Its been a while since my last and the only post for 2022! I ended that post with a confident claim that my portfolio is designed to pull-through market volatility and the impending correction that would ensue the hawkish stance that FED may persue in response to increasing inflationary pressure.

Top two investments in my portfolio are Meta Platforms (FB) and Berkshire Hathaway (BRK-B). Of all FAANG (or MAMMA) stocks, I always believed that FB was conservatively valued discounting for the expected future growth for a large-tech firm. How wrong was I and what a wake up call! 4th quarter FB earnings came in below analyst estimates– at $3.67 vs $3.84 and the Daily active users (DAUs) came in at 1.93 B vs 1.95 B expected. The later number was a big-deal, as for the first time its 18-year history, did FB see DAU numbers decreased!

The consequence, FB stock fell >25 % on a single day, wiping out ~$232 B, biggest single day decline in market value! My portfolio was not spared by this decline and when >10 % of portfolio is invested in one stock, a single day decline of >25 % for the stock most certainly hurts!

The massive drop has resulted in me re-evaulating my pain threshold and my conclusion, I do not want to ever experience such a massive single day decline in my highest conviction stock investment! What that means in practical terms, I may never grow my investment to be >10% of portfolio at cost!

The only exception, I foresee to above rule is investing in Berkshire Hathaway. Since going public in 1964, Berkshire has never seen a single day drop >20 %, the worst being ~18 % on black-Monday in 1987 and ~12 % during the financial crash of 2008!

That said, lets look at the impact on AVI family net worth.

• The drop of ~4 % in non-retirement investment portfolio, is entirely attributed to the massive drawn down in FB stock in the last week
• As we will see below, the markets– esp tech stocks with no tangible earnings has gotten shalacked— but my portfolio but for FB stock has withstood the beating! If anything the retirement investment portfolio, which is pre-dominantly diversified ETF portfolio, has ecked out some gains
• I am pre-loading 401K investments and the gain of ~5 % in that account is primarily driven by new moneys added to the account
• I am consistently paying down mortgage and the number is now down to only 13 % of Avi Family FI number.
• The value of Avi family primary residence is now close to 60 % of Avi Family FI number. Here’s an example of house recently sold in our neighborhood. The property is 2000 sq ft house with 3 bedrooms and 2.5 bath. It was listed on Jan 19th 2022 for $1,088,000 and was sold on Feb 7th for $1,345,000, that more than quarter-million dollar over asking price! What!!!!
• Thanks to the insane growth in home prices, inspite of a massive portfolio hit, AVI family net-worth seems to have increased by 1.83 %

And here are the key FI-metrics

• Net Worth (as percentage of FI number): 145.61
• Accessible Net Worth (as percentage of FI number): 86.14
• Liquid Assets/ Debt Ratio: 5.303
• Cash Balance/Two Year Living Expense Ratio: 0.81

Cash balance has now gone down below the minimum required for 2-years worth of living expense. With inflation raging at 7.5 % and growing.. holding cash is a big drain on finances! As such, with a stable job (atleast for the time being) and predictable monthly cash-flow, I am feeling rather comfortable holding less than 2-years worth of cash on hand! Moving forward, my ideal will be to target cash-balance ration to 0.5, i.e. one-years worth of living-expense!

Lets close out todays post with a fascinating chart, highlighting the risk of wishful-investing!