It is the time of the year when I do an annual review of how AVI family performed financially. The progress report on years past can be seen under– 2019, 2020, 2021, 2022.

Here is the summary report on how we did on various personal finance metrics that I like to track (as percent of AVI family FI number)

The year 2023 will go down in market history as the year of the magnificent-seven. Collectively, the seven companies, all part of the S&P 500 index, Nvidia, Alphabet, Microsoft, Tesla, Apple, Amazon, and Meta, have produced outsized returns in 2023, handily beating the S&P 500 index and the Nasdaq index. It may not be an exaggeration on my part if I venture to claim that no single actively managed hedge fund could boast the returns of these mag-seven stocks in 2023.

Fueled by the impressive performance of these stocks, the S&P 500 index closed out the year with a remarkable returns of ~25%.  Such substantial returns amid a tumultuous year marked by soaring inflation, Federal Reserve interest rate hikes, notable events like Silicon Valley bank and FTX’s blowout, governmental shutdown threats, and the backdrop of geopolitical tension in the Ukraine-Russia war, all while the threat of recession looming—is simply unprecedented!

We saw a healthy rise in AVI family net worth, though not to the extent of mag-seven or S&P 500 index growth. Accessible net worth, which discounts equity in primary residence, however, grew at a rate surpassing S&P 500 index, suggesting (a) primary residence, for a second year in a row a drag on net worth and (b) portfolio of assets primarily invested in equity markets coupled with some bond holdings, managed to move in lock steps with S&P 500 index.

Liquid assets, cash + non-retirement brokerage funds, are now at 8X of our house hold debt, which is primarily composed of home mortgage. At this multiple, we are anything but home rich and cash poor. I cannot wait for this metric to reach double digit multiple at which point I intend to payoff the remainder balance on house mortgage. I summarized my thinking on the idea of early mortgage payoff in this article. Back then I was in a completely different situation financially. I had begun my journey towards FI and did not have liquid assets even 2X the debt. Even then, I felt reasons for paying off mortgage far outweighed those against. The middle ground I outlined back then was to either (a) payoff the mortgage in lump sum or (b) refinance, should interest rates fall. Well, in the interim period, interest rates did fall and I did refinance my mortgage. However, since then interest rates have jumped significantly. I am therefore sitting pretty with low interest mortgage on hands and relatively large liquid asset buffer. As such, the new middle ground on the question of early mortgage payoff for me is to pay it off in lump sum as soon as we hit double digit multiple on the ratio of available liquid assets to debt. Until then, I will trudge along, trying to pay a bit-extra principal each month.

Emergency funds to cover 2 years of living expense was my mantra since I began on the FI journey. However, a couple of years ago I came to a realization that, 2 years worth of cash buffer is far too conservative. Since then I have been trying to be diligent in reducing the final metric of cash/(two year living) to 0.5. As the table above shows, directionally I have made progress but there is still some way to go to reduce our cash allocation.

In the chart below, I am showing how various AVI family asset  evolved through the year 2023.

The last two months have been tremendously beneficial for my equity portfolio, thanks to Mr Powell, who toned down his rhetoric on interest rates, which markets interpreted to assume that no more rates hikes will happen in the new year. Some what surprisingly though, house prices (atleast in our neighborhood) took a nose dive in the last two months. I am not sure how to interpret this observation other than linking it to seasonal downturn for housing in winter months. Regardless, home equity drawdown dragged Avi family net worth down.

At the end of 2019, AVI family net worth stood at 61.67 and today it stands at 162.53, which represents an annualized growth of ~27.4 %. A staggering rate of increase, especially when compared to S&P500, which increased at an annualized rate of ~15.25 % in the last 4 years. All in all, I am quite pleased with how AVI family has managed to sustainable compound wealth. I am hopeful that we can sustain this journey for a foreseeable future all the time being mindful of lifestyle creep that will eventually set in as we see sustained growth in our disposable assets.

As has been the tradition for me on these annual net worth posts, I also make a list of goals that I want to pursue in the new year. For 2023, I had the following goals

• Build Money Management Business
• Run a Half-Marathon
• ANW to cross 100
• Practice the art of articulating an investment thesis in depth
• Read atleast 6 books

So how did I fair on these goals?

I managed to start a investment partnership, 26valuepartners L.P. As of this writing, we are 11 partners and have asset of just over 1 Million dollars under management. We are off to a decent start and I am hoping to build on this in the years to come.

Anything to do with exercise is always difficult for me. I have strong motivation to focus on health and every year, have one goal related to health and exercise. This year my goal was to run half marathon. I was inspired to do so after reading an excellent book by Haruki Murakami, titled  “What I talk about when I talk about running”! Alas, this year has been no different. I have not made any strides on this goal.

We crossed ANW>100 goal very early in the year, thanks to the roaring markets that ensued right from the first month of the year. I am ending the year with ANW~115, solidly above the 100 mark. A thumping success on this one!

I have made some strides on this objective, see here. In my partnership letters, I have penned more articles in similar vein in an attempt to articulate my investment thesis for partnership funds. Overall, I can claim satisfactory outcome on this goal.

Unlike last year, no single book stood out for me in 2023. I began reading several books, but finished none. Here’s a list of some that I managed to plow  more than half way through: Joys of Compounding by Gautam Baid; Top five regrets of the Dying by Bronnie Ware; Die With Zero by Bill Perkins (I finnished this book); King of Capital, The remarkable rise and fall of Steve Schwarzman by David Carey; The Anarchy  by William Dlrymple (fascinating history of the East India Company and how it came to rule India) and finally a fiction book, The Paris Mystery by Kristy Manning. Overall, partial success on this goal.

Lets get on with the goals for 2024:

• Spend more time with Family— It is a difficult goal, given my current work circumstance! But I want to try. Kids are growing fast and in a blink of an eye they will be out and about on their own. I am coming to the realization that I have precious few years left to enjoy time with our children. 2024 will be the first year when I want to begin to make conscious effort to spend quality time with kids and family!
• Grow Investment Business– I want to try and double assets under management in 2024.
• Focus on health– This is an eternal goal. No different from other years. However, hopefully 2024 will be the year when I will finally work to move the needle on this goal.
• Read atleast 6 books– This is yet another goal that is persistent year on year for me. For starters, I want to finish off the books that started in 2023 but did not finish. Then I do have a list of books that I want to read in the new year.
• Aim to achieve AANW target of 100– In 2023, we achieved ANW (accessible net worth) goal of 100. In 2024, I want to do the same for AANW (Adjusted Accessible Net Worth). We currently stand at 80 on this one. 20 points increase in one year is a tall order! It doesnt hurt though to try!

Onto the new year! Wishes to all! We will revisit this post in one years time to see how we fared on Networth in 2024 and our goals for the new year!