It has become a tradition for me in the last days of a given year to take a stock of the year gone by through the lens of AVI family finances. These articles follow a fixed structure– I summarize our family financial journey for the year, make a commentary on the markets –highlighting a theme or two that dominated the year and then conclude the article by reviewing new year goals that I laid out in the past year and finalizing the new year goals for the upcoming year.

As I reflect on 2024, my annual financial review carries additional weight due to the significant challenges I’ve faced this year. The loss of my mother after a prolonged illness in mid-December was particularly difficult. As a single child, the pain is intensified by the fact that I was unable to be close to her during her final days on earth and it has impacted the daily life of the AVI family. Throughout this difficult period, I’ve grappled with some of life’s toughest questions, ultimately distilling my experiences into three crucial lessons to help me cope: first, focus on areas where I have control and avoid worrying about things I cannot influence; second, live in the present and refrain from dwelling on past events or future uncertainties; and third, concentrate on the process of achieving goals rather than fixating solely on the outcomes. My hope is these lessons will guide me not only in navigating personal struggles but also in shaping our family’s financial journey in the year ahead.

I can hardly believe I’m writing this—it’s déjà vu all over again! The year 2023 was marked by the impressive performance of the Magnificent Seven stocks, and 2024 has proven to be no different. As highlighted in the table below, for the second consecutive year, these seven stocks have collectively excelled, achieving an average year-to-date return of 70.3% and I venture to guess again that not many active investors including professional money managers could possibly get even close to the returns produced by these mega tech behemoths for second year in a row!

Bears are all on the verge of throwing in the towel. Here’s what David Rosenberg, a prominent economist and a perma-bear of sorts had to say in a recent article titled, Laments of a Bear, “It’s high time for me to stop pontificating on all the reasons why the U.S. stock market is crazily overvalued and all the reasons to be bearish based on all the variables I have relied on in the past“.

He goes on to write, “This is not about throwing in the towel as much as trying to get a grip on what is going on beyond just calling this a “bubble” every single day. There must be more than that to what we have been seeing over the past two-plus years.”

So does David Rosenberg have a point? Is it the case that the large cap growth stock of today are the new value stocks of tomorrow? It may be the case that instead of a bubble we may be witnessing a structural shift in market dynamics induced by the revolution in productivity gains unleashed by AI. It could also be the case that we are very much in the early innings of the AI revolution, where the focus is more on the picks and showels for AI. Once the capital expenditure cycle on AI infra is over and firms are entrenched in deploying AI to all sorts of applications, we will witness the true explosion in productivity gains. While this potential is exciting, the current enthusiasm surrounding AI-related stocks is reminiscent of a bubble–the most prominent example of which is the .com bubble of late 1990’s. As a result, my exposure to these mega tech companies is limited to Google. I do hope that, third time round is a charm and this approach of timing the market pays off some dividend.

However,  I recognize the challenges and risks associated with trying to predict market cycles, especially in such a fast-paced and transformative sector. To remind me of this, I dont have to look far!  Seth Klarman, the fabled value investor got it completely wrong with Tesla over a decade ago when he identified Tesla to represent a prototypical example of market exuberence leading to an asset price bubble. Back then Tesla was valued at $30 Billion and today it is touching $1.3 Trillion!

Getting back to reflections on how the year has panned out for AVI family, below are the key metrics

For a second year in a row, AVI family net worth has seen a healthy double digits increase, though for the second year in a row, the growth is sub-par relative to the gains observed by the SP500 index. The number that I want to particularly focus on in this article is the Adjusted Acc. Net worth (AANW), which stands oh.. so close to 100. Infact the AANW number crossed the 100 mark back in November and I celebrated the occasion by penning the article, “End of FIRE Journey“. AANW of 100 implies AVI family now has easily accessible liquid networth matching the FI number that we decided for our family back in 2019.

Unfortunately for us, we are 6 years too late to the party. The FI number of 2019 inflation adjusted is now ~1.23 times higher, assuming an average annualized inflation rate of 3.57 % in the intervening 6 years. Inflation adjusted the metrics look as follows:

We are  basically back to where we started 2024 with (in terms of fixed FI ratio). As such, we are back to the grind and the call to end the FIRE journey that I made in November, on reflection, now seems a bit premature.

The components contributing to networth evolved over the year as follows:

Funnily enough, the growth in home equity mirrors those of last year. The growth in its entirety has come from draw down in mortgage balance as opposed to growth in asset price. For the second year in a row, we have seen no change in valuation for home price and given where we are in the inflation and interest rate cycle, it is very unlikely that we will see any asset price appreciation for home price in 2025. One more important point of note as far as mortgage payments is concerned, I have removed escrow on my account and as such monthly payments are now limited on Principle+Interest, with me making lumpsum taxes and insurance payment on due date. This change reflects my desire to not allow the mortgage company to eat into the interest earned on my hard earned escrow dollars. As such, a lower monthly payment also means, higher monthly cashflow and a lower desire to pay off mortgage anytime sooner.

Retirement portfolio showed impressive gains rising far above the growth in non-retirement portfolio. The incremental 10 % gains are the result of new money pouring into retirement account, in particular, the self-Roth account of spouse through her business and maximizing 401K contributions by yours truly so as to fully benefit from employer match. Cash saw a spike in March, which was a direct result of annual bonus from my employer. All the money received was immediately spent into the family purchasing their first EV. Since then, the cash portfolio has tracked the my desired level of cash buffer. However, towards the tail end of the year, the cash buffer has slowly ticked up simply because I have been diversifying out of some high flying equity holdings.

Another point worth noting is the bond portfolio that is hidden in my non-retirement portfolio. Over the year with 10 year yield hovering in mid 4 % range, I have significantly increase my allocation to mid/long range bonds. The result, lower effective returns in a year when markets rip-roared! However, I am at peace knowing that the interest payment on my mortgage is now more than covered by the dividend yield of my bond portfolio.

Getting onto the goals for the year, lets review those to see how I fared in 2024.

• Spend more time with Family– 2024 was the year to forget as far as this goal is concerned. While on the surface, I did spend a lot more time involved with family activities in 2024, some problems that are too personal for me to elaborate here resulted in 2024 being the worst year for AVI family. All I can say is anything related to family that transpires in 2025 is going to probably be better than what we went through in 2024. In terms of grade, I would put this goal at barely above passing grade at D.
• Grow Investment Business– Not much progress at all on this front. The AUM growth was dismal in 2024. A big F on this goal
• Focus on Health– Some progress here. I have started to experimenting with regular stretching regimen and have dabbled in some strength training. Coming from where I was in 2023, progress for sure, though not much to call for. Another D in terms of grade here.
• Read atleast 6 books– I finished five books– The Practicing Mind and the Silent Patient and 3 Anthony Horowitz murder mysteries. I started on several books but havent yet finished them– Four Thousand Weeks, Churchill, Cant Hurt Me, The Price of Time, How to Get Rich, One Hundred Years of Solitude, The House Maid, The Art of Uncertainty, and finally No More Mr Nice Guy. While I started several books that remain unfinished in the year, I did manage to increase my intake of non-fiction reading. Especially the Anthony Horowitz series, which took me back to the pleasant memories of good old days of devouring Agatha Christie novels! On the reading front, I sure should give myself a grade A.
• Achieve AANW of 100– The only goal that I did meet (although briefly) in 2024. As of this writing I missed on successfully completing this goal by a hair. A solid A on this goal.

In summary, a rather forgettable year with goals! In 2025 I must do better and given the track record of 2024, better should certainly be achievable.

On to the new year and new goals!

One of the most important changes I plan to make in 2025 is to move the goal post of desire from “Optimizing for Financial Goals” to “Optimizing for Health Goals”. As such one of the big goals for me in the new year will be to track my progress on exercise routines. Having said that, concretely the following are my goals for 2025

• Develop an exercise routine and regimentally follow through out the year so as to make them a habit– Stretching 15-20 min per day; Strength exercise 30 min atleast 4 days a week and cardio– swimming/biking atleast 4 times a week!
• Grow Investment Business — I have take the first steps in this direction by hiring a co-Partner to join my firm with the explicit goal of growing our investment business. I want to diligently focus on this goal this year! Try to get to atleast 50 % growth in AUM in 2025.
• Be more assertive in self desires — I am done living for other and starting from this year, I am going to make it a habit to focus on self first, “Don’t Explain Don’t Complain” is going to be the motto by which I am going to live by in 2025.
• Spend increasingly quality time with Family— The mistake in writing last years goal around family I made was to omit the word “quality” from the goal. While I did spend a lot of time with family in 2024, I cannot say it was a quality time spent together. Work to do on this front and a key focus in 2025.
• Finish Reading atleast 6 books — This should be easy. I have atleast 9 books partially finished, which I intend to read through in 2025.
• Achieve AANW of 100 on an inflation adjusted FI terms— As I noted earlier, inflation adjusted, we are still no where close to truly achieving FIRE. After two bumper years of NW growth, the level of gains required in 2025 for me to achieve this goal has low odds! And in an ironic way, if I have to make predictions— of all goals this goal will probably be the one where I will get poor grades when it comes the time to review the progress.

And there you have it—another year wrapped up! For me, it has been a largely forgettable year, though I am looking forward to the new opportunities in 2025 in the hope for a positive change in fortunes on a personal level!