Sunday, January 26, 2020

Year 2018 in Review

No. That's still not a typo. I'm really going back to look at previous years' performance as I haven't been doing that for a while.
Review of 2017 is here and the review for 2016 is here. 


During 2018 I became a father for the second time which has been awesome in a way words cannot describe. Photo by mulan from Flickr, not my children.


Savings

This chart shows my 2018 portfolio value changes. The end of the year doesn't look too good..
Portfolio valuation and savings. The blue line is the value of my portfolio and the red line is cost of the portfolio, i.e., savings.


Let's look at the numbers for my portfolio cost and value in more detail in a table:



31.12.201730.12.2018change
cost (= savings) 86 392 euro100 069 euro+13 677 euro
value118 336 euro122 966 euro+4 630 euro

Turns out 2018 wasn't a great year. During 2018 I managed to save only 13 677 euros which was down considerably from previous years (2017 was 19 807 euros2016 was 16 127 euros and 2015 was 12 167 euros). 
I can't say that I'd be disappointed with that number but I can't rejoice such a big decrease. That yearly savings works out to be 1140 euros per month

During the year, my net income was 45 151 euros which is roughly the same as last year.
(46 245 euros in 2017 and 37 600 euros in 2016). The net income went down because I paid some of last years taxes now this year, and this explains the lesser contribution also to some extent. I did get a raise at work which meant a couple of extra grands but not enough the outweigh other stuff. 

I also bought a car during the year, which swallowed a couple of grands. I went the frugal route and bought an old cheap clunker but had to make acute repairs to it, costing money but mostly a lot of effort. 

My savings rate for 2018 was only 30% of net income which I'm not happy about. 2016 and 2017 were both at 43% of net income

Growth

2018 wasn't great in the markets either. My portfolio is up in value by 4 630 euros during the year. But this is only due to savings. The market was down about -7.5% during the year which for my portfolio meant being down a bit over 9 000 euros.

2016 and 2017 were both up years of a bit more than 9k, so 2018 wiped away one of those years. Down years are inevitable in investing so I'm not too concerned about the loss.

The below chart shows the TWR return calculation (in green, left axis) and the EUR/USD (in burgundy, right axis) currency rate. It was looking a like a good year until about the start of October but then things went south fast! The year ended about -7.5% in the hole.

My portfolio is quite heavily weighted towards dollar nominated stuff so there's a definite correlation with the EUR/USD exchange rate as seen below.


TWR return calculation (in green, left scale) and the EUR/USD (in burgundy, right scale) currency rate.


Mortgage and net worth

During 2018 I also paid off 5 340 euros of my mortgage. There's still plenty left. As the Euribor rates are super low at the moment, I don't see any reason to contribute more than minimum to mortgage for the time being.

I can't tell yet if this will be considered an investment or not but if it were considered an investment, my total contributions to my net worth would be 19 017 euros or 42% of net income (2017 was 54%2016 was 56% and 2015 was 46%).

My net worth during the year was up about 13 600 euros to roughly 153 900 euros but I don't really track my net worth. I'm mostly interested in my money generating portfolio.


Conclusion

2018 wasn't a particularly good year. Neither for savings or in the market. My savings were hindered by last year's tax trickery, while Mr Market turned negative in October. 

The year was also made worse by me doing tax loss harvesting sales on 28th of December 2018 which turned out to be the bottom of the market, so the worst possible day to make those sales. As a learning point, I should do tax loss harvesting throughout the year, not just on the last days.

Still, with constant dollar-cost-averaging during the year, my portfolio made new records during the year: 120k in May and 130k also in May. 

Outside of saving and investing, during 2018 I also became a father for the second time which has been awesome in a way words cannot describe.

All in all, 2018 wasn't great but it didn't suck either.

Year 2017 in Review

No. That's not a typo. I'm really going back to look at 2017 because I haven't had time or the energy to review my progress. The last yearly review was for 2016. I also plan on doing reviews for later years. 


Savings

This chart shows my 2017 portfolio value changes. 


Portfolio valuation and savings. The blue line is the value of my portfolio and the red line is cost of the portfolio, i.e., savings.

Let's look at the numbers for my portfolio cost and value in more detail in a table:



31.12.201630.12.2017change
cost (= savings) 66 585 euro86 392 euro+19 807 euro
value89 189 euro118 336 euro+29 147 euro

Woot? So, during 2017 I managed to save an astonishing 19 807 euros (2016 was 16 127 euros, 2015 was 12 167 euros). I am really happy with that number. That's 1 651 euros per month.


During the year, my net income was about 46 245 (37 600 euros in 2016). The big gain in net income is mostly explained by me adjusting tax rates. I also got a raise that explain a couple grands of the amount but mostly I adjusted my withholding to be artificially low. Basically this means that I took a short-term investment loan from the government that I'll need to pay back next year. My savings rate ended up being the same 43% of net income as last year

Growth


But I'm even more happy with the next number, the value of my portfolio is up 29 147 euros during the year. That means that the market produced about 9 340 euros or about +9% in gains for me. In euros the gain was about the same as last year but percentage-wise last year was a bit better. But I'll gladly take 9% gains over a long period of time.

The below chart shows the TWR return calculation (in green, left axis) and the EUR/USD (in burgundy, right axis) currency rate. The TWR was quite smooth throughout the year, with most of the gains coming within the September to November timeframe. My portfolio is quite heavily weighted towards dollar nominated stuff so there's a definite correlation with the EUR/USD exchange rate as seen below.


TWR return calculation (in green, left scale) and the EUR/USD (in burgundy, right scale) currency rate.


Mortgage and net worth

During 2017 I also paid off 5 198 euros of my mortgage. There's still plenty left. As the Euribor rates are super low at the moment, I don't see any reason to contribute more than minimum to mortgage for the time being.

I can't tell yet if this will be considered an investment or not but if it were considered an investment, my total contributions to my net worth would be 25 005 euros or about 54% (2016 was 56% and 2015 was 46%) of my net income.

My net worth was up during the year about 31 750 euros to roughly 140 250 euros but I don't really track my net worth. I'm mostly interested in my money generating portfolio.


Conclusion

2017 was a good and busy year. I made a withholding tax trick that allowed me to put more towards savings. I might write about that in some later post. In the markets the year was a pretty good one with my portfolio making +9%. The TWR return shows a pretty boring chart, nothing major happened in the markets during 2017.

I achieved some new record numbers during 2017, including 90k in January, Six figures or 100k in May and 110k in October. All in all, I'm happy with 2017.