If you have a look at the About section of this website, I noted down 4 key goals for me to start and maintain this website:
- A repository for me to collect ideas and compile lessons learned in my journey as a value investor
- An education platform for fellow small-scale retail investors such as myself where I could disseminate actionable tools and methodologies on investing
- A platform to track my performance as an active investor and finally
- A platform to track my journey towards financial independence.
Over the last few years, of the four agenda items listed above, more often than not, my focus turned to using this website as a platform to track our family journey towards financial independence (FI). Towards that end, I diligently focused on tracking our family net worth on monthly basis and kept a close eye on metrics that would allow me to quantify our family’s progress towards FI.
As of this writing, the personal finance metrics for our family are:
- Net Worth (as percent of FI): 145.62
- Accessible Net Worth (as percent of FI): 89.56
- Liquid Assets/ Debt Ratio: 6.011
- Cash Reserves (as percent of 2 years of living expense): 96.1
A refresher on these metrics is warranted to provide a rationale for why I feel quite comfortable claiming FI.
Net worth is defined as sum total of all assets (liquid– cash, securities in non-retirement funds etc; and non-liquid–real estate; investments in retirement accounts) – total liability (mortgage, car loans, credit card debt etc..).
Accessible Net Worth, as defined is Net Worth – Equity in Primary Residence- Equity in Vehicles owned
Liquid Assets/Debt-Ratio, defined as the ratio of Liquid Assets (cash + securities in non-retirement brokerage accounts) to the net Debt
Cash Reserves, measures the amount of cash I have relative to those required to run house-hold expensese for two-years.
It should be evident from above that as far as these metrics are concerned, I have a runway of atleast 2 years before I will feel the need for taking a dips into my investment portfolio or make drastic moves to sustain AVI family life style. I have sufficient cash buffer, manageable debt and comfortable net worth cushion.
I have been in this position for better part of this year (not withstanding the market downturn we have witnessed in 2022) and as a consequence my motivation to systematically track these metrics and update blog has been going down. Even so, I dragged along tracking personal finance metrics , moving from a frequency of 4 monthly posts to two monthly posts to one and eventually zero for the past few months! I went into hibernation mode, primarily to figure out what it is that I want to aim for in the next phase of my personal finance and investing journey!
Some of my close friends are aware that I was always interested in investing and had an intrinsic desire to be a full-time money-manager starting out managing my own family funds to begin with and eventually opening up the fund to seek outside capital. I feel now is the time to take first steps in this direction.
I am inspired by the story of Mohnish Pabrai, who inspired by Warren Buffett, started out his investment fund, pabraifunds.com, coming into the field of investing from a tech-IT background. He started investing his own funds in 1994, starting out with ~1 Million and growing that to ~13 Million by 1999, when he started his money management fund!
While, I cannot claim to have success that mimics Mohnish in the years he was diligently following the “rules of investing“, as espoused by Warren Buffett, I have experienced some success, managing a small investment fund and tracking my performance for the last 5 years, following a subset of these rules coupled with `the framework of contrarian value investing.
Not withstanding the fact that I was tracking an investment portfolio ~10X smaller in size relative to what Mohnish started with, over the last 5 years, I have managed to beat S&P 500 index handily (annualized returns of 15.87 vs. 11.82 % for S&P 500) with risk-adjusted alpha of 5.41.
In the last 5-years, we have seen a lot of market volatility– not withstanding the growth in FAANG stocks, to the pandemic crash to the post-pandemic meme stock rally to the eventual bust of high-flying growth stocks! At macro-level, we have gone through a period of low inflation, boom in housing market, low interest FED put environment, to massive Covid-19 induced FED stimulus, to eventual rise in inflation and FED tightening, the Russia-Ukrain War, and the upheaval with supply-chain problems.
Through it all, my portfolio has consistently beaten S&P 500 index! While these results are now history and in no way shape or form may be indicative of future performance, they do give me the confidence to scale my efforts, both in terms of dollar amount invested and the time commitment, making the enterprise of investing a full time gig for me!
As such I will be embarking on a new journey of “serious” money management and hence forth will focus this blog on writings detailed report on my investment thesis for particular stocks that I may initiate a position in or exit out of a given position. My goal would be to write these reports about a month or so after I would have reached the desired level of portfolio allocation for a given equity in my portfolio.
I will continue to occasionally pen articles on personal finance, though more and more, the blog will focus around investing topics–investment philosophies; business principles; investment books; sound investment business principles etc.
In summary, I am out of hibernation and am looking forward to next phase of the evolution for this blog, focusing on my journey as a money manager!