I did a live stream where I talked through all this as well. It is here:
Mid-Year Financial Plan Update (July 2021)
I usually update my financial plan twice each year. During my mid-year update (this one), I usually take extra time to assess where I’ve been over the past year (and if I’m still on track). During my year-end update, I usually determine my updated goals for the coming year. It is a plan that has worked for several decades. I update a VERY nerdy spreadsheet that has all kinds of numbers dating back to the mid-1990s. Recently I decided to write this down (for my own sake) and to share it (in case anyone else might find it useful). I also might pop on a live stream later to discuss all this.
Major Financial Planning Drivers
- Earn It – Earn as much as we can for as long as we can. Figure out ways to keep income coming in for as long as you can. Maximized your income and earning the highest amount that you can earn.
- Spend It Wisely – Consistently spend less than you make. It helps if you have hobbies that don’t involve spending money. Hint: it isn’t how much you make, it is how much you spend.
- Save It – Save regularly and automatically. Pay yourself first. Be thoughtful when you receive windfall/unexpected money. This grows much more important if you can’t earn for a long time (or in very high amounts).
- Invest It Wisely – Most people think that is investing is complicated or requires them to find some incredible investment. On the contrary asset selection/allocation is one part of the equation. Managing your investment expenses is likely much more important. Tax efficiency is the area most people spend very little time and energy on but it is the most important part. I have no question about this.
Two of the items just require you to do it (earn and save). Two require you to use your brain to make sure you are doing them well (spending and investing). They all take time and effort if you intend to do them well and to prosper financially.
I think if anyone does any one of these things exceptionally well he can have a very good financial life. I think if anyone does each of these reasonably well they can have a very good (and balanced) financial life. None of these things are rocket science. Like anything they just take time, thought, discipline and energy. I try to spend time on them regularly (hence the reason for annual updates like this one).
Major Recent Actions
- Worked And Then Worked Some More – Emily and I were lucky that our jobs remained in place throughout the pandemic. We are currently busy keeping up with normal bills as normal people do. We are also cranking through the 5th year of having two kids in college at the same time. We do our best to travel as much as possible but in reality, all we do is work. The past year has been fairly draining on the work front. I’m not complaining too much, however. We are fortunate to be able to work and contribute with our skills.
- Continue Funding Tax-Advantaged Accounts – We fund IRAs and an HSA (which we use for retirement and not medical expenses). I’d fund a 401k too except neither of our employers offers one. Few things in life make me happier than taking money away from the taxman! I run a pretty tax-efficient investment portfolio. But putting as much money as possible into tax-advantaged accounts is the best way to ensure near-perfect tax efficiency. Managing your investment fees is important. Making sure you invest in the right things is also important. I believe both are of minuscule importance to managing your investment portfolio’s tax efficiency.
- Converted Savings To The Bitcoin Standard – In very early 2021 I decided I was done with holding any amount of cash in a savings account earning no interest. I converted our savings to Bitcoin and moved it to an interest-earning account. I’m now on a Bitcoin Standard. I’ve never liked having too much money sitting around idle in an account earning next to nothing (which has been the case for well over a decade). Due to this, I’ve been entirely too cash lean throughout most of my existence. The thought of cash being inflated away (guaranteed) was much more disturbing to me than managing my way through a short-term cash crunch that might arise (maybe). This was a life-changing light switch that has been flipped for me. I now get very excited about running a budget surplus each month so that I can save the leftovers. This is the first time in my life I’ve ever enjoyed saving money. I’ve always done it begrudgingly, but now I do it with much excitement. By the way, I’m well aware that the price of Bitcoin gyrates wildly (which is not how a savings account is supposed to work). Got it…I’m good! I’m currently investigating a new ‘solution’ that promises to more closely mirror a traditional savings account.
- Refinanced Home – In early 2021 we refinanced our house to decrease the interest rate (again). I also took cash out so that I’d have less equity tied up in the home. I have no desire to have a paid-off house (along with a large pile of money tied up in that asset). I’d also rather have non-callable house debt than any other type of debt. In 2020 I convinced myself that I needed to finance some vehicles to make myself stay ‘fully engaged’ in working hard. If Deano has lots of bills to pay, then Deano better get his butt to work. Once I flipped the switch and converted to the Bitcoin Standard I now have all the motivation I need to stack as many Sats as I can each month. I refinanced the house, took out lower interest money, and paid off the (higher interest) loans. I continue to maintain a very conservative debt load (in relation to both my income and total assets). If rates continue lower and house prices continue to rise I’m sure I’ll repeat this exercise in the future.
Deanco Investment “Group” Update (July 2021 / Month 44)
I started keeping track of my investment portfolio back in October 2017. It has helped me greatly to track and write down my thoughts, each month, over the past 44 months. Again, I’ll share in case anyone might find this useful.
Major Portfolio Drivers
- We Are All Along For The Ride – Not a single person on this earth knows with any certainty what is going to play out in the financial markets. The global financial system is, in my opinion, the ultimate AI (Artificial Intelligence). It knows more than anyone else and prices that information into everything, all day, every day. We don’t have a chance at outdoing that. I try to remain educated on things and I have ideas on what I think may happen. I fully expect that none of that will do any good, whatsoever. Mr. Market will do what he/she wants. We are all along the ride! I direct my investment portfolio using my opinions, but I try to remain very diversified in case I am wrong. These days, I also try to spend as little time as I can on it. Life is too short to spend extra time trying to make an impact on something that you cannot have any impact on. I work hard to manage my fees, invest wisely, and manage my investment taxes. I can control those things, so I do. Come what may with the rest, I’ll be ready. The past year has been a good preview of what we might expect to happen in the future.
- No Certificates Of Confiscation – I’ve felt like the financial system has been moving in a really bad direction ever since the 2008 financial crisis. When the policy to print money and peg rates at zero was implemented and left in place for over a decade, I knew this was not a good thing. When I started focusing on my investments back in late 2017, I was anxious about it and the impact it was going to have on my life/wealth. I had been anxious for some time. As the markets powered to new highs in 2018 I began to de-risk my portfolio. I remained in this mode for most of 2018-19. When COVID hit and the markets got hammered in early 2020 and I witnessed the policy response I quickly realized that what was likely coming was going to make 2008 look like a cakewalk. The policymakers bluntly state that they are going to keep doing what they are doing indefinitely (and in larger amounts). We’ve crossed the rubicon from uncharted waters (of 2008-2019) into completely uncharted waters where every single government is debasing their currency at the fastest pace ever. My translation is they are going to print the currency into oblivion. I don’t believe they have a choice. I believe any asset that is fiat-based (or a fiat derivative) is the worst place you can have any money held. Bonds, in my opinion, could easily be renamed Certificates of Confiscation. I was sitting on very little cash anyway but I had a bond position. I began closing out my bond position aggressively at this point. By the end of 2020, I’d closed it out completely. I’ve reallocated this capital into mainly commodities and Bitcoin. I’m not sure this is a good answer to all this…but…in my mind, it must be done.
- Uncomfortably Long Assets – I remain ‘uncomfortably long’ assets. Back in late 2020, I decided to get very uncomfortable. I would much prefer to be more conservative and safely ride out whatever happens. I believe, however, if I do that it might wind up being devastating to my investment portfolio (and net worth). Risk ON = very uncomfortably! I wrote about it here: https://deanorolls.com/2020/12/01/im-uncomfortably-long-assets/. The past year has produced wild volatility in our investment portfolio. I expect there will be more of that in the coming years. My bet is it is going to remain very uncomfortable! The fiat money we use is broken and becoming worthless. This is driving all kinds of distortions in all kinds of things (interest rate manipulation, asset prices, home prices, land prices, consumer prices, labor prices, wealth inequality, etc.). I don’t think it ends well or at least without consequence. Regardless, I know I need to 1) stay as far away from fiat derivative assets as possible and 2) prepare for a wild ride. I’d much rather not do this (which is why it will be uncomfortable). That said, I don’t see an alternative that works out well over the long term. Watching my portfolio gyrate wildly is the price I must pay to remove myself from the “safety” of watching my portfolio not gyrate wildly but have its purchasing power rapidly eroded. I think people who didn’t have assets got left behind after 2008. Likewise, I feel like if you don’t have assets as of mid-2020 your wealth is being obliterated. This is most impactful for those with less wealth (furthering the wealth inequality divide). Things in the world are going up in price faster than you can earn to keep up. I feel like this in my own life. I don’t think I am alone.
- Bitcoin – Bitcoin remains my largest individual portfolio position (and the only position I am adding to at this time). I’ve spent considerable time/energy learning about it. I think a lot of people should do the same. I’ve added to my original position several times (as I learn more and more). I revisited this decision in March 2021 (as it was trading near all-time highs). I wrote about it here: https://deanorolls.com/2021/03/09/bitcoin-do-i-still-want-to-own-it/. Since then, it is down around 50%. I have not changed my mind at all. Some of the smartest people I know believe in it and are working to drive the Bitcoin protocol forward. I believe it is one of the few remaining good options available for the vast majority of the population in this fiat denominated world. I regularly get choked up listening to technologists and leaders in the space talk about the impact it is already having on the lives of normal people just trying to get by. The vast majority of humans on this planet have no way to store/protect their wealth (in case you didn’t live in America…like most don’t). The open-source Bitcoin protocol is the most perfect solution to this problem. Bitcoin is for billions…not billionaires!
- Coffee Can – I’m becoming more and more comfortable with the concept of buying an asset and putting it in a coffee can on the shelf and never selling it…EVER! A few years ago, this concept was not one I would have embraced. I was constantly looking for new opportunities and weighing them against existing assets. I would constantly reshuffle. I’ve moved away from this. I now allocate new capital into whatever I believe has the best value at that time (or whatever is most out of whack with my target allocations) and then stop. Full stop. Never do another thing again. Just let whatever is going to happen…happen. It is going to happen anyway no matter how much time/energy I spend thinking about it. If scenarios present themselves at some point, I am not opposed to reallocating capital but it is not something I wake up looking for each day, week or month. I have several positions that I believe will be coffee can portfolio holdings in my portfolio. I’ll sell them if/when I need money in retirement, otherwise they’ll just sit there. An added benefit is this methodology is VERY tax-efficient (which is super, super important)!
Ultimately…
“Don’t tell me what you think, tell me what you have in your portfolio.” ― Nassim Taleb (good quote but a real jerk).
Class Target Allocation
I’m not sure I know exactly what my target allocation needs to be right now. I can say that how I am allocated currently has me “less worried” than I have been in years. I sleep like a baby with this portfolio allocation. Even during the March 2020, COVID-related drawdowns, I was not stressed much at all. That hasn’t always been the case across the 44 months I’ve been tracking it (and before). At my age, I feel like I should push my stock allocation higher. Having less than 60% of my portfolio allocated to stock doesn’t feel right. Stocks, however, are more closely fiat derivative than other assets in my portfolio. This has driven their valuations alarmingly high. My safety play is commodities and Bitcoin. I’ll likely underperform stocks over time but I take this trade-off to be a bit more diversified.
Performance Update
My goal, as an Enterprising Investor, is to beat the stock market over a long period (because IMHO it is the best asset class for real returns over long periods). Ultimately, I MUST beat my weighted blended benchmark, however.
The past few years have been a wild ride. Early on I started picking individual stocks to try to mitigate the risks that I perceived existed from “overpriced stocks”. This took a lot of time and energy. I won some and lost some. After doing it for a couple of years I decided I was wasting too much of my life force. I also learned that I was not going to be able to solve the problem of “overpriced stocks” by buying “not overpriced stocks”. I was fooling myself…and working myself very hard in the process. I converted my stock investing model in late 2019 and completed the transition in the third quarter of 2020. I have been completely happy with this new methodology. In essence, I have created my very own index fund. Time will tell if it is a good methodology or not.
When the COVID pandemic walloped the markets in March I was at the lowest cumulative return in the time I have been tracking everything. Since then, the financial markets have erupted higher with no sign of stopping at this time. At one point recently I was outperforming every index I compete against. The recent pullback in Bitcoin (and precious metals) has slowed me down in the past couple of months. Frankly, this was to be expected. Things were moving a bit too quickly. You can’t win them all.
All this wild volatility is THE definition of Uncomfortably Long Assets. It is no fun seeing these wild gyrations in one’s investment portfolio. But, I believe, it must be endured because asset prices will continue to rise (due to monetary inflation). I don’t think they can stop inflating the money so I don’t think it will stop. They have told us exactly what they are planning to do. I trust them (and I’m not a trusting person)!
About Deanco Investment “Group”
There is no investment group, it is just me and my money. I’m just a normal guy who has a full-time job that is not in the field of investing (right now). However, I do have a finance degree and co-founded a fintech investment performance reporting company out of college (in the late 90s). I’ve always been interested in investing and doing it well. I’ve read many of the great investing books and built all kinds of tools/models (and fang-dangled spreadsheets). I’ve been super focused on my investing for the past few years. I began working hard to get my investments into assets that I believe will perform well in this crazy world we find ourselves in these days. I’ve learned a lot and changed strategies the more I’ve learned. It is why I like investing; you can always learn more than you know today and use your knowledge in your investing journey. I try to write down my journey each month and track my performance. It helps me to perform regular reviews on my investments. Since I’m doing them anyway, I figured I’d share. I try to share my investment portfolio, individual investments, and performance (good or bad) each month. This is my July 2021 update (44 months of tracking it).
Writing things down has been a game-changer. No one particularly gives a hoot about me or my money but the discipline of noodling on things and then writing down the thoughts regularly has been extremely helpful. It has also been excellent to be able to come back later and easily remember why I did a particular thing I did.
I do this solely for myself but if you are interested you can read more here: https://deanorolls.com/investing/ I’d love to talk about investing with you. Link up with me on Twitter https://twitter.com/deanoroll5
DeanoRolls (@deanoroll5) 