2021 Wrap Up: Net Worth and Investments

2021 was another strange year. Both of our incomes were depressed, and there was noticeable inflation is many of the staples we buy. In Germany, many of the activities we would have taken part in were curtailed by pandemic rules. My small side incomes sources shriveled to nothing as projects were cancelled or simply not planned.

Despite these challenges, our net worth rose year over year by 43% in USD and 53% in EUR to $124,045 and €109,697 respectively. In December, that represents a respective monthly rise of 6.65% and 6%. Our liquid net worth stood at $104,269/€91,544.

Investments in 2021

The power of compounding assets that work in the background is amazing and shocking. Yes, we made money this year. Yes, we saved money this year. But this relentless background grind of our assets - primarily in stocks, both taxable and tax-advantaged - overwhelmed whatever other forces were working on our lives.

And this was the case, despite the fact that my portfolio only returned around 20% against the S&P 500's 27%. I underperformed overall when compared to that benchmark, and still I'm surprised by how well it works.

In the period between January 7, 2021 (the date the Brexit transition hit my IB account) and December 31, 2021, our investments made a total of $15,752.53 within the taxable account. That includes $504 of dividends, with the rest being a mixture of realized and unrealized gains.

My primary contribution to this result was having some amount of fortitude to withstand all the fears hurled at us investors in 2021. The biggest gains were in positions that I'd bought in prior years and held. That's not to say that I did nothing.

In general, my decisions to sell were, at least in the short term, correct decisions. My decision to sell Square - now Block - was a good call. I sold Cloudflare, which was early but basically correct, and bought back in, which was not correct. I briefly owned a number of foreign growth stocks, but I realized their valuations were beyond comprehension, and I bailed on them. That turned out to have been a good call, though I held Alibaba too long and lost some money on that.

In May, I made big bets on Facebook - now Meta - and Amazon, which have been basically flat since then. I figured those were at least five year bets, so I'm holding without thinking about them too much. I did not expect my Apple position to continue to grow so well, but I can't complain. I also added a lot to Berkshire Hathaway and bought another share of Alphabet, both of which have paid off.

Late in the year, I took out a €30,000 loan with which to buy stocks. My largest single purchase was AbbVie, which was a terrible immediate-term pick since it declined 10% within 15 minutes, but since then has nearly returned enough on its own to pay for the entire interest cost of the loan. Other smaller picks like Intel and Enbridge have been flat but volatile. Greenbrick Partners is volatile but has given a good return so far. Likewise, small positions like Bank of America, D.H. Horton, and Pulte have all done well.

I entered the cryptocurrency space early in 2021, exited after becoming disillusioned, and then I re-entered just as a correction was starting. It's been an uncomfortable few months as my new purchases get swallowed up, but I view the space as promising enough to buy a little bit every month. However, I might be wrong, but I'm strictly using my personal allowance money (BLOW) to pay for these purchases.

On the last trading day of the year, my portfolio looked like this:

The Vanguard All World Stock Index Fund was my largest single holding since that's the entirety of my U.S. tax-advantaged accounts. The largest positions after that are Apple, Amazon, and Berkshire Hathaway, each larger than 10% of the entire investment pool. Some of that is due to deliberate position sizing, while in the case of Apple, that position simply became dominant despite a much lower cost basis.

Final Thoughts: Finding Yourself as an Investor

I have a friend who got an inheritance windfall in 2015. He basically knew nothing about investing, but he knew that he wanted to buy cheap stocks that had promising futures. Like me, he's an American in Europe, so he had to buy individual securities, and he bought around 40.

His performance has been quite good, having bought a mix of growth and value. Some choices turned out to be under performers, and they've have been cut. But he's been admirably steady in his positions even when they grow very large.

It's taken me years to "find myself" as an investor. I bounced from all sorts of styles, but what seems to work best is to be more like him: buy reasonably priced companies that have good odds of doing well in the future. Get convinced ahead of time that the purchase is a good one. It's ok to have some speculative stuff, as long as you're aware it's speculative stuff. And then for the most part let it ride.

Letting it ride is hard, but I'm getting better at it. Over the past month, the market has been rough, but my tendency to want to sell has been quiet. Likewise, I'm trying to get past the need to find the perfect investment or investment style. If I achieved greater than 10% returns annually over time, that would be an achievement.

I plan on writing more about 2021, especially about our income sand saving. Until then, stay healthy. May your 2022 be full of happiness and good fortune.

Update: May 2021

Our net worth dropped 1.36% in USD and 2.23% in EUR to $100,509 and €82,452 respectively. The major factors leading to this monthly drop were reduced income, higher one-time spending events, and volatility in the stock market. Year over year, our net worth increased just under 60% in USD.

The biggest factor affecting 2021 so far are our reduced incomes. My salary has steadily gone up over time, but because of reduced opportunities for doing extra work, I've not had those big one-off boosts to my income. Due to Covid-19, my wife's profession has been severely affected. I've written about this paradigm since the pandemic began, so I feel like I'm repeating myself, but conditions for us have remained very stabile. No one lost their job, but we are nevertheless reduced.

This has meant that we've been unable to take advantage of the market volatility because we're just having trouble saving anything. It's a tricky moment for us on the savings front.

Closed Lots of Stock Positions

During this last month, I closed a lot of positions. I liquidated my small cryptocurrency holdings, and I sold off a lot of stocks while putting that money back into other companies.

I wrote about my feelings on crypto recently, but the stock sales arose from a sense that I couldn't go to war with these names: I knew that I would have difficulty holding them through a serious drawdown, so I bailed on them now. That, and I wanted more Amazon, Facebook, and Berkshire Hathaway shares. I moved out of low conviction names into higher conviction names.

Selling some of those positions will likely have been a mistake when I have the benefit of hindsight. But increasingly, I'm admitting to myself that I am a stock picker, and that means that I need to believe in the position if I'm going to hold it long term. A bunch of small positions that don't mean much to me are just anxiety fuel, and that was especially true because so many of them looked severely overvalued. Some of the positions I sold will likely outperform the positions I bought, but I believe that my behavior will be better in the positions I bought because I have more faith in them.

My desire is to hold a few high conviction names for the long term. That means that I have to understand what's going on and be comfortable holding them through thick and thin. It also means that I will miss out on some other stocks' meteoric rises, but that will have to be ok. I don't have to take part in absolutely everything to have a good result, and, as I saw during the big March 2020 crash, I can hold on to high conviction positions even during trying times.

But to avoid similar culling in the future, I need to be more careful with the stocks that I buy. The sin here wasn't selling, but instead it was that I purchased some names using a half-brained theory, believing that I was a computer who could dispassionately buy and sell companies that I don't have any emotional investment with based on certain factors. This has been a recurring problem for me, and it's time to forego systems that treat me like a computer.

That said, don't be surprised if some of these stocks re-enter the portfolio. I'm not dead-set against them under all circumstances.

As has been the case for the past few months, you can see those positions under the Portfolio tab.

How's June Lookin'?

June will look a lot like May. Our incomes will basically be the same, and we have to pay our estimated taxes, which will hit our savings. Unfortunately, we won't be able to save much, which is a drag.

We're still waiting on our tax refund as well as the U.S. stimulus payments, but those will arrive whenever they arrive.

Update: March, 2021

In March our liquid net worth dropped 3.38% in USD and .26% in EUR to $91,767 and €77,834 respectively.

There were three major influences on these numbers:

1. The stock market had increased volatility, and it impacted a lot of the names in my portfolio. Growth stocks fell out of favor this month, and I have a bunch of those. The few "value" names that are in there, or names associated with value like Berkshire Hathaway, did pretty well.
2. The dollar strengthened against the euro. A month ago, it took 1.217 dollars to buy a euro, and now it only takes 1.179. That's a pretty quick drop, and you'll notice that despite the lower prices of my US stocks hurting our $ number, our € was basically flat.
3. We had a number of large expenses. In March we pay our estimated taxes, and it was also the month we had to pay for our tax preparation. We're expected two large payments from the German government (tax refund and help for businesses affected by the pandemic), but those haven't landed yet, so I'm not counting them.

A Year Since the Plunge

A lot has changed over the past year, to put it mildly. In March, 2020 we had the largest month over month change since I began writing this blog:

Our net worth dropped since this time in February by 12.16% in USD and 12.48% in EUR to $52,448 and €47,985 respectively.

The reason is obvious. Our stock portfolios fell precipitously as Europe and the United States responded aggressively to the COVID-19 pandemic.

Since then however, our year over year change is up 75% in USD. We certainly didn't save enough over the last year to explain that number; instead the stocks we own just did really well, and we plugged in money whenever we could.

If I can give myself credit for anything it's that I didn't lose my cool and sell everything. I did sell some right as the panic started, to be sure, but it was mostly tinkering around the edges. And that money stayed in the market (except for sales to close out our margin balance). So we got to enjoy the weird ride up over the last year.

There's always some hindsight bias. If I'd known how the market would react, I wouldn't have sold anything, including the margined positions. I would have reduced our emergency fund and would have thrown it and the stimmy payment from the US government into the market as soon as I could.

But I was scared, and it was hard enough to just hold and add a little. Even Warren Buffett sold the airlines, and at the time it seemed like a reasonable decision. I sold my retailers (Simon Property and Foot Locker), and that was - with hindsight bias - a terrible decision, but it looked like we were entering a new paradigm, and assumptions I used in buying those positions weren't strong enough to keep me holding them, so I sold and ate my largest losses ever.

April Forecast

As mentioned earlier, we expect a couple large infusions from the Germans, and someday we'll get those last two American stimulus checks, though I have no expectations for when. As always, the market could have a convulsion in either direction. No matter what though, I'm going to be making my monthly stock purchases today.

2020 Wrap Update

By December 26, 2020, our net worth rose 4.1% in USD and 1.72% in EUR to $87,233 and €71,385 respectively. This caps off a year where our liquid net worth rose by 46% in USD.

December Update

This is almost entirely a story of strong stock market performance. In December, our taxable account rose by 5.5%.

We spent a fair amount of money in December. I purchased a new computer for €1550. We spent a lot on groceries. Since we're in lockdown again, we're spending a lot more time at home, which means we're just eating at home a lot and trying to make that as interesting as possible. I've purchased more novelty meals that I normally would because it's hard not to think, "Eat, drink, and be merry for tomorrow we die".

We also earned a bit extra. I got my December bonus, which is 1/3 of a month of pay. My wife did a new type of work that gave her a big one-time boost. I made some money from my photography hobby.

Regarding the computer, we saved for this. Since last summer, we'd been saving money every month, so with the extra cash this month plus that savings, it became easy to pull the trigger. I also signed up for a US credit card, so hopefully next month, the signup bonus will land.

2020 Wrap

As of December 26, 2019, we were worth $59,577. That means we experienced a $27,656 rise in wealth in 2020. Of that, we deliberately saved about $17,500 for a savings rate of about 28%. Some of that was the big stimulus check, which we, also, received and left in a US savings account. We also took on a large debt (sans interest) for this piano, and so the rest was stock market appreciation.

Our taxable account had a time-weighted return of 30.3%. Our US tax-deferred accounts rose by 16.5%. That compares to the S&P 500's performance of 16.26%.

It has also to be said that we were extraordinarily lucky this year. Yes, we had good stock market performance, and I deserve some credit for not panicking and selling back in March. However, I got to keep my job, and my wife actually managed to expand her customer base and offer her services online in addition to in-person. Had either of us experienced a complete zeroing out of our incomes, things could have gone very differently.

Not everyone was so lucky, which is true even here in Germany where the social safety net is so high. There's a visible increase in people sleeping outside in our neighborhood, and so we're going to start making monthly donations to a local organization that serves the homeless in our neighborhood. There's one here that's doing visible good work and has had to adapt to the challenges of coronavirus.

Lessons of 2020

Here are some takeaways from the year.

Use budgets to estimate reality and not to impose strict personal austerity

I'd been trying to reduce spending in a few areas by artificially tightening the budget there. For example, our groceries item was always estimated to be lower than the reality. This didn't do anybody any good and just made us feel guilty. I'd still like to get our budget lower, but our budget spreadsheet isn't the place to do that.

Just budget for reality and try and do better than that.

Have the Portfolio You Can Hold Before The Crisis Occurs

It's worth asking yourself what, if anything, about your portfolio makes you uncomfortable. Think through a crash that takes your portfolio with it. What position will keep you up at night when the S&P 500 falls 10% in a day? Deal with it now, when the markets are stable because once they crash, you're going to want to panic sell it.

I took some big losses in March, because I had positions that weren't "hold worthy". I was using some margin, and this was an extra stressor when markets began plunging. I sold a bunch of positions to cover it much earlier than I otherwise would have. It wasn't a catastrophic error, but it could have been. I had also overweighted a position that was too risky, and I ignored the signs that it was turning against me. That will probably stand as my largest loss for a long time.

Check In With Used Prices Often

This is my wife's input, and she's right. We should regularly check in with what something costs used so that we experience sticker shock at the new prices. She has found an online second hand clothing service, and she's been ordering things for €5.

Take Walks: You Never Know What You'll Find

This is neighborhood specific, but my wife's walking habit in May and June got us some nice free used items. Nothing was especially luxurious, but you never know what a neighbor would rather be rid of immediately for free if you don't get outside and look around.

At the same time, we also often leave some free things out front for passers-by to take, so it's a virtuous cycle.

2021 Thoughts

It's hard to make estimates for what a year will bring. This time last year, coronavirus wasn't on our radar. I never would have guessed that we'd have bought a new piano or computer. Nor could I have guessed that we wouldn't fly to the US.

I'm going to keep making monthly stock purchases. I'm going to try and get more of these photography jobs as well as look for other avenues of income generation. I assume my wife will continue diversifying her customers. I assume my employer will still exist. I want to fly to the US.

We wish you a healthy and prosperous 2021, and if you experienced any misfortune in 2020, I hope that 2021 will be a happier year for you.

November 2020 Update

In November, our net worth rose 12.04% and 10.91% to $83,765 and €70,155 respectively. This was after two months of greater than 5% declines.

The main reason for this is that the stock market did very well in November. It'd been a rough couple of months leading up to the US election, but November's performance more than made up for that. Some of my individual holdings really just exploded upwards, and some of the weaker positions regained some ground.

The main driver is likely the good news from the various coronavirus vaccines. I wanted Joe Biden to win, but I'm under no illusions about the market rising because of his victory. The virus and the resultant economic pain and disruption are the alpha and omega right now.

This past week was Thanksgiving, which I celebrated only by video chatting with some family in the US. My wife and I didn't prepare a giant meal since we're being good social-distancers, and a couple pizzas were just fine. I remain thankful that we've remained healthy, and that our careers haven't been too negatively impacted. It could have gone differently, but through luck we've gotten through this so far better than many. I'm thankful.

October 2020 Update

Our liquid net worth fell 5.07% and 6.51% to $74,763 and €63,252 respectively in October.

The reason for the fall is entirely because we bought a piano, and they're expensive. We actually ended up getting a better deal than expected, which will save us about 1k EUR, but it meant receiving it now rather than later. To keep myself honest, I've listed it on our balance sheet as a liability since we'll be paying for it over the course of the next year. It's a rent-to-buy: we'll be making payments while simultaneously saving for the lump-sum payment we'll have to make in one year. However, there's no interest accruing, and the price we could have paid all at once was the same as the price for rent-to-buy.

You can see the liability on the chart as a pink mass below the zero line.

Otherwise, stocks performed surprisingly well. We saved some money. I got an automatic raise due to my employment length with the company. It's the kind of raise that helps a little now, but over the course of years it really adds up. My wife is working more hours.

New COVID Lockdown

Yesterday, new coronavirus-related rules went into effect across Germany, which limit certain activities. We're allowed to go outside, and while my wife's profession isn't currently impacted, my company can't earn any revenue for the next month at least. We've been assured that it's not an existential crisis, but of course the mere mention of that idea raises alarm bells.

It's good to have savings in a time like this, though we wish we had even more. I can hear you now, "Then why the hell did you just buy a piano?" And the answer is because it was important for my marriage, which is more important than any one bout of employment. It was clear that this was very important for my wife, and I think my company will most likely survive this.

The alarm bells are nevertheless a good reminder to keep socking away cash.

Net Worth Update: March, 2020

Our net worth dropped since this time in February by 12.16% in USD and 12.48% in EUR to $52,448 and €47,985 respectively.

The reason is obvious. Our stock portfolios fell precipitously as Europe and the United States responded aggressively to the COVID-19 pandemic.

Big Picture

Thankfully, I still have my salaried job, and my employer has stated that we're at no risk of dissolving. My wife's work hours have dried up considerably, but she is still working over Zoom for those clients who can still manage it. My sibling still has a job despite vast layoffs. Both parents have Social Security at least and one has a healthy retirement portfolio.

Most importantly, none of us have caught the virus yet. However, I don't know how long I can expect that. Two family members live in one of the hot-spot cities in the US. One parent is working again and coming into contact with people. I have nagged them to take precautions as far as is reasonable, and I have to trust them to take care of themselves.

As of right now, I feel like I'm in an enviable position, and I consider myself very lucky. But when I see charts like this:

Or this:

I recognize that anything that affects so many people will eventually affect me as well. It's just a matter of time, and I've been mentally preparing as best I can.

Savings Rate and Other Factors

Our savings rate of our mixed pre/post tax income was 46.3%. Easiest way to get your savings rate up is to hold expenses steady when you earn more money, and this month is clear evidence of that.

I received an outsized payment at the end of February due to some extra work I did. My employer also gave me too much money, and that will be taken out of my end-of-March payment. That will obviously hurt April's savings.

We paid estimated taxes in March. Fun fun.

We spent much too much on groceries this month. We didn't stockpile aggressively at all, but we ended up well outside of our budget.

We received a refund for overpayment of health insurance for my wife. Because she's self employed and utilizes the public system (the gesetzliche Krankenkasse), her payments are based on income and fluctuate every year.

April

April is going to be tight. I wish I had a lot more money to throw at the market or our emergency savings, but it's not going to happen unless we get one of these stimulus checks from the IRS in the next few weeks.

Good luck and stay healthy.

Self-Assessment: Early Coronavirus Edition

Now that our situation has settled into our new reality, which I'll call "Semi-Self-Imposed Lockdown," I have some time to think through our position and evaluate what's going well, and what's not going so well.

What we did well leading up to this crisis

• We have an emergency fund. I don't think it's large enough, but I'll get into that with the critiques section.
• We have a stable income. My job is such that I am unlikely to be laid off during this crisis. My wife's work scales up and down, which makes it more vulnerable, but there's no point where she's "fired": work will simply start to come back over time. Because of her stability via my income, she may come out of this with an even stronger position.
• We have liquid investments that could be turned into cash if necessary. I really don't want to turn them into cash, but if it were absolutely necessary, we could probably survive a year off of our current investments.
• We always tended to buy large amounts of shelf-stable food. We still had to go to the grocery store a few times at the start, but we could have eaten our stores of stuff if we felt it wasn't worth the risk.
• We have a large amount of unused credit on American credit cards. If we had to, we could run up a giant credit card bill. It's wouldn't be ideal, but having credit is better than not having it.
• We live in a country with a social safety net and a willingness to help its residents.

Critiques

• Our emergency fund wasn't large enough. Currently, we could last a month to two months with our emergency fund. Despite my employment stability, it's not a 100% guarantee that I come out the other side of this with a job if the German economy collapses for years. Although I'm unlikely to lose my job, I am also unlikely to easily get a new job quickly if I lose this one.
• We don't own our own home outright. Renting has long seemed the wise course of action, but not having to make rent payments would go a long way towards easing my mind.
• We don't have enough over-the-counter drugs. We have aspirin and some anti-histamines, but we have no expectorants, NSAIDS other than aspirin, acetaminophen, not to mention rubbing alcohol. The German Apotheke system is great when you get a prescription, but it makes getting certain normal items more challenging than in the US.
• My investment portfolio is not diversified enough amongst asset classes. I should be holding some bonds, for example, and I'm not.
• I came into this with margin debt. Holding margin debt years into a long-run bull market is dumb. Full stop.
• I underestimated the risk of pandemic to my investment portfolio and to my life.
• We should have larger food stores. They sell giant bags of rice here, and we should probably always have at least one. Likewise lots of pasta. Likewise lots of soy milk (the cartons keep for a long time at room temperature). The risk isn't so much that we'd run out of food due to shortages, but instead it's risky going outside right now to stand in a supermarket line. Minimizing grocery store trips is important right now.

Some Action Steps

First, I need to separate out our savings into clearer buckets. I've been dumping everything into the Tagesgeldkonto (savings account), even though I'd mentally earmarked it for taxes or tax prep costs. One account should be strictly for the emergency money, and it should get steady contributions to it until it reaches the famed 6-months-of-expenses level. It's possible that FATCA will make this more difficult than it should be.

Second, we should be saving money to buy property. That needn't have a specific end date, but it's one of those things that gives us optionality should a compelling offer arise. Somewhere I read that Ramit Sethi saves some money to buy a house/apartment not because he definitely wants to buy one but because having the option is worth it.

Third, I need to go to the Apotheke and pick up some useful over-the-counter drugs. I could also order them online.

Fourth, I should build a 10% position in long-term bonds. I can buy individual bonds in Interactive Brokers no problem. The interest rates are garbage, but they provide stability and rebalancing potential in terrible stock market situations. And at the end, you get your money back.

Fifth, I shouldn't use margin.

Sixth, this blog post is my attempt to come to terms with pandemic risk.

Seventh, honestly it would be irresponsible to try and build up large amounts of food storage right now due to the general run on the grocery stores that's happening. But once the shopping situation improves, we should get on that.

Rethink Risk

Lastly, I need to reevaluate risk. I'm not going to do that by selling stocks right now. That moment has passed. But the way I was using my money was clearly riskier than I appreciated or wanted.

I have to find a new way to judge my risk tolerance and build a portfolio of assets that match it. At the same time, this crisis will subside, and we all have to make sure that we're not just fighting the last war but imagining what new surprises might come our way.

Constant Acceleration of Coronavirus News

In the past few days, it feels like the news is accelerating rapidly and in ways that directly impact us:

• The United States is no longer accepting travelers from the Schengen area of Europe, including Ireland and the UK and my personal expat home of Germany. If I were to find a flight back, according to the consulate in Frankfurt, I would have to self-quarantine in the US for two weeks, though it's unclear how that's enforced. Basically, this renders all vacations into the US impossible.
• Germany has closed its borders with France, Denmark, Austria, and Switzerland.
• Restrictions are going up on businesses, including restaurants, clubs, gyms and shopping centers. Many will be forced closed, while others will only be able to operate in shortened time windows.
• The stock market had its worst one-day crash since the 1987 crash.

And there's so much more happening, such as the restrictions going up in municipalities in the US and other European countries, that I can't list out here. It's too much.
Over the weekend, there was a clear shift in tone about this outbreak. Friends who posted skeptical memes about the virus aren't posting that stuff anymore. I have a colleague who felt safe enough to travel outside the country over the weekend and is now worried about if and when he'll be able to get back. I've been saying no to social engagements in an effort to practice "social distancing," and no one has pushed back. My employer has suspended most in-house work for the time being. My wife's work is drying up. I will continue to be paid my salary, but we are facing a definite reduction in income.

On the upside, I've had more time to contact friends and family in the US. They're less busy, and so am I, so it's been good to reconnect. There's also less temptation to spend money! So I got that going for me, I guess.

I'm continuing to hold my stock positions, but it hurts. Many have been hit much harder than the market as a whole, and I have to remind myself why I purchased them. Focus on the picture 20 years out, and it becomes easier to sit tight.

Otherwise, my wife and I are having to adjust to our new realities of being complete homebodies. And of course, we hope that we don't catch this thing.

Take the Power Back

It's stunning how quickly everything in the world is moving due to coronavirus:

• Like many organizations, my company has suspended some operations to prevent large social gatherings.
• My wife's business has seen cancellations out of fear.
• Stock markets feel like they're properly crashing. Unlike 2018 or 2016, the S&P 500 is well below the 200-week moving average. That alone makes this look like 2008 or 2001.
• Not to mention, there's the giant oil price blowup.

I took steps weeks ago to manage my risk. I sold my lowest conviction positions, and I extinguished all my margin debt. I'm fully invested (not including our emergency fund) and don't plan on making any adjustments to my existing portfolio. I've made my bed, so now it's time to sleep in it. When I get paid, I'll continue purchasing assets and setting aside cash for our cash buffer.

But more importantly, we're having to face the very real real-life possibility that we and/or many people we love will get ill and, possibly, die. I believe it's important to simply be honest about this and begin to adjust to the reality.

I have two parents over 70. I also have two grandmothers. My sibling in the US is in a densely populated city with rising numbers of infected. My company has around 500 employees working in close contact with one another, and some are definitely high risk. My city is one of the largest in Germany, and cases are increasing here.

It's funny going to the supermarkets here and seeing sold out soy milk or pasta or toilet paper. All those purchases were made out of an attempt to prepare, as if hand sanitizer or toilet paper meant you could control the outcome. Yes, yes, wash your hands, and stop touching your face. This has long been a good standard practice, so even after coronavirus, you should keep this up.

But the preparation must be more in your mind and less in your pantry. We must think through what reality might look like in the coming weeks and months for us. Only then can we make rational choices.

You might have some risks that you need to deal with. Some social distancing is wise. Some financial risks carry "blow up" potential, so deal with them as rationally as possible and move on. However, try to avoid waving your hands and justifying poor choices -- such as selling out of all equities after a big drawdown -- out of fear. We are awfully good at justifying poor behavior, so try and resist it.

And this needn't be a dark process. I've been actively reminding myself of what I enjoy. I enjoy reading. I enjoy music. I enjoy playing guitar and taking pictures. I enjoy exercising. I love my wife. I love my family. These are all things I can have more of if I choose to.

Just as you can. Take whatever power you have and use it to love your life.

Net Worth Update: February, 2020

From last month's update:

Our February budget right now is aiming for a 22.6% savings rate, so if the market holds still for a month, we're looking at a net worth change of ~€1000-€2000.

¯\_(ツ)_/¯

Instead, our net worth declined to $59,706/€54,826, which is a decline of 4.3% and 3.07% respectively.

Stocks Plunge

The reason is clear. In the last weeks of February, and especially in the last week, the international stock markets plunged. My portfolio went down right alongside it.

The reason for the drop is typically blamed on the outbreak of the coronavirus. That may have been the catalyst, but it's also true that the markets had been running up in valuation, and there was likely going to be something that triggered a pullback in any case. There's no way to run that alternate experiment though, so nothing is certain.

What is certain, is that I saw that the risk was real at the beginning of the week and began unloading my lowest conviction positions. Something told me that heading into this with margin debt wasn't a great idea, so I trimmed that back, and as of this writing, I'm not using margin at all.

This process has actually been very enlightening, because it's helped me see what gives me confidence in positions during difficult situations. Why are some positions that are in drawdowns fine to hold while others in drawdowns grate on my psyche? It was irritating to sell those positions, to be sure, but the money was lost when I bought them, because I didn't buy them for good reasons. I also sold some things for a profit, and again, these were positions that were my least confident positions. But whether something is in drawdown or at a profit isn't necessarily what gives me confidence.

The past few years has been showing me what it looks like to have confidence in positions. I'm not a professional money manager, so finding confidence to hold individual companies might arise from something different in myself than a professional might have. Something else has to grab me about a position to make it worth the stress of owning it.

Anyway, I think I'll write more about this idea in the future.

Savings Rate

We achieved a savings rate of our mixed pre/post tax income of around 31.5% in February, which was pretty good for us! It is disappointing that the money saved seemed to be fed into the markets with very little return, but that's the way it goes sometimes.

I mentioned last month that my wife wants to buy a piano, so we're saving up the required money over the next year. I couldn't stomach the idea of cutting from our asset-building savings to save up for it, so it's coming from both of our BLOW budgets.

March

Who knows what's going to happen. As I said, I'm out of margin debt as of this writing, partially because I got such a large payment from my company at the end of February. I'm still waiting on more dental stuff refunds, so one day that will come.

But the truth is the markets will determine what happens over the next month. I've put in the money, and now I have to wait just like everyone else. Much as I hate to see past money lose value, my future money would appreciate lower asset prices, so I'm of two minds regarding what I want.

Tja, wir sehen mal.