. This output reflects my commitment to sharing valuable insights and experiences with readers, particularly during a time when many sought guidance on navigating financial uncertainty.

Although my writing volume increased, I found myself stretched thin, balancing entrepreneurship and family life. The correlation between effort and reward is evident, as my increased focus on writing has led to higher online income, which I reinvested into my financial goals.

One of my proudest achievements was completing a 110,000-word book with Portfolio / Penguin Random House. The writing process was rigorous, yet rewarding, enhancing my appreciation for the craft. It serves as a reminder that producing quality work often requires immense dedication.

Annual Assessment: Grade for 2021

Reflecting on the year, I would assign myself a grade of B+. Despite numerous challenges, I navigated the complexities of fatherhood, finances, and writing, albeit with stress that occasionally impacted my well-being. Stress management and work-life balance are crucial moving forward, and I aim to ease my workload in 2022.

For those contemplating their own year-end reviews, consider these aspects:

• Evaluate achievements and areas for improvement
• Reflect on family dynamics and personal growth
• Set clear goals for the upcoming year

These reflections can serve as a guide for crafting a more fulfilling year ahead.

Recommendations for Financial Growth

If you're looking to enhance your investment strategy, I highly recommend exploring Personal Capital. This free tool allows you to track investments, analyze asset allocation, and identify hidden fees, providing valuable insights into your financial health.

Additionally, consider picking up a copy of Buy This, Not That, an instant Wall Street Journal bestseller that provides actionable investment strategies for a more prosperous life. Through informed decisions, you can pave the way to financial freedom.

Lastly, stay informed and connected by signing up for the Financial Samurai newsletter and receiving posts directly via email. Join a community of over 55,000 individuals eager to navigate their financial journeys effectively.

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