At the end of last year, I noted the fact that we were about to end an entire decade with no official bear market. How fast did that change in the new year! From the peak market valuation reached on February 19th 2020 to the market nadir on March 23rd of 2020, the markets (S&P 500 index) fell ~ -34 %, only to rise from the ashes to close ~16.3 % higher for the year end!

The Feds and the Congress took quick and unprecedented action to support the economy during the worst of the pandemic. Back in April Powell, the Fed Chairman said “We are deploying these lending powers to an unprecedented extent [and] … will continue to use these powers forcefully, proactively and aggressively until we are confident that we are solidly on the road to recovery“.

The message to the markets was loud and clear. Bouyed by these actions, investors began dipping their toes in the markets again and soon the markets were off-the charts! Pandemic stocks such as Amazon, Netflix and Zoom benefited from the lock downs and retail investor driven rally led to Tesla to become more valuable car company than the top seven combined! While investors and tech billionaires have in particular enjoyed the upside of Fed largess, low-skilled, women, minorities, the young and small businesses have all suffered through the pandemic.

As for the AVI family, as noted in my last post, we fared reasonably well. Infact, as we will see in the charts below, 2020 has been probably the best year for AVI family in terms of percent increase in AVI family net worth!

Below’s the comparison of the key net worth metrics vis-a-vis where we were on the 1st Jan of 2020 (Note: NW numbers are presented as fraction of AVI family FI number (100 as a baseline))

AVI family net worth increased by 29.91 points or 47.8 % in 2020. The key contributors to this gain can be analyzed by looking at the income/expense equation for the year as follows:

• Employment Salary for Mr AVI: 8.61
• Employer Stock Equity Vesting for Mr AVI: 9.62
• Mrs AVI Business: 0.97
• AVI Portfolio Investment Income (Div + Interest): 0.78
• AVI Portfolio Investment Gains: 4.15
• Annual Living Expense: 4.75

The sum total of taxable income minus the annual living expenses contributed 19.38 points towards NW gain and the remainder came from unrealized portfolio gains and growth in home equity for the year!

I am very pleased that AVI family was spared life-style inflation, (some examples of potential expenses that may ultimately happen: home renovation, luxury travel, new electronics, fancy clothes, expensive sports equipment, pamper gadgets–massage chair) and as a consequence the increasing family income was a significant contributor to the massive gains that AVI family saw in NW for the year 2020!

A look back into the evolution of net worth and the investments over the year can be had through the chart below

• Home equity was a major contributor to NW gains in 2020. The big jump around May was the result of mortgage-refinance and the simultaneous payment of additional principal mortgage dues. In addition, every month I have been diligently paying down extra principle towards mortgage payment. This fact coupled with a nice gains in house prices in our neighborhood were the key contributors to the observed gains in home equity.
• The second highest contributor to NW was the significant increase in AVI active portfolio investments. Part of the gains in active investment portfolio came through timely cash injection into the markets. Market-cycle reversal into value-oriented stocks that seems to have started around November has for sure added a nice booster to the observed gains.
• For better part of the year until later August, I was cash negative, relative to the start of the year. My goal is to always sustain cash balance to sustain 2-years of living expenses and in general the time-series of cash should be less volatile. It was certainly not the case in the earlier half of the year. However as markets have recovered, I have managed to sustain some stability in the trajectory of cash in my accounts.
• Retirement component of AVI portfolio has seen sustained gains, recovering nicely with the overall markets

Summary, atleast from a financial perspective, the year 2020 has been a massive success for AVI family, that too without partaking in any of the market manias that we witnessed in 2020!

What about other items on the wish list from my last post on this topic at the end of year 2019?

• Read atleast 6 books for the year: Lets see, I managed to finish 3 of the Stock Market Wizards book: Market Wizards, Stock Market Wizards and The Little Book of Market Wizards; I read two books on wealth: The Geometry of Wealth and The Laws of Wealth (my favorite book for the year); finished 80 % of technical book on options trading titled, Option Spread Trading, a Comprehensive Guide; read through two non-fiction, non-finance books: Freedom at Midnight and The Complete Tightwad Gazette (a fun though some what quirky personal finance tips book) and read two books on Finance-Whiz Kids by Gregory Zuckerman, The Greatest Trade Ever and The Man Who Solved the Market and finally am done through about 40 % reading of The Practicing Stoic.
• Write More: Well, here I regressed to writing less. My original goal for this blog was (and still is) to write atleast one article per-week. However, in the pandemic ensued work-at-home environment with two children home-schooling, it was near to impossible for me to manage my day-work during regular working hours and have spare time to put pen to paper. As such, my frequency of writing suffered! Unless we get out of this new life-schedule, I do not see this changing anytime soon in the new year!
• Work on improving note taking and knowledge retention methods: Atleast for electronic material, I have figured out a way! Keep summary of important articles, and links on Whatsapp! Whatsapp desktop application serves as an excellent tool for me to log articles that I want to read and refer back to.
• Get health in order: Pathetic is all I can say. And its not for lack of trying. I tried to get onto the bandwagon of fitness apps, got myself annual subscription of Sworkit as well as Fitbit Premium membership. I bought starter weights, yoga mat and nice pair of shoes! The plan was to spend atleast 15 minutes everyday following the exercise plan suggested by Sworkit (and/or Fitbit). Alas, my exercise-regimen lasted but 2 weeks! I also had plans for regular walks in our neighborhood, which I must say I followed more diligently than exercise! However, even that in aggregate would less than a quarter of days in the year! Not all is lost though, in the new year, I still have my Sworkit subscription and so do all the accessory that I purchased. All I need is a routine!
• Grow net worth to 3 quarters of AVI family FI number: Nailed it!

50 % success, I can give myself a pass! Moving into the new year I want to

• Read atleast 6 books and summarize the learnings: I want to not only read 6 books, I also want to enhance my note taking ability and find a way to neatly summarize the key learnings (even if it is of entertainment value). No matter how hard I try to diversify the genre of books that I should read, I invariably tend to gravitate towards Finance and Investment related books. So be it, my goal simply will be to read 6 books and summarize the learning!
• Get health in order: No excuses here! My goal will be to make a conscious effort to identify a routine for exercise and daily walks, convert it into a habit and stick with it!
• Grow net worth to FI status: If the last two years is anything to go by, and unless markets experience a massive and sustained correction into bear territory, this goal should be amenably achievable.
• Grow viewership for the blog: This is a non-goal per se. But it sure would feel nice if some of the folks who read my blog updates regularly and find them useful share it with their peers and friends. Organic growth of blog and awareness of personal finance, and DIY-investing to grow and sustain wealth is something that I believe is within reach of every ordinary joe such as myself! So folks, please help out here!

Lets see how I fare on each of these one year down the line!

Video/Book/Article/Audio for the Week

• Podcast: I discovered two new podcast in the past one month! The Tim Ferriss Show and Against the Rules with Michael Lewis.
• Blogs: In 2020 I have been quite a regular reader of these blogs (and for whatever reasons, I never referenced these on my own blog),I Retired Young maintained by David Cox, The New Dark Age maintained by William Bowles, Practically Independent maintained by Jay Rigler, Gentleman’s Family Finances (I actually do not know the real name of the person who maintains this site) and finally, Modern FImily maintained by Court and Nic.
• Article: Checkout the 2020-Global Wealth Report by Credit Suisse.