2020: A Most Unexpected Result

Count us among the very, very lucky in 2020. Amid the craziness of a deadly pandemic, global race riots (that started in our metro area), and a rancorous Presidential election, we stayed healthy and our retirement nest egg did much better than expected.

Last night I went through our year end numbers and updated the spreadsheet I use to track our portfolio. We’ve been enjoying our FIRE lifestyle for coming up on 5 years and we are sitting in a good place.

You can see from this chart we are at a high point in our savings – just 2 years from a difficult low point, when my MegaCorp stock options collapsed. That’s a positive swing of 7 years spending …

In terms of percentage growth, our portfolio was up 18.0% in 2020. The moves I made on St Patrick’s Day were the difference maker.

That’s an amazing return given how safely our portfolio is invested – with a significant chunk in bonds, private mortgage investments, and 3 years of cash. By comparison, it was 6x my goal for the year – about 3% growth.

Here’s our returns in detail by component:

  • OVERALL PORTFOLIO: +18.0%
    • S&P 500 Index Fund (VTSAX): +16.5%
    • MegaCorp Stock: +11.5% (leveraged 2.5x)
    • International Stocks (EFEA): +5.3%
    • Bond Fund (VBMFX): +4.5%
    • Private Mortgage Investments: +4.5%

One worry in early retirement is the ‘sequence of returns’. Bad returns in the first few years of your retirement cause a disproportionate negative impact on your long-term returns. It’s a risk that no retiree can really control and what I worried might be happening to us back in 2018.

Now 5 years in – and carrying a 3.5 year cushion – I feel a lot more confident. Especially given that risky MegaCorp stock options – which once represented half of our nest egg – are now down to 1%. In addition, our cash balance is high enough that we can live off of savings for a few years and not worry bear markets or changes to the tax code.

Again, we have been very, very lucky in 2020. So many around the world are dealing with so much – medically, emotionally, and financially – we are very blessed. Here’s hoping for prosperity around the world in 2021 as we hopefully fight the coronavirus into oblivion!

How Were Your Returns In 2020? Better Or Worse Than Expected?

Image Credit: Pixabay

8 thoughts on “2020: A Most Unexpected Result

  1. New to this site. Got lucky as well in 2020 as I, too, invested in a lot of conservative investments like municipal bonds. But I also had mostly tech holdings for stocks along with the index.

    Been jobless since 2012 and net worth has grown significantly since. But might try something new!

    Sam

    Liked by 1 person

    1. It was a great year for tech, so I’m sure that boosted your returns in total. When you are well-invested, isn’t it amazing that your net worth can grow without working?

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  2. Against all odds, 2020 was a very good year for growth. Over time, of course, everything tends to revert to norm. Stay the course was my motto last year, and this year. Unless my objectives change, my long-term, well-diversified, capital-protection, conservative investment strategies remain the same, whether annus horribilis or annus mirabilis.

    Liked by 1 person

    1. When I left MegaCorp in 2012, I thought having 10 years of blue-chip stock options would be a dream. A stable, well-managed, defensive, consumer staple. Little did I expect the nightmare of 2017/2018. I wish them all well, but I am so glad to have exercised them at an unexpected high point. Now I can manage our portfolio for the longer-term with so much less risk.

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  3. Congratulations on a great year financially! Your overall portfolio returned 18%, but the assets you listed were all below that number. Just wondering if the outperformance was all due to market timing, or from an asset not listed?

    Liked by 1 person

    1. Good question. You’ll note the MegaCorp stock increase had 2.5x leverage. Those were stock options. Back on St Patrick’s Day I sold the options high and bought the S&P 500 low. Best timing I’ve had in a decade! How did your portfolio do this year?

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      1. Congrats on the excellent timing!
        Net worth was up 28% in 2020, which includes primary home and rental properties that weren’t revalued. Like you had, I have a concentrated position that I’ve been diversifying out of for years (a terrible move on my part).

        Liked by 1 person

      2. Up 28% in the year that the world economy shut down due to the pandemic. Amazing result!

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