2025 Update: Portfolio, Job Change, Outlook

In 2025, our net worth rose by 25.92% to $245,127 in USD and 11.56% in EUR to €208,619.

2025 was an enormous year for us. Our wealth has settled above $200,000, and I’ve changed employers after years of feeling economically underappreciated. In this year of contrasts, I earned some of my best money while also taking a substantial pay cut for the hope of a brighter future.

Net Worth Change

2025 generated significant returns in the markets for us, as it did for nearly anyone who held financial assets. We were net savers this year, yes, but it was the markets that did the heavy lifting.

Last year I wrote:

May we call a spade a spade? US large caps are in a bubble. Investors in US large caps are ignoring major risks to valuations. Even ignoring those risks, the overvaluation becomes undeniable when I look objectively at the outrageous outperformance of the S&P 500, the Nasdaq 100, and the hyper-focused growth and technology funds.

Adding to this discomfort is the knowledge that it's impossible to time the bubble's bursting. Any actions taken now will likely languish in relative underperformance while the market valuation churns upwards.

My action plan was:

I've decided to sell Apple and am debating Lowe's.

...within the Wiseguy Portfolio, I've reduced exposure to large-cap growth and raised small-cap value. I may increase exposure to bonds and gold, but I haven't decided yet.

I did all of the things I said I would definitely do and none of the things I thought I might do. How’d that work?

Individual Stocks

Selling Apple was, at least in the short term, the right call. Apple had trouble near the start of 2025 and ultimately underperformed despite having an up year. The largest purchase I made with the proceeds was AVDV (Avantis ex-US Small Cap Value ETF), which went on to have an incredible year. I also purchased a little more SGOL (Aberdeen Physical Gold Shares ETF), which, as part of the broader gold story, also had a great year.

My individual stock holdings did very well in the first quarter of the year (led by Berkshire Hathaway), only to trade range-bound until the end of the year, leading to a 11.82% return. I underestimated the effect of tariffs on companies like Green Brick Partners, Dutch Bros, and Lowe’s, and the announcement of Warren Buffett’s retirement led to trendless price action from Berkshire.

The Wiseguy Portfolio

Indeed, the Wiseguy Portfolio outperformed the S&P 500 24.13% to 17.82% (with dividends reinvested). The reduced growth-stocks version of it I adopted at the beginning of 2025 did even slightly better than that at 24.69%, but I’m not certain the juice was worth the squeeze. However, my actual performance was 23.22%, which is more than acceptable.

A reminder. The Wiseguy Portfolio, as originally conceived, is:

• 25% Large Cap Growth Stocks
• 50% Small Cap Value Stocks (divided equally between US and ex-US)
• 20% Long Term Bonds
• 5% Gold

An updated version, called Wiseguy 2.0, is:

• 25% Large Cap Growth
• 50% Small Cap Value
• 10% REITs (US and ex-US)
• 10% Long Term Bonds
• 5% Gold

The Wiseguy Portfolio outperformed because of gold (SGOL was up 63.99%) and ex-US small-cap value (AVDV’s return was 49.37%). Both assets had an incredible year, and we may have entered a period of alternative asset outperformance for which portfolios like the Wiseguy were built.

U.S. small-cap value remains a lagging factor. I won’t pretend to know why, but I hope that one day, the small value factor will once again shine in the U.S. as it has abroad.

That said, although I’m happy Wiseguy outperformed this year, my expectation is not that it will always outperform. The point of the portfolio is to increase the likelihood that I’m exposed to winning assets/factors in any given year, to reduce risk, and to reduce the possibility of prolonged negative performance or “lost decades” while also, more or less, achieving a market return.

Job Change

In 2019, I wrote “Out of Levers at My Current Job” where I expressed concern that there wasn’t anything else in my job I could do to meaningfully move the needle professionally. I felt frustrated that there was almost no amount of extra effort I could put in to improve our economic situation. I had reached the top at that job, and the only future improvements I could see would come from seniority raises, unionized negotiations, and side gigs, which were limited due to the time constraints of my job.

When the pandemic hit, I began looking in a different direction, and although it took years of effort, it paid off in 2024. I wrote at the end of last year:

I'm deliberately vague here about what I do for a living, but in 2024, I took some steps that have already had meaningful results for my life. Whether or not they translate to extra money is uncertain, but I do feel like I've been overly cautious career-wise for too long, and 2024 was the proof.

At the beginning of 2025, negotiations were still ongoing, but I landed the new job in January. This is one reason I haven’t been writing: my life has been consumed with change this year, and it’s been hard to find the mental space to write. Indeed, as I began to write this review, I was suddenly engaged in some extra work that devoured my attention.

The irony of my new life is this: I’ve taken a pay cut. My life is higher risk right now, but for the time being, it’s not higher reward. It might become so one day, but for now we’re having to buy groceries a little more carefully and be more judicious with our extravagance, which was never that extravagant.

At the very least, I am more satisfied with my work, which gives me a greater sense of purpose.

2026 Anticipations and Fears

Last year, I ended my yearly update with:

I am currently pessimistic about the direction of the world. This shift right-ward both in the US and in Europe threatens stability. Much of what we value about the world exists due to international order and the rule of law. The safety of shipping, the low barriers to trade, and the patchwork of friendly nations working together to solve problems has been imperfect but prosperity making. This new order threatens all of that while offering very little in return.

The events of the last year have reinforced those fears. Throughout 2025, President Trump threatened and bullied other countries with tariffs and trade policy and threat of takeover. He bombed Iran in June and Nigeria on Christmas Day. On January 2, 2026, he attacked Venezuela and kidnapped Nicolás Maduro, which was followed by threats to other countries, including Greenland/Denmark. Moreover, there has been rampant corruption in the White House.

In 2026, I am afraid of war, both an American civil war as well as war between the US and other countries, especially its allies. The ongoing threat to Taiwan from China remains, and the possibility of greater escalation in Ukraine also exists.

Truthfully, I don’t know what a portfolio can do to protect against this. I have no idea how Germany will react if the U.S. truly becomes hostile to Europe or invades Greenland. I don’t know if the U.S. will become even more hostile towards its citizens living abroad. Within the Wiseguy Portfolio, I have been adding foreign large-cap stocks to the large-cap growth allocation, and I’ve added world bonds to the bond allocation.

Let’s get real, though: if the United States truly turns into a rogue state, all bets are off. I called my portfolio the Wiseguy Portfolio because I was trying to control the uncontrollable. I wanted to always have something working within the portfolio, and I wanted it to be ready for nearly all situations. However, a complete breakdown of the world order is beyond any portfolio. Financial assets are merely a series of contracts, and contracts require a functioning legal order. The current president threatens that legal order. Godspeed to the protesters.

All of that hangs over what is otherwise a bright time in my life. It is difficult to know how to feel as I celebrate personal successes, even as there is increasing chaos in the background threatening to force its way to the foreground.

On that depressing note, I nevertheless wish you a healthy and happy 2026. Look for the value of things politics can’t touch.

2024 Year-End Review, Net Worth, Career, Large-Cap Bubble

2024 was complicated for everyone, I think. Although we got richer overall, it's hard not to look at last year's developments and worry about the future. I'm worried about what comes next. First, the good news.

Net Worth

Our net worth grew in 2024 by 14.59% in USD and 21.53% in EUR to $194,321 and €186,667, respectively.

Volatility and Expenses

This annual result masks some volatility. Like most investors, we saw the market jump after the Trump victory, only to watch as most of those gains were lost. In some positions, we lost much more than just the election jump. For example, Greenbrick Partners suffered heavily in the latter half of the year.

We also had some large expenses that ate into our returns. Most substantially, we have lingering tax issues from 2022, which inflated our 2024 estimated tax payments. I hope we'll be refunded much of that money in 2025, but as it stands, it's a loan we've been forced to fork over to the Finanzamt.

Careers

Both my wife and I continued to push our careers forward. I'm deliberately vague here about what I do for a living, but in 2024, I took some steps that have already had meaningful results for my life. Whether or not they translate to extra money is uncertain, but I do feel like I've been overly cautious career-wise for too long, and 2024 was the proof.

My wife's small business continues to grow. She has sharpened her preferred customers, raised prices, and increased her income. Although she doesn't think so, she's very brave and keeps impressing me.

Now let's look at the negatives.

US Stock Bubble

May we call a spade a spade? US large caps are in a bubble. Investors in US large caps are ignoring major risks to valuations. Even ignoring those risks, the overvaluation becomes undeniable when I look objectively at the outrageous outperformance of the S&P 500, the Nasdaq 100, and the hyper-focused growth and technology funds.

Adding to this discomfort is the knowledge that it's impossible to time the bubble's bursting. Any actions taken now will likely languish in relative underperformance while the market valuation churns upwards.

There are some acute risks that the market appears to be wholly discounting:

1. The risk of the US debt ceiling not being raised by the Republican-controlled Congress. The idea that US bonds are the safest asset in the world is at serious risk of being disrupted because the Republican party regularly threatens to not raise the debt ceiling.
2. Donald Trump's proposed tariffs on all imports may trigger inflation while provoking reciprocal trade wars.
3. Cuts to federal spending may reduce growth.
4. Bird flu transmission between humans. The first death from this latest strain was announced on January 6, 2025.
5. Geopolitical risk, especially the invasion of Taiwan by China. So much of the value of US growth is based on products manufactured in a country at major risk of invasion. For an example of geopolitical risk biting a country in the rear look no further than Germany. Allies warned Germany about tying its energy needs so tightly to Russia. As Germany built gas pipelines and shuttered its nuclear power plants, it was clearly ignoring a major source of risk, especially since its economy is so dependent on cheap energy. As we know now, that risk was very real, and Germany is now paying dearly for having hidden its head in the sand.
6. The risks associated with the US no longer being a "rule of law" country. The country elected a felon for president, for God's sake. This felon has promised to pardon the people who tried to overthrow the last presidential election. He is suing newspapers for coverage he finds offensive.

Beyond those acute risks, many stocks with the heaviest weighting in the S&P 500 are dangerously overvalued. Here are some charts from FAST Graphs showing the reasonable valuation line in orange based on earnings growth, their normal valuation line in blue, vs. a chart of weekly closing prices in black:

The SPY ETF:

Apple Inc:

Microsoft:

Nvidia:

Oracle:

Walmart:

Eli Lilly:

Broadcom:

Tesla:

My Portfolio

Several names in my portfolio are overvalued. Lowe's, Apple, Dutch Bros, and Berkshire Hathaway appear overvalued relative to their P/E ratios and growth prospects. I'm exempting Berkshire from this because evaluating book value is a better metric. But what do I do with the others? I intend on holding Dutch Bros because I always intended it to be a never-sell position. It's a tiny position, and I bought it on its first trading day like an idiot. So I'm holding.

Lowe's and Apple are harder. Both are excellent companies. Both are stupidly overvalued. I've decided to sell Apple and am debating Lowe's.

I've struggled with this next decision, but within the Wiseguy Portfolio, I've reduced exposure to large-cap growth and raised small-cap value. I may increase exposure to bonds and gold, but I haven't decided yet. Recessions hit small-cap earnings, too; regardless of their valuation, they will feel pain.

Vanguard Brokerage

After over a decade of using Vanguard as a mutual fund platform, I've finally switched over to their brokerage platform. They emailed me saying that they were forcing the change, which made the decision an easy one.

My foreign address was a hindrance before, but I've changed to an American address to switch. I hope this doesn't bite me in the butt, but I don't know what else to do. Vanguard has tolerated my foreign address for years, and I hope they remain tolerant of me for the foreseeable future.

As for the brokerage itself, it's not nearly as full-featured as Interactive Brokers or Robinhood. It's obviously designed for people who don't want to trade every day, which is fine for me, but I'm still struck by some information being difficult to find. Their app doesn't display the average price paid per share of a given security. That's weird. In the app, trade confirmations don't say how many shares I've purchased if I buy using a dollar amount. It's also annoying that purchasing in dollar amounts is limited to Vanguard securities only. It's a strange bit of self-serving, but it's not the end of the world.

2025 Forecast

I am currently pessimistic about the direction of the world. This shift right-ward both in the US and in Europe threatens stability. Much of what we value about the world exists due to international order and the rule of law. The safety of shipping, the low barriers to trade, and the patchwork of friendly nations working together to solve problems has been imperfect but prosperity making. This new order threatens all of that while offering very little in return.

I don't know what 2025 will bring. In less than a month, Germany will have its own elections, which also threaten to make the lives of immigrants worse. When it impacts us directly is impossible to say.

Until next time, take care of yourselves and your loved ones. Stay healthy. Keep saving.

First Quarter Update 2024

We had an excellent first quarter of 2024. Our net worth rose 8.42%/%10.82 quarter over quarter to $182,025/€168,542.

After I'd tallied everything, it hit me that we might cross the $200,000 mark sometime this year. It wouldn't even take outstanding performance. Even if our wealth compounds at 7% over the next two years, we'd pass that threshold sometime in 2025. Naturally, it's best to not become attached to any rate of return, but I'm trying to steel myself for the fact that growth might come more quickly than I'd anticipated.

Naturally, the primary mechanism of this is stock market growth. I've been saving every month, but the market has been easily outpacing my contributions. It's also been outpacing my spending (I went to the United States and bought a new iPhone this quarter). However, the reverse could just as easily be the case. So far in April, our portfolios have plunged more than our current year contributions. That kind of volatility is to be expected, but it's still bracing to see. Our contributions are gentle rows in a canoe that's already flowing through the water, but the current can still take us in unexpected directions.

Pension Valuation

We crossed the $100,000 mark sometime in late 2020, and I didn't recognize it at the time. I hadn't begun adding my German pension to the calculation, so life continued as normal. Frankly, I could probably goose the current numbers to equal greater than $200k now; all I'd have to do is value my pension as the equivalent of my contributions. But without a good reason to do so, I won't do that. When considering a pension rationally, the value of it can only equal or be greater than the value of contributions when viewed in hindsight.

One new emergent factor in my pension calculation is the reduction in life expectancy in the United States. Being American, I use the Social Security actuarial tables, and I have discovered that life expectancy has dropped by several years. I suspect this has to do with COVID-19, but regardless of the reason, with a potentially shortened lifespan, the valuation decreases.

Second Quarter Forecast

This has already been and will continue to be an expensive quarter.

The stock market thus far has been harsh to all factors. The one bright spot has been my small gold ETF position, but this is a mild retardant to the drawdown. Ex-US has also been relatively stable. However, this drawdown has already been nearly as severe as the cost of any of the spending I'm about to mention. If the drawdown continues, it will easily be greater than whatever spending we embark on.

My wife and I have decided it's time to do some remodeling and lifestyle upgrading, and we're spending on new bits of furniture and other household accouterments. It's nothing extravagant, but it's a cost. We will likely re-enter the world of TV ownership sometime in the next few months, for example. Ikea has also been padding its cash flow statements with our money.

We also plan to visit the US briefly this summer. My wife has an ill sibling, and we're taking some time to visit them. We also recently helped financially support this sibling's adult child, who had a cash crunch. Although they offered to reimburse us, I agree with Dave Ramsey that loaning money to family members is a way to hurt that relationship, so we gifted the money instead.

We also owe taxes from 2022. We don't know when the Finanzamt will hit us with the bill we know is due, but it's coming any day now.

Despite all that, we're doing well. Until next time. Stay happy and healthy.

2023 First Half Update

2023 Second Quarter Update:

The first quarter was full of re-evaluations of financial goals and strategies and was full of fear over impending disaster in my family. Back then, we had to make difficult decisions and have difficult conversations.

The second quarter of 2023 was much milder.

New All-Time High

After a year and a half of being in a net worth drawdown, we emerged at the end of June at a new all-time high. We're just shy of $150,000 at $149,097/€136,162. That's a quarter-over-quarter rise of 10.05%/9.05%.

The 2022 bear market, although not extreme by historical standards, was the worst extended drawdown we've had to live with during our married lives. Despite some losses, there were no disasters in our portfolios, and the stress lead to some necessary reappraisals of how best to allocate savings. I'm grateful for the lesson and happy to allocate most money to an ETF/mutual fund asset mix. While my stock picking has done well this year, I feel safer knowing that all of our eggs aren't in that basket.

The drawdown was exasperated by the drawdown of our incomes. My wife has a lull in her business as she changed strategies, and my extra income opportunities at work dried up. As the market corrected, we were unable to add money in any kind of aggressive way. However, both of those states have started to change: I've found new sources for additional work, and my wife's new business strategy is starting to pay off. It's exciting.

Family Disaster Averted

After much Sturm und Drang back in January and February, it appears that PoorParent will stay put. Staying put means staying in an uncomfortable but stable situation with a family member who has health problems.

It's clear that PoorParent isn't thrilled with this, but they also don't appear to be angry at me and Sib.

Honestly, Sib did most of the heavy lifting. I helped Sib define their own boundaries and see how they weren't respecting their own limits and desires. This lack of self-respect led to Sib not respecting my limits. But once Sib understood this, they had the uncomfortable conversation with PoorParent. Thus far, admittedly, I haven't spoken to PoorParent about my worries. They haven't brought it up, and I won't either.

Portfolio Performance

My individual stock portfolio returned 19.91% in the first half. This was mostly led by Greenbrick Partners and Apple Inc. Greenbrick is now a 1 bagger. It's had astounding performance. But so has Apple! Frankly, if there's any greatest mistake I've made while investing, it's selling even one share of Apple, and unfortunately, I've sold many more than one.

The laggard was Abbvie, which is facing increasing competition from Humira biosimilars. I may add more to the position if its price nears my purchase price.

The Wiseguy Portfolio as I've implemented it is hard to measure. Because it's across three different accounts and uses Vanguard "Admiral" funds in addition to ETFs, it means that getting close to the target weights is currently very tricky. Additionally, the iteration of the portfolio I call Wiseguy 2.0, which includes REITs, didn't take place until a few months ago.

An idealized version of the portfolio returned 12.07% in the first half of 2023. That underperformed the S&P 500, which returned 16.81%.

Second Half Financial Goals

As of yesterday, I have maxed out our 2023 IRA contributions. I put the final $2,000 into the US REITs portion because I refuse to hold a REITs ETF in my taxable accounts. Currently, I'm overweight REITs and US large-cap growth and through the rest of the year, I'll be adding to gold and the small cap value buckets in my taxable account.

We're also rebuilding our emergency fund. If we aim for 6 months of spending, then we need around €16,000, which we're not close to. I'm not planning on pulling a Ramsey and devoting every euro to that goal, however, and I will simply be adding monthly sums to it in addition to other saving. That kind of single-minded focus doesn't make sense when I have plenty of assets, and the risk to my livelihood is so low in comparison to the American "at will" employment reality.

That said, having extra cash would be reassuring.

We've also begun a small down payment fund. We're not devoting large sums to it yet, but it's frustrating not having anything saved for a better living situation.

My wife suggested a dog fund. We both want a dog someday, but we're concerned about the cost, so we've begun saving for it.

Wrap Up

I don't see any disasters on the horizon. The stock markets could always take a dive, which would be both a bummer and an opportunity. No matter what, we'll keep saving as best we can without running afoul of our dual tax situation. Until next time, stay healthy and keep saving. It adds up over time!

Asset Allocation Conundrum

When I decided to focus on a diversified ETF strategy, I hoped asset allocation questions were settled science.

Nope. Not even close.

Accepting Lower Returns

One aspect of this that's a hard pill to swallow is that it will likely force me to accept lower returns. When I buy an individual stock, my hope is that it will appreciate by 15% a year for the foreseeable future. Naturally, volatility won't make that a smooth ride, but generally 15% is the goal.

Expecting a 15% CAGR when you're allocating to a basket of assets is foolish. After backtesting various portfolio types, it's probably wise to expect a 4-9% CAGR. Some years will be better, but due to overvaluation and volatility, sometimes there's no escaping bad returns. There might be an extended period of 0 return.

If I can get 15% on a stock but only 4-9% on ETFs, then why get the ETFs? Well, it's because the stocks aren't guaranteed to work. Additionally, they expose me much more to my own thinking errors, behavioral mistakes, and biases. Perhaps my analysis is simply wrong or under-baked. Basically, I need some money set aside into broad buckets that will perform well enough in case my stock picking doesn't work out.

That's where asset allocation comes in, and - even accepting lower returns going forward - it's tricky.

Why Not Just Do Something Lazy?

So what would be the, you know, "Ah, screw it" portfolio?

As a baseline, there's J.L. Collins 100% allocation to VTSAX (ETF: VTI). Lazy and easy, and you won't feel a lot of FOMO (fear of missing out) since it's the whole U.S. stock market. It's also very hard to beat:

But what if you want some "hold onto your butts" assets for the scary times? Something like the Bogleheads' 3 fund portfolio fits:

For sure, lazy has a lot going for it. It would be easier for me to manage, and should I get hit by a car, it will be easier for my wife to manage. There are some portfolio varieties that just have too many funds in too many strange percentages. If it requires a computer to manage, then it's probably not the best choice.

And the lazy portfolios don't perform strangely. If you spend years envying the S&P 500, how long can you reasonably hold out before you just buy the S&P 500?

That said, are there ways to achieve slightly better risk-adjusted returns without it becoming too complicated?

International

I should have been prepared for difficult questions since I've been an active listener of Meb Faber's podcast. He has idiosyncratic views about asset allocation. For example, he argues effectively that a global allocation is not only valuable but even dangerously underutilized in many modern portfolios.

To make a long story short, being concentrated in one country in a market-cap weighted portfolio leaves you open to major country risk as well as valuation risk. There will be periods of underperformance, and there's the risk of a total country disruption that leads to a total loss.

What's hard to get over, however, is that international additions to a pure 100% US market allocation have been a performance drag in recent memory. It's one thing to know that allocating all your assets to a single country (even the US) can be risky, and it's another to actually allocate money to underperforming geographies:

Adding international exposure looks like a leap of faith based on the following ideas:

• The US is likely overvalued relative to international markets, which may lead to sustained international outperformance during times when the U.S. is working through overvaluation.
• The existential risk of single country concentration is high enough that putting up with potential lower returns is worth the risk. Countries don't stay on top forever, and whole country's stock markets have gone to 0.
• Adding international adds even more diversification.

With those ideas in mind, I will probably add an international component.

Drawdown Protection Portfolios: 60/40, Weird, and Permanent

If I want lower drawdowns in a lazy way, there's not much lazier than the 60/40 or 40/60 portfolio:

One of the accounts I follow on Twitter is ValueStockGeek. While occasionally, he'll put out some information on a specific company he's interested in, the most surprising content he writes is about his Weird Portfolio. I encourage anyone interested in this stuff to read what he's written on it, but long story short it's:

• 20% US Small Cap Value
• 20% International Small Cap
• 20% Gold
• 20% REITs (divided between US and ex-US)
• 20% Long term treasuries

It's his variation on Harry Browne's Permanent Portfolio, and it's more aggressive than Browne's risk-averse allocation (25% US stocks, 25% Long Term Treasuries, 25% Gold, 25% cash).

Notice the slow and steady return of the blue line (the Permanent Portfolio) vs the more jagged yellow line (the S&P 500), with the red line (the Weird Portfolio) somewhere in the middle.

Both alternative portfolios are trying to consider inflationary and deflationary environments, and how those periods impact the various components. When both portfolios succeed, they leads to lower but steadier growth with much gentler drawdowns. The Sharpe ratios are considerably higher than a pure stock allocation. The Permanent Portfolio's returns are low but with much lower risk, while the Weird Portfolio has more acceptable total returns.

Backtests point to something like an 8-9% return for the Weird Portfolio. In the Great Recession, the drawdown was higher than the Permanent Portfolio's, but it was much lower than a 100% stock allocation. Combine that with a 9% return, and it feels like a revelation.

My concerns with it however are:

• Small cap value outperforming over time is necessary for the growth to be satisfactory. It hasn't out-performed during this last decade, though its longer term record is very good:

• The drawdown protection via gold and treasuries has to actually work.

Nevertheless, I find it compelling despite my concerns and will integrate some of this into my own approach.

Other Compelling Portfolios and Final Thoughts

Look around enough, and you'll see all sorts of smart portfolio constructions. Take a look at the Ginger Ale Portfolio for one idea. For my taste, it's too many ETFs, but to each their own. Or stroll through the Boglehead forums to read intelligent debates about portfolio construction.

Nothing is guaranteed, and we have to make best guesses about our own psychology and how best to navigate an unknowable future based on the available research and how assets have behaved in the past. Avoiding blunders is paramount.

The strongest takeaways for me are:

• U.S. Market exposure is basically good enough on its own. It prevents FOMO and will probably perform well. It has risks though.
• Some "hold onto your butts" assets make sense.
• A tilt towards small cap and value makes sense.
• Too many assets gets unwieldy.
• Some international exposure is likely worth it despite recent underperformance.

This only begins to scratch at the surface of asset allocation decisions that someone could obsess over. I think I have a basic plan, when I make a decision I'll write more.

Update: January 2021

This one is very late. There was a lot of real life that happened in the first week and a half of February that threw off my normal schedules. With that out of the way...

Our net worth shrank in January by 3.02% in USD and 1.72% in EUR to $121,177 and €107,809 respectively.

The main drivers were the stock market and some personal spending. Anyone who's exposed to the tech sector has experienced a good amount of pain recently. January had a sharp decline and a reversal at the end of the month that eased the pain a little, otherwise our numbers would have been worse.

On the spending side, I'm re-jiggering my cameras (I like photography and, increasingly, video). That means, I'm buying cameras and trying to sell my older cameras. That will impact the January and February numbers.

On the upside, our incomes are improving as normal working life resumes post-pandemic, and we received our German tax refund. Score.

That's it for this month. February so far has also been a rough stock month, so I expect losses. Thankfully that will be mitigated by our incomes somewhat, but it won't be enough, I expect, to totally offset this volatility.

Stay healthy. Until next time.

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.

June 2021 Update

On June 26, when I took the monthly measurement, our net worth had risen in the prior month by 1.74% in USD and 3.87% in EUR to $102,269 and €85,653 respectively. Year over year, that's a 50.4% and 41.33% rise in USD and EUR respectively.

We've essentially returned to where we were in May with slight changes to the overall relationships between various accounts. As I wrote in earlier updates, we haven't been able to actually save much in the past few months, so the gyrations of our stock portfolios have been entirely of their own volition.

Stock Shenanigans

Now, I enabled this volatility a bit by selling and buying some things, but there wasn't really much of a period where any of the proceeds of those sales sat in cash.

May provided one of those confounding periods that I wish I were better at predicting. After I sold some stocks, I purchased different shares. When the first stocks fell, I felt vindicated. When the newly purchased shares also fell, I felt like a fool. My instinct to sell had been right, but my rush to buy was not, and much of the frustration I felt in the past two months could have been reduced had I sat on my hands a bit longer and allowed volatility to help me out and make me feel like a genius trader.

That said, in the long run, it won't matter. I can barely remember the various agonies I've experienced since buying my first shares. Eventually this small irritation in May and June will fade like those others I've forgotten in the past. It's all the more reason to avoid making large blunders that make these periods unforgettable.

The one thing that might have been such a blunder was my sale of Cloudflare. This is not a stock tip. Following the sale, I experienced serious regret and a nagging sense that I had made a long-term blunder. I even dreamed about it. After analyzing the company to a greater extent than I did when I first bought the shares in 2019 on a whim, I've decided to average back into it. Make of that what you will. My other sales haven't distressed me, so this will be a good gauge of my instincts as the years play out.

Taxes

We had to move some money out of savings and into the hands of the German federal government by paying our estimated taxes. If we're overpaying, we probably won't see that money again until the end of 2021 with the lag times between receiving the necessary paperwork, the tax preparer's time, and the pace of the German Finanzamt.

In America, I found doing taxes to be kind of fun and easy. I studiously learned the rules as best I could and filed on time every year. When I moved abroad, I knew I needed to file a US return as well, which I've always done.

But taxes have become a drag and a source of dread. Almost none of that feeling has come from paying taxes, but instead it's the vast quantities of paperwork and organization we're required to maintain along with the conflicting rules of two countries that drive me to anxiety and occasional despair.

It appears I've missed something in all my US filings, and now we're going through the IRS' Streamlined Procedure because the risks posed by the outlandish penalties are too high to ignore. Namely, I misunderstood the FBAR (IRS Report of Foreign Bank and Financial Accounts) and how some of my arrangements in Germany might, repeat, might have been reportable. No one can say with certainty whether they are or not, but because the potential penalties are so extreme, and because I'm already in the IRS system, I can't ignore them.

So now we're paying a firm to help us, and in the days before I fly to America to re-establish my relationships with my blood relatives, I'm reassembling three years of data to prove to the IRS country that we don't owe taxes and that we weren't trying to hide money from them. Along the way, I'm learning the other small ways in which U.S. expats are screwed by the US' tax system and it's hard not to feel like our country hates us. Charlie Munger exhorts people to never feel sorry for themselves ("I know self-pity is stupid"), and I try to keep that in mind to keep plunging forward in this task, but that sense of injustice and unfairness grates like sand in my shoes.

June Outlook

We will have to pay the aforementioned tax preparer in June, and I will likely have elevated spending while in the US. Otherwise, I'm hoping for not too many surprises. Because I received my summer bonus, I had some extra money to save, which I've done. Should we receive any of the various stimulus checks from the US or the mythical refund for our overpaid 2019 German taxes, we'll have a boost.

Happy Independence Day to any American readers, and I wish you health and happiness. Until next time.

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: April 2021

Our net worth increased 10.75% in USD and 8.07% in EUR to $101,894 and €84,336 respectively. That's a year over year change of 78.77% in dollars and 60.24% in euros.

And what a year it's been. We're still masking up to go to grocery stores. My wife still isn't allowed to meet with people face to face and works from our home office entirely. Our incomes are still depressed. Our restaurant budget is still nothing. I still can't go to the gym.

But if you were long risk assets this past year, you've probably had a very good year financially. In fact, it's been such a good year, that I think a lot of assets have become overvalued and therefore risky.

April Contributors: Stocks and Stimulus

The factors that affected our numbers this month were primarily the strong performance of the stock market and a stimulus payment my wife got from the Germans because of the impact this whole mess has had on her business. That money went straight into an account for earmarked funds.

Germany has had various stimulus programs, but they've been pretty complex to use. Unlike the US, they haven't just shuttled money out to the citizens in waves of checks. The programs have been highly targeted, dependent on the state (Bundesland) to implement them, and you need to meet very specific criteria. For example, my wife missed out on one early stimulus payment because the timing of a vacation she took in 2019, which made the year over year comparison look better than it really was. But that meant zero help despite her income dropping to very low levels.

Additionally, because of these criteria, it requires the use of a tax preparer, whose fee reduces the impact of the stimulus. We love our Steuerberaterin, but we're sending her a lot of money in a very short time.

That's all to say, it's all a bit convoluted and over-engineered, which is kind of the German way.

Selling Stocks

I sold out of my positions in two companies yesterday:

Square (SQ)

And Cloudflare (NET)

Both had run up so much that I couldn't make sense of the valuation anymore. It's entirely possible that I'll regret this at some point in the future if/when they pop upwards, but such a pop would only further divorce them from their fundamentals, and their fundamentals suggest upwards of a decade before their valuations align.

Naturally, if they crash, I'll happily buy them again. And some other companies might also be on the chopping block once I figure out the tax implications.

However, selling is hard, and I often get it wrong. I sold Equinor (EQNR) and Ternium (TX) in the last few months, and both quickly climbed above my sale price. Much to my chagrin, I sold Foot Locker (FL) and Simon Property Group (SPG) a year ago at low prices and ate a huge loss, and both have recovered very well indeed.

My buying instincts appear solid, but my selling instincts need refinement.

Speculative Excess

Nevertheless, I can't help but feel like we're living in a moment of speculative excess, and that makes me more cautious. Speculative excess doesn't just affect the prices of assets, but it affects the way people talk about those assets and the way the press reports on them. It's self reinforcing and full of confirmation bias.

It's one reason I sold: I saw the confirmation bias in myself. I was looking for the angle that could justify my continuing to hold both of those companies, and seeing that in myself made me realize how flawed my own judgment was. The valuations don't make sense, and I was trying to make myself see that the valuations actually did make sense.

Beyond pure speculative insanity, we've seen several major blowups this year already from traders using too much leverage:

• Archegos Capital
• Greensill Capital
• Forced liquidations on Binance

Regarding crypto, whatever merits there are to cryptocurrencies, the proponents of crypto are behaving in the way you'd expect bubble proponents to behave: they are often dismissive and full of bile towards anyone who questions the basis for their belief (Disclosure: I have a tiny amount of Bitcoin and Ethereum).

Likewise, despite John Templeton's admonition that, "The four most dangerous words in investing are 'This time is different'", I've seen lots of arguing that this time really is different! It's hilarious. I've heard it in podcasts, seen it online, and heard it from friends who believe we've entered a new era in some way. They might be right, but it sure sounds like the same sort of rationalization that accompanied previous bubbles.

So what else is there we don't know about? How about fraud? It's likely lurking somewhere, since crypto doesn't solve people behaving like people.

Anyway, I'm feeling cautious.

Over $100,000

As mentioned in my last post, we crossed the $100,000 mark for the first time. I figured it would happen this year, but I didn't expect it to happen quite so fast. And I didn't expect the sudden difference in my mindset. It's not as if I'm going to quit my job to become a full time speculator, but I have a greater sense of autonomy and more emotional detachment from my job.

The Virus Rages On

But financials obviously aren't the only thing, and this past year has been very hard on just about everybody. Thankfully the vaccine rollout is happening faster in Germany, and there's some light at the end of the tunnel here. In fact, we have our appointment for our first shots in a week and a half.

However, the virus continues to hurt people around the world, and I continue experience cognitive dissonance about the relative ease of my life.

May Expectations

Nothing special will happen with our incomes this month. We won't be able to save much because of some fees around my wife renewing her work permit. Because she's self-employed, they require a special document prepared by our tax preparer for yet another fee to that preparer, plus the fee for doing the renewal.

Meanwhile, we're still waiting on our 2019 tax refund. Hopefully that will land soon. And one day we'll get those last two stimulus payments from the US government, but I won't hold my breath.

I'll leave you with this:

Guilty as charged. Until next time.

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.

February 2021 Update

Our net worth rose in February 3.36% to $94,974/€78,039.

The main positive factors were a relatively high savings rate, decent but not great stock market performance, and a large refund from a January purchase. Negative factors were negatvie stock performance at the end of the month and reduced income due to the pandemic.

Our incomes remain depressed due to the pandemic. Due to lockdown measures in Germany, my wife's ability to work has been severely limited. While many of her customers are happy to work via Zoom or Skype, many aren't and are happy to delay their purchases until the day they can meet in person. Meanwhile, I earn a salary, but the extra work that often served to goose our incomes has completely dried up.

Simultaneously though, we are essentially forced to save money. The restaurants are closed. The shops are closed. I need to buy new clothes, but nowhere is open to facilitate the purchase. When I last tried, back in October, I wasn't allowed to use the changing rooms, so I bought a pair of pants, hoping they'd fit. Unfortunately, they didn't, so upon the return, I decided I'd wait until the dressing rooms re-opened. Joke's on me!

Naturally, there's always the internet for purchases, but eventually, you do run out of things to buy, unless you're willing to also buy clothes over the internet. My wife has become very adept at buying clothes online, while I lack the patience. It requires a willingness to try on and send back repeatedly. But ultimately, I might have to bend on this.

Stock Jitters

It's pretty easy to get spooked about the stock market. Valuations are high. The CAPE is high. When I look at the charts in FASTGraphs, I see just how extended some of my own positions are. Meanwhile, you have people like Michael Burry calling for Weimar-style inflation and Jeremy Grantham saying we're in an enormous bubble.

It's easy to write these folks off since doom and gloom predictions have been so wrong for so long. But at the same time, there's clear bubble behavior. I'll refrain from naming specific areas, but I'll leave you this passage from William Bernstein's latest book The Delusions of Crowds:

Financial manias can be thought of as a tragedy, like Hamlet or Macbeth, with sharply defined characters, a familiar narrative arc, and well-rehearsed lines. Four dramatis personae control the narrative: the talented yet unscrupulous promoters of schemes, the gullible public who buys into them, the press that breathlessly fans the excitement, and, last, the politicians who simultaneously thrust their hands into the till and avert their eyes from the flaming pyre of corruption.

The promoters follow a classical Shakespearean tragic path and are consequently the most fascinating of the actors. Most begin as brilliant hard-working visionaries, who intuit before others the riches that a new technology will bestow upon society. In the process of bringing their visions to fruition, they grow rich and powerful and in a capitalist society that judges men by their wealth, become their nation's lions. When the speculation runs its course and bursts, they wind up disgraced and bankrupt and usually but not always narrowly escape the jailor.

The public proves easy pickings for the blandishments of the heroic charismatic promoters. Competent investing requires a rare combination of mathematical ability, technological expertise, and, most critically, a working knowledge of economic history. Alas, people greatly prefer stories to data and facts. When faced with such a daunting task, humans default into narrative mode and perhaps the most pleasing story of all is one that involves the effortless wealth to be had from buying into a new technology.

The press falls prey to the promoters in the same way as the public. Few things corrode journalistic excellence as the ease of writing about the revolutionary ventures of brilliant businessmen, who with alarming frequency grace magazine covers first as heroes then as accused felons.

Finally, financial manias sweep into their ambit politicians whose reputations and popularity are enhanced by the economic prosperity that temporarily results from speculative excess and who not infrequently get caught raiding the cookie jar.

January, 2021 Update

Our net worth climbed to $91,890 and €75,505, an increase of 5.34% and 5.77% respectively. For the first time, our assets grew above $100,000.

Stocks did well, and we had an inflow of cash that obviously more than made up for our spending. I bought another musical instrument, and actually, these numbers include a double charge for which I haven't yet been refunded, so it was a surprisingly good month. We sold something to some friends for a few hundred euros, and at the end of January, I received a bonus as a kind of stimulus due to the pandemic.

Regarding the pandemic, we can't do anything besides order stuff online. We considered buying some plane tickets, but it seems pre-mature at this moment. We can't go to bars, and we can't even have friends over, which often prompts us to spend a lot on groceries. There was none of that this month. Our money went to things, generally, that we can resell later.

We also hit the bonus for an American credit card, which gave us a bunch of very useful points, which we'll eventually use to save money flying back to Germany one day. I value those at 1¢ per point, though the tickets I plan using them on will cost much more than that were I to buy them with cash.

GameStop Thoughts

Since that's the big market news at the moment, I'll say that I'm not participating in this trade. It just isn't my kind of thing. And I generally try to resist this kind of stuff, even if I might end up winning big. My belief is this: the behavior that might make you outrageously rich suddenly is the same kind of behavior that might make you broke suddenly. So I'll stick to my plan, which is doing fine.

I've also watched r/wallstreetbets for a while as a lurker, and while their trade ideas are often really good, there's a time element to them that requires you to be early or not take part at all. However, with the reinforcing peer pressure on the subreddit -- all that talk about "diamond hands" -- it can incentivize the willing latecomers to participate much later than is wise. Just remember, every time you buy, it means someone else is selling.

Anyway, be careful and good luck.

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.