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?
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