Investing Insights From an Unusual 2017

Investing can often feel like navigating through a maze—especially in years marked by unexpected events and market fluctuations. Reflecting on the lessons learned from the surreal year of 2017 offers invaluable insights for both seasoned and novice investors. Understanding these experiences can help refine your strategy for better risk-adjusted returns.

Throughout 2017, I took a proactive approach to track my investments using a meticulous spreadsheet. With my cash flow on the rise, it was crucial to ensure that my funds were allocated wisely. The aim was to avoid impulsive spending that could derail my financial goals. This discipline became particularly important after witnessing the aftermath of the housing market crash, which heightened my fear of losing money. The pressure of being a parent added another layer of complexity to my financial decisions, making it essential to strike a balance between saving and investing effectively.

Investment strategies: a snapshot of 2017

In 2017, I mobilized a remarkable total of $2,263,319 across various investment avenues. This was a significant milestone, marking the largest sum I had ever invested in a single year. Of this amount, $750,000 was allocated to conservative investments—primarily bonds, mortgage paydowns, and home improvements—aiming for a gross return of around 4% per annum. The remaining $1,500,000+ was directed toward higher-risk assets with an expected return of 8% to 18%. My overarching goal was a total annual return of 10%, although I would gladly accept anything above 8%.

A key driver of my investment activity was the sale of a rental property in June 2017, generating proceeds of approximately $1,788,000. I made this decision after considering various factors, including declining rental income, high property valuations, rising mortgage rates, and new tax policies that could impact real estate investing. This strategic move allowed me to reduce risk exposure by $476,681 while simultaneously increasing my cash position by $450,000.

Lessons learned from real estate investments

My experience in the real estate market during 2017 reinforced the importance of strategic cash management. I had initially hoped to find a winter property deal but found myself holding onto cash as I evaluated potential acquisitions. While I identified two appealing homes, the sellers were unwilling to entertain my lower offers, leading me to question whether I would even be satisfied with the properties given the maintenance challenges associated with them.

By December, I made the decision to invest an additional $300,000 into real estate crowdfunding, thereby diversifying my holdings across multiple properties. This move was not merely a financial strategy; it was also a response to the high valuations and risks associated with traditional property investments in San Francisco. Through crowdfunding, I gained exposure to a portfolio of over a dozen properties with better net rental yields than a single expensive rental property.

Exploring stock market dynamics

As the year progressed, I became increasingly optimistic about the potential tax reforms being discussed in Congress. In October, I decided to ramp up my stock investments, anticipating a favorable market reaction if the tax plan passed. Corporate earnings were projected to benefit significantly from these changes, reinforcing my belief that my investment strategy was on the right track.

Additionally, I took the opportunity to contribute $70,000 to my son's 529 college savings plan, further diversifying my investments. This decision was strategic, allowing me to superfund the account and maximize contributions while providing flexibility for future educational expenses.

Bonds investing: unexpected gains

One of the pleasant surprises of 2017 was the performance of bonds. The long-bond index fund, TLT, rose by approximately 10%, while my California municipal bond positions increased by around 3.5%, coupled with a gross adjusted yield of about 4.5%. This resulted in a total gross gain of around 8%—a solid return in a market where I had anticipated a mere 4% from safe investments.

As market conditions change, I plan to reevaluate my bond investments. If the 10-year bond yield approaches its 12-month high of 2.6%, I will consider increasing my bond holdings. This strategic timing can enhance my overall investment portfolio.

Reducing mortgage debt: a strategic approach

In 2017, I managed to pay down a total of $921,000 in mortgage debt, primarily through the sale of my rental house. This included $106,646 paid in additional principal throughout the year. The sense of relief from reducing my debt load was profound, despite the low-interest rates I was paying. My goal is to eliminate the mortgage on my vacation property by 2023 while keeping my primary residence mortgage manageable.

Continuing to pay down debt is essential, especially as I aim to invest in my future dream home in Hawaii. Maintaining a balance between debt repayment and investment will allow me to adapt to changing circumstances effectively.

Other investment activities

In addition to traditional investments, I allocated $200,000 to my friend's venture debt fund, expecting a return of 15% to 20%. The fund had already called $96,219 within its first year, with expectations to call the remaining amount by the end of 2018. The performance of this fund is closely monitored, and I anticipate a more conservative return of 10% to 13% based on historical trends.

I also ventured into speculative investments, allocating $50,000 within my stock portfolio. This area yielded unexpected returns and provided valuable lessons on balancing risk and reward.

Main lessons from investing in 2017

Reflecting on 2017, several key lessons emerged that can benefit any investor:

1. Look beyond politics: Emotional responses to political events can cloud judgment. Focus on economic fundamentals instead of letting political views dictate investment decisions.
2. Real estate vs. stocks: Real estate often provides a more straightforward investment experience compared to the complexities of stock market fluctuations.
3. Think in percentages: Breaking down investments into percentages rather than absolute dollar amounts can alleviate anxiety, making it easier to deploy capital.
4. Stick to an investment framework: Maintaining discipline and adhering to a well-defined investment plan is essential for long-term success.
5. Invest with purpose: Always have a clear goal in mind when investing. This focus can guide decisions and reinforce the importance of risk management.

Reflecting on a year of growth

According to my final performance report for 2017, my public investments yielded a return of 15.87%. Given the significant capital exposure relative to my expenditures, I was pleased with these results. My objective is to earn a consistent tailwind of 4% to 6% annually while building my lifestyle business, a target I have consistently outperformed since my transition away from traditional employment.

As I continue to navigate this financial landscape, the birth of my son has transformed my approach to investing. With a longer investment horizon in mind, I’ve found greater peace with my risk tolerance. Investing for his future has become a motivating factor, encouraging me to seize opportunities while preparing for the inevitable market fluctuations ahead.

Diversifying investments in private growth companies

As a final thought, consider diversifying your portfolio by investing in private growth companies through venture capital funds. The landscape of investment is evolving, with companies remaining private for longer periods, meaning that early investors can reap significant benefits. For those seeking promising opportunities, the Innovation Fund focuses on sectors such as:

• Artificial Intelligence & Machine Learning
• Modern Data Infrastructure
• Development Operations (DevOps)
• Financial Technology (FinTech)
• Real Estate & Property Technology (PropTech)

With an investment minimum set at just $10, this fund presents an accessible option compared to traditional venture capital, which often requires a much higher investment. Given the potential trajectory of these sectors, investing in private growth could be a game-changer for your portfolio.

Si quieres conocer otros artículos parecidos a Investing Insights From an Unusual 2017 puedes visitar la categoría Investing & Crypto.