At the end of every quarter, I share a snapshot of my current finances. This includes what I’m invested in, their values and the change over time. The goal of sharing this information is to show it’s possible to make money investing in super-simple ways without the need to watch the latest news.
If you want to look back at past investment reports, you can view them all in one handy place or check out these links to the past few:
- Minafi 2017 Q3 Fall Investment Report – $1,088,008.50
- Minafi 2017 Q4 Winter Investment Report – $1,221,774.00 (+12.2%)
- Minafi 2018 Q1 Spring Investment Report – $1,202,654.00 (-1.59%)
- Minafi 2018 Q2 Summer Investment Report – $1,236,856.00 ($2,068,156.00) (+2.84% investments or +71.9% net worth)
- Minafi 2018 Q3 Fall Investment Report – $1,226,089.00 ($2,292,717.00) (-0.91% investments or +9.79% net worth)
- Now – $1,958,287.00! (+37% investments or -14.5% net worth)
Whew, that’s quite a ride over the last year. When I registered Minafi in July of 2015, I was 33 with a net worth around $770k (thanks to a windfall, being at a startup that was acquired and saving a good chunk of my yearly income). At the time, all of my calculations about FI had me getting there around age 40-42 – and that was dependent on solid market returns, keeping spending under control and staying employed.
Account Value Over Time
It was a huuuge few months for me. The biggest change was that my ownership in Pluralsight turned from hypothetical ownership to real in-my-account stock ownership! That change meant that it was no longer ownership in a business, but ownership in a publicly traded stock. Anyone who’s owned or sold a business knows that until everything is finalized and the cash is in your account nothing is assured.
Working at startups and non-public companies means trying to stay unattached to “maybes” and “could-bes“. Code School was acquired by Pluralsight a full 4 years ago now – almost 8 years since I started there. 4 years ago I had absolutely no clue this is how things would turn out!
Looking at my net worth and my total investments quarter by quarter, it’s been a pretty insane ride these last few years.
There are a few things to point out on this chart:
- Investments and net worth merge due to me getting full access to those funds – something that wasn’t guaranteed until it happened.
- Technically my net worth line would go all the back to the beginning of this graph – but it would have been difficult to value and even more difficult to sell before the IPO.
- My 2015 net worth is as high as it is because it came directly after the initial Code School acquisition. Add to that ongoing savings and windfall from inheritance.
- For these 4 years, a diversified portfolio would have performed at: -1%, +7%, +14%, -5%. In other words, portfolio growth wasn’t a primary driver in growth.
- My income stayed relatively flat during this time. I even technically took a pay cut (since we did profit sharing at Code School, which meant some pretty nice bonuses).
- Following the acquisition, there were additional payouts in the following years. These were a nice added bonus! When a company is acquired, it’s useful to set aside money for potential lawsuits, or other unknowns for a set period of time (say 2 years). If there are none, then that money can be paid out to owners. This meant an extra $70k here or $30k there. That’s one reason why this line continues to rise even in stock market slumps and with a stagnant salary.
- In Q4 2018, my ownership was realized in the form of stock shares in $PS. Add to that getting a nice sized employee stock purchase plan payout (which was honestly pretty tough to give up when I left!).
My takeaway is that the reason this chart looks like it does is that I
was lucky had a significant amount of money coming in due to the acquisition, having a well-paying job and investing during a time of stock growth.
One thing that’s not shown on this chart is that I never had golden handcuffs to stay employed. Even if I had left my job 4 years ago immediately after the acquisition, my investments/net worth would look roughly the same. I would have still earned the same amount from the IPO.
When some companies are acquired they require people to stay on board for some length of time to earn a payout. I was fortunate to have flexibility. I even applied for some other jobs – some that offered double my salary – but opted to stay at the same job, hoping that it would likely be my last ever job working for someone else.
When it comes to financial independence, there are two ways to get there faster – make more money and/or spend less money. Many people, myself included, speak more towards the spend less money side. Controlling lifestyle inflation, tracking your savings rate and spending intentionally are more possible to control than the slow process of growing a career.
The other side of the coin is trying to make more money. People like Bobby and Grant drill this point home. Even though making more money was the path that paid off for me, I don’t write much about it. The main reason is that I’m still trying to figure out how myself! There’s a difference between being hard working and being a hustler. You can be hard working but not be amazing at making money (I’m case and point at that with my wealth of failed side projects).
What worked for me was working very hard and networking with other people who were amazing at the hustling side. That allowed me to hitch my hard work to their horse and do very well. Playing to your strengths is a great way to look at it, especially if you understand your weaknesses and actively seek out others who are great in those areas.
My investments themselves are very simple. I tend to invest in the smallest number of individual funds I can, while maintaining low-fees, diversification and optimized tax treatment. This minimal investor style helps me sleep at night. It focuses on a few core principles:
- Invest 95% in diversified index funds (whatever I want in the last 5%).
- Lower fees, load and any management costs to the minimum.
- Don’t use two funds when one fund will do.
- Rebalance quarterly-preferably by shifting where future investments go rather than by selling.
Unfortunately, this minimal investor style hit a (good) hiccup this quarter. On November 15th, I suddenly had 34,000 shares of $PS @ $21.66 each – a $736,440 increase in my liquid net worth instantly!
What did we do to celebrate? I picked up two $0.99 instant ramens at the grocery store and joined Mrs. Minafi at her work for lunch. 🙂
That was also the day I lost my sunglasses on the way home from lunch, which lead to this Tweet.
Suddenly my portfolio was wildly out of whack. So what should I do? Well there are a lot of options:
- Keep it all, and sell it off whenever I actually need money (30+ year time horizon)
- Sell some over some set period of time (x year time horizon)
- Sell it all immediately. I’d pay long-term capital gains tax on everything, likely with a $0 cost basis. This would mean breaking into a new tax bracket and playing 20% on a lot of it + 5% state tax (0 year)
- Sell over time, while staying employed. This would limit when I could sell to trading windows for the company. This could allow spreading taxes over 2018, 2019 and perhaps even 2020 (14 months)
- Sell over time, while NOT employed, outside trading windows while also leveraging against potential stock declines (buying protective puts). Buying puts is not an option if you are an employee. (14 months)
In my position at PS I had no inside information on the long-term future of the company – so any decision I’d make would be based entirely on public information (they drove the fear into us about insider trading, and I’m staying as far away from that as possible).
I ended up giving notice in September and leaving Pluralsight in December – just before the next blackout period for employee trading. Because of that, I’m able to sell shares or buy puts at any time.
In talking with various financial planners and doing a bunch of research, I ultimately decided that staying at PS while in a blackout period when I was thiiiis close to FI wouldn’t be worth it from a risk standpoint. Having 40% of my net worth tied up in something I couldn’t sell was just too much risk for me.
So what did I end up doing? Well, I decided I’d start dollar cost averaging the sale of it – selling a little each day. I set a goal to sell 1/3 in 2018, 1/3 in early 2019 and 1/3 in 2020. This guarantees I lock in some of the value of the stock while not putting all my eggs in one basket.
Why not just keep it and sell it when I need it? That’s easy: diversification. Having that much wrapped up in any single company (or even sector) is dangerous. Being overextended opens you up to massive swings in the market – something I do my best to avoid. Just take a look at my investments over the last year according to Personal Capital.
You can see that my net worth grew faster than the S&P 500 due to $PS’s quick rise from it’s $15 IPO up to $38, before falling to $28 where it stands today. This has been fortunate for sure. The chart could just a well have been inverted – with the losses being FAR below the S&P 500.
By earning -0.39% for the year on my investments, I’m ecstatic with the results. Compared to the S&P, Dow or international markets, I’m +5%, +6% or +13.5%! I’m very happy with that return, even if it’s been primarily due to one stock and some bonds.
Between my accounts high value (on September 11, 2018) and the low (on December 24, 2018 – Merry Christmas!) the difference in my portfolio dropped from $2,546,823 to $1,742,583 – a change of -$804,240 or -31.5%! Whew, that’s a lot on paper to lose in 3 months. As I’m writing this today, it’s back up to $2.1m, but again, still only on paper.
To help spread this out and make sure I don’t lock in that kind of massive loss, I’ve been dollar cost averaging the sale of over time. Being in a stock that’s both gained and lost 10% in a single day makes it difficult to not constantly second guess choices.
Now that it’s the end of the year, here’s a look at everything I’m invested in quarter by quarter.
|Account||Holding||Value Q1||Value Q2||Value Q3||Value Q4||Percent|
|401k||Spartan Bond Index||$87,963.13||$92,354.81||$94,582.63||$103,034.00||5.2%|
|Roth IRA||Vanguard REIT||$43,258.66||$48,232.05||$46,422.29||$44,767.55||2.2%|
|Roth IRA||Vanguard Total Bond Market||$36,274.11||$67,341.04||$66,649.61||$68,316.35||3.5%|
|Brokerage||Vanguard Small-Cap Index||$73,019.98||$63,298.67||$60,170.83||$52,686.39||2.7%|
|Brokerage||Vanguard Total Intl Stock Index||$259,438.49||$249,442.63||$230,648.57||$219,166.10||11.2%|
|Brokerage||Vanguard Total Stock Market||$488,952.82||$531,347.05||$503,941.76||$516,864.73||26.4%|
|Brokerage||Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares||$14,522.29||$100,474.63||$64,753.67||$66,423.79||3.3%|
A few things to note about this list:
I’m heavy in cash right now. This is due to the shift to spending more than we earn as a household. It makes more sense to avoid the sequence of return risk. I’m aiming to increase my cash and bond positions this year and invest back into the market slowly over the next ~5 years – basically a bond/cash tent. This cash is all held in my Simple account, earning 2% a year. I could earn slightly more in a CD, but so far this 2% while having all my money easily accessible while I figure things out has been ideal.
That 30% in Pluralsight is a lot. I’m aiming to sell half of it in 2019 and more in 2020. I do like the idea of continuing to hold some $PS long-term (<5% of my portfolio). I still believe in the company and I enjoy seeing everything I worked for continuing to grow.
I’ll be paying a lot in taxes in 2018. Between selling $250k in stock and moving to a state with state taxes (something I might not have done if I knew I’d be in this position), I’ll likely end up paying $60k in capital gains taxes. On the bright side this will reset my cost basis on my investments, making it possible to spend $80k a year and pay nearly no taxes.
I sold all my Bitcoin and Ethereum. *sigh* This just didn’t work out. At one time my $45k investment was up to $160k. Unfortunately my personal rules for investing were around long-term holding, and I didn’t adapt fast enough to take advantage of that gain. In the end I sold everything for around $20k, taking a $25k loss for the year. On the bright side that will offset $25k in gains for the year.
I still have my Wealthfront and Betterment accounts. These I’m keeping around more as an experiment than for anything else. I’ll be writing more about them later. For new investors getting started today, there are a lot of dragons out there in the investing world. I still think these two are great options for someone who doesn’t want to do it themselves.
Everything in my portfolio is out of whack right now. Even though I have a long-term plan for what I want my portfolio to be (below), for now, it’ll need to be flexible. I need to put aside a bunch of cash to pay taxes while also continually selling more funds.
Asset Allocation Breakdown
I keep a spreadsheet that contains my overall asset allocation broken down by market sector, showing the actual and ideal amount.
Doing this exercise quarterly makes it clear which sectors are off from my target. Turns out it’s just about everything. It does make it clear where I should first shift money though – split some more cash into bonds. I could also double my REIT position in my Roth to keep that at 5% of my total portfolio.
Spending & Savings
I switched from tracking my spending in Personal Capital to Mint starting this quarter. I love Personal Capital for understanding and keeping up with investments, but Mint does a better job of organizing spending. With Personal Capital you also can’t enter a manual transaction (ie Cash), which means that not everything can be monitored.
We do have our final spending for the year: $97,303.83! Well, we’re under $100k, so that’s good. We spent $85k in 2017, $81k in 2016 and $61k. Those past years don’t have the clearest data though, since Mrs. Minafi and I didn’t fully combine our finances until 2018. Now we know for sure that this number is our total combined spending.
If this seems high to you, it seems high to me too. Of that, 27% was spent on home, 15% on travel, 12% on transportation, 11% on food and 9% on luxuries. The other 25% was entertainment, personal care, gifts and everything else.
Home – $6,881.53: Our rent, utilities and general household supplies were a consistent expense throughout the year. Our rent is $1,880 a month base for a beautiful, new apartment with a view of the mountains. I absolutely love living in an apartment, don’t plan to move into a house anytime in the foreseeable future. There are cheaper places to live, but this place is great. I can walk to 3 grocery stores, bars, coffee shops (some open until midnight) while still being able to drive to the mountains to ski within 30 minutes.
Transportation – $717.65: It finally happened – our transportation expenses went down! With only 1 paid off car, this expense is all gas and insurance. It does include driving to work a bunch and a road trip to soutch Utah, so it’s likely this will be even lower in Q1 2019.
Entertainment – $2,398.67: This category rose in the last few months. We bought a number of tickets for 2019: Moulin Rouge (NYC in June!), Aladdin (SLC) and Ali Wong (SLC). I’m also including any alcohol we buy in this category – which was somehow $600 for the quarter. This includes alcohol for holidays (Thanksgiving, Christmas, New Years, leaving work) as well as parties we threw and holiday parties we went to.
Travel – $1,976.57: We took 3 trips in the last 3 months: a few days in Zion, Thanksgiving with my family in Richmond, Virginia and Christmas in Orlando. I’m starting to split these expenses out more – namely to travel food, travel experiences, travel lodging, travel alcohol and travel transportation (airfare, lyfts, etc).
Luxuries – $1,162.89: We didn’t spend too much in this category for the quarter. The largest expense was replacing my foldable Ray-Ban sunglasses. I love these – since they compress down to almost nothing.
Food – $2,660.59: $1,884.05 in groceries, $776.54 in restaurants. We spent less on food for the quarter than in any previous one this year. I attribute that to eating a lot of leftovers and getting a Costco membership. Now that I have more time, I’m most curious to see what happens in this category starting in the new year.
Education, Business & Career – $1,802.50: This includes cell phone bills (including 12 months of Mint Mobile), 12 months of Audible credits and paying a hefty tax preparation fee ($850) to finally close my 2017 taxes. I’m looking forward to doing my own taxes again, but that’ll likely wait until my 2019 taxes. 2018 contains enough oddities that I’d like another set of eyes.
Personal Care – $2,970.03: The three biggest expenses in this category are fitness (which includes 3 months of CrossFit and an Ikonpass for skiing and gear rental), beauty/hair/makeup for Mrs. Minafi and some clothing replacements. I’m not too happy with how these are categorized. I’m changing things up in 2019 to be much clearer.
Pets – $908.82: Whew, that’s a lot spent on one dog! We boarded our pup for Thanksgiving and again for Christmas. At up to $40 a day it’s not cheap. We’ll be doing a lot less travel in 2019, so this will go down. I’m also hoping to ask some friends about dog sitting, which would save a bunch of money. I’ll also have time to dog-sit for some friends to help them out too.
Everything Else – $1,252.51: Mostly gifts and charity. With it being Christmas, these numbers are higher than they would be otherwise.
Q4 Spending Retrospective
We spent less in Q4 than in Q2 or Q3, but it was still quite a lot. If we were to keep our spending around $7k/month, that’s $84k a year – which would be right around 4% of our total portfolio. Mrs. Minafi is working now as well, so the actual amount would be significantly lower.
The 4% rule is based around having a diversified portfolio – not having 30% of it in a single stock that can fluctuate wildly. This is why in my post about leaving my job I mentioned that I don’t consider my situation to have reached FI in the tradition sense. There’s still a bunch of variables that would need to be addressed before that:
- Moving my portfolio to a more diversified asset allocation.
- Lowering spending (or developing side income) to where we’re solidly in the 25x+ range for spending.
- Understanding what our actual spending is when I’m not working.
- Budgeting in health care (since we’re able to use Mrs. Minafi’s insurance now).
What we have the most control over now is trying to lower our spending. In 2018 we didn’t spend
much any time trying to optimize spending – we just bought anything and everything we wanted to. We went on our honeymoon, bought a car, went on a dozen other trips, furnished an apartment and explored our new citys restaurants.
I’d like to see our expenses dip down a bit closer to $80k/year. If we can lower that down, or make a little profit on Minafi that would give us more breathing room. Both good goals for 2019.
2018 Q4 Takeaways
These last few months have had the highest swings of any in my financial life. Seeing my accounts drop $736,440 in the span of a few months was scary, but not scary enough to change my strategy. Having a solid set of investing guidelines truly helps me stay on track. My portfolio has already recovered almost $400,000 of that lost amount in the weeks since Christmas! If I had panicked and sold then I would’ve locked in my losses and been out a bunch of money.
From an investing standpoint though, this quarter reminded me that I prefer the boring, diversified route to the active investing route. The best investments are the ones that help you sleep well at night. I don’t like constantly wondering if I should’ve sold sooner – or if I sold too soon. While I could just hire a financial advisor to make these decisions, I’d be just as conflicted with their decisions as my own.
As for 2019, I have no idea if the market is going to grow or retract. I plan to continue investing more of my cash back into the market while looking for ways to cut costs (especially travel hacking, dog sitting and traveling with friends) while continuing to grow Minafi and see where it goes next!
1 CommentWhy not add to the conversation below? Your voice is welcome!
January 22, 2019
Is your $270k cash position mostly a result of selling some PluralSight stock?
I’ve been diversifying out of a concentrated stock position for the past 20 years. It’s a very volatile stock that has had multiple corrections over 50% but overall has returned over 240x from IPO to its peak. There’s just no easy way to do it, and no right or wrong way either. Because even with a lot of insight into the company strategy and prospects, it’s ultimate trajectory is probably unpredictable. PluralSight is not a consumer staple behemoth, in 10 years it could be wiped out by competitors or some poor decisions made by the CEO, or it could become a giant in its field… very hard to know now. And an advisor is not going to be able to help with any of that. They would just tell you to diversify as soon as you can.
You may want to consider protecting your position with put options or a collar strategy. There is also a possibility to place your shares in an exchange fund that would diversify you without incurring taxes (you trade your company shares for a share of a fund that holds many other companies without selling). There might be some minimum limit to qualify you to do that, and some shares may be more desirable than others to the fund manager.
Also any FI calculations should account for the huge tax liability embedded in your assets.