Reviewing the Start of 2021: Mixed Feelings and Hope

The beginning of 2021 has certainly brought a mix of emotions, ranging from hope to anxiety. As we step into the new year, it’s essential to reflect on our personal lives, financial situations, and the broader economic landscape. This review aims to provide insights into family dynamics, financial progress, and market trends that are shaping our world today.

As we navigate the ongoing challenges brought by the pandemic, it’s crucial to maintain a balanced perspective on our health, finances, and future aspirations. Let’s delve deeper into the various dimensions of January 2021, examining how these elements intertwine and impact our lives.

Family Insights from January 2021

This January has been particularly significant for my family as we continue to adapt to life with young children. My daughter, just 13 months old, is on the brink of walking. While there’s no rush for her to take her first steps, I can’t help but reminisce about the chaos that ensued when my son began to walk. As we prepare for this new phase, it's a reminder that parenting is a journey filled with both challenges and joys.

My son, now nearly four years old, is thriving in his explorations. We're engaging in various activities, including art projects that nurture his creativity. Soccer has also become a favorite pastime; we practice kicking and dribbling at an astroturf field nearby, combining fun with physical activity. Reading is another cherished activity, especially as he starts to recognize words in the new Gerald & Piggie books by Mo Willems.

With the emphasis on homeschooling, I can’t help but wonder how this experience will shape children’s educational outcomes in the long run. There’s potential for them to excel beyond traditional curriculum standards if they receive adequate support at home.

Preschool Potential in a Pandemic

One of the highlights of January was my son’s video interview with two preschool teachers for admission in Fall 2021. It’s a strange reality that even a three-year-old must adapt to virtual interviews. Last year, we faced the disappointment of being waitlisted, which turned out to be a blessing given the current circumstances. This year, we are hopeful for a better outcome.

Given the current trajectory of vaccinations, we anticipate more ease as my son enters school at 4.5 years old. By August, many families in San Francisco and across the U.S. should be vaccinated, alleviating some concerns surrounding potential quarantines.

• Developmental readiness: It's essential for him to learn to interact with peers and follow instructions from adults other than his parents.
• Maintaining a healthy boundary between home learning and school: This has been a challenge, as children often struggle to differentiate between roles.
• Backup options: If he doesn't secure a spot at the preferred preschool, we have an invitation to return to our previous neighborhood preschool, which is a relief.

We await the admission results with bated breath, hoping for a positive outcome this time around.

Financial Samurai Overview for January 2021

On the financial front, the Financial Samurai website continues to operate steadily, with traffic remaining relatively stable. Although this consistency is reassuring, it presents a challenge in gaining substantial growth, especially as my wife and I manage the site part-time.

This month, I undertook the monumental task of reviewing and updating approximately 100 posts, with about 600 more waiting. Balancing updates with new content can feel overwhelming, almost like a full-time job in itself.

Managing inquiries has also become increasingly difficult as my inbox fills up, leading to delays in responses. My focus has shifted; I no longer actively market the site due to energy constraints. However, I welcome any help from readers to spread the word.

For those interested in staying updated, here’s my free newsletter, where I share insights and updates. Additionally, I host a podcast on iTunes that features monthly episodes.

This month, I particularly enjoyed the following posts:

• Two Retirement Philosophies Will Decide Your Safe Withdrawal Rate
• The Best Time To Retire May Be Right Now
• Why There Are So Many Asian Landlords And Small Business Owners

As I look ahead, I dream of re-retiring by 2022, perhaps lounging on a serene beach in Hawaii. Before that can happen, I intend to finish updating the remaining posts and consider hiring a writer to assist with the workload.

Review of the Stock Market in January 2021

As January unfolded, the S&P 500 faced a rocky start. The initial days of the month saw fluctuations that left many investors wary, as indicated by recent charts.

Having published a bullish outlook for stocks and real estate in 2021, I decided to invest in VTI, the Vanguard Total Stock Market ETF, during the first downturn. However, the market's volatility compelled me to reassess my investments.

Despite my hesitations, I ended up purchasing more VTI shares following another sell-off at the end of the month. While I feel positive about investing in tech stocks like Google and Amazon, I remain cautious about expanding my portfolio too aggressively due to the high valuations currently in play.

Reflecting on my choices, I recognize that I would have been wiser to invest in the Russell 2000 index, which has seen impressive gains year-to-date. Additionally, I briefly revisited day trading, but it proved to be a stressful and ultimately unproductive endeavor.

In terms of long-term planning, my wife maximized contributions to our children's 529 plans, while I had previously super-funded both accounts. As our 529 plans grow, I find myself questioning the necessity for further funding.

Currently, I have reached my comfort limit with stocks, allocating around 30% of my net worth to this asset class. However, with the S&P 500 at a high point, I feel a mix of optimism and caution, especially given the speculative investments that have surged recently. Therefore, I plan to increase my cash reserves in anticipation of a potential 5% to 10% market correction.

Tracking my investments through Personal Capital, my portfolio has seen a 7.29% increase year-to-date as of February 8, largely driven by tech stock performance. Although my initial outlook anticipated the tech sector might underperform, thus far, my predictions have been proven incorrect—a relief, nonetheless.

Real Estate Landscape in January 2021

Having purchased a new home last year, I don’t foresee acquiring additional physical properties this year, as I’m already managing three rental properties. However, for those without any rental properties, now may be a prime time to explore the market, especially in major urban areas.

The national real estate market has shown robust strength, with home sale prices rising approximately 15% year-over-year, according to data from Redfin and MLS. This trend suggests that investing in big city real estate could yield strong returns, as these areas have not experienced the same price surges as the national median.

Many tech employees experienced substantial gains in their stock portfolios last year, with increases around 40%. This surge in wealth could lead to a resurgence in demand for urban living, particularly as we look toward a post-pandemic world where many are eager to move out of their parents' homes.

Currently, I feel secure with my real estate exposure, which comprises about 40% of my net worth, slightly higher than my stock allocation. My confidence in real estate’s performance is bolstered by the expectation of a rebound in demand for urban living in the coming years.

In addition to my residential investments, I have also diversified into 14 private real estate syndication projects across the country. As some hospitality ventures navigated through the challenges of 2020, I remain hopeful that their recovery will continue to improve.

This month, I also participated in my first capital call of 20% for a venture debt fund initiated by a business school friend. I have been involved in all three venture debt funds he has established. If there's interest, I can elaborate on the intricacies of venture debt investing in a future post.

Monitoring Key Financial Indicators

As the market continues to show bullish trends, Treasury bonds have experienced sell-offs, pushing the 10-year bond yield to nearly 1.2%. My prediction for the year was an average yield of 1.25%, and we are approaching that figure.

A rising 10-year yield often signifies expectations of economic growth; however, it also implies higher borrowing costs, which can hinder growth prospects. Given the current recovery pace, it’s plausible that the yield could reach 1.5%, a threshold where both the stock and real estate markets may become uneasy.

As a precaution, refinancing your mortgage before rates potentially rise further is wise. I anticipate a rebound in S&P 500 earnings of over 25% in 2021, which could lead to continued increases in interest rates.

• The 15-year fixed-rate mortgage currently offers excellent value.
• The 30-year fixed mortgage is another solid option.
• Mortgage rates have not yet fully aligned with the rise in the 10-year yield, but this alignment is likely to come.

For those considering refinancing, you can find competitive mortgage rates through Credible, where multiple lenders vie for your business, providing no-obligation quotes. Also, consult with your current lender for potential options.

Reflecting on the Fast-Paced Month of January 2021

As we close the chapter on January, it’s clear that the month flew by with numerous reflections and lessons learned. My forecasts for 2021 remain optimistic, anticipating positive trends for both stocks and real estate. However, it’s crucial to brace for potential corrections within the S&P 500 at some point.

As my children grow, I find myself cherishing each moment, despite the occasional temper tantrum that can test my patience. The passing days serve as a reminder to savor these fleeting years.

My top financial focus for the upcoming months is to rebuild my cash reserves, while my personal goal is to prioritize my health and fitness. Every day presents an opportunity to take steps toward these objectives.

How has your start to the year been? What are your aspirations for 2021, and have your views on the stock and real estate markets shifted? Let’s continue to navigate these uncertain times together.

If you seek more in-depth personal finance insights, consider joining over 100,000 others by signing up for the free Financial Samurai newsletter. I have been sharing my personal finance journey since 2009.

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