Time in the Market’s 2017 Year in Review Extravaganza

2017 has passed on, it is no more, it has ceased to be so it’s time FOR THE 2017 YEAR IN REVIEW EXTRAVAGANZA. 

What makes this an EXTRAVAGANZA? Will there be fireworks and fried dough? No, there won’t but there will be graphs and things like that and those are just as good; some might say better.

Thanks for the support bear friend.

Since I’m a resourceful chap, I kept track of my portfolio, dividends and expenses on a monthly basis. Now that the year is over and the December data is in, I can take take that data and compile it into a yearly view.

Don’t get too excited yet because there’s more than just that. I’ll also take some of this data and break it out into quarterly views and even calculate my portfolio performance for the year. Now we’re talking; it’s a party and everyone here is excited!

Let’s take a look at my portfolio first.

Portfolio

My last portfolio review covered most of the bases on this topic. Still, I want to take a deeper dive into what happened during 2017. I don’t track data based on the first of the month so I don’t have a 2017 only view but 1/8/2017 to 1/7/2018 is close enough.

The portfolio grew from a total of $372,838.70 to $499,535.04 during the course of the year. I used the power of mathematics to get a 33.98% growth rate but that includes contributions made during the year. Those totaled up to $35,856 in that period and included both my contributions and what my employer contributed to my 401k and HSA.

It’s really freaking awesome to see my portfolio grow by over 125k despite only putting 35k into it this year. That’s a bull market for you and really speaks to the power of staying in the market. There were plenty of people saying the market was overvalued going into 2017 and if they sold out, they would have missed a massive year like that.

The actual return of my portfolio without contributions was 24.3%! That’s great considering the S&P 500 returned 22.6% in that same period. I wouldn’t say the S&P 500 is a great analogue considering my asset allocation but it is A comparison.

Stocks were the obvious winners this year and bonds and REITs were the laggards in my portfolio. The fact that I beat a 100% stock allocation with a 10% allocation to REITs and a 7.5% to bonds and while holding some cash makes me feel really solid about my performance. Those two asset classes returned less than 5% for the year so it’s clear that my other assets picked up the slack.

Most of my money is in ETFs and index funds in my 401k and Roth IRA. The rest is in a taxable stock account where I mostly hold individual stocks.

That individual stock account was up 42.8% for the year. I’m a stock market genius! In all seriousness, I only hold a few securities any given time and those just happened to outperform the market. It could just as easily move the other way which is why most of my money is in index funds and ETFs.

My best performer yielded a 300% return and it was a small position in ATVI LEAPS opened in 2016 and closed out recently as it was due to expire. I currently also hold a LEAP in JD.com that is up nearly 100% since purchase and contributed to the 2017 results. I’ve had good success with LEAPS in the past but only purchase them when I want to have exposure to a stock in an asset class where I’m already close to my target.

Both of these were very small positions so while they did swing the returns up, it wasn’t a major swing. What drove that more than anything were my two biggest holdings. Apple and United HealthGroup which both had a 40%+ return for the period. Those two positions make up 65% of my individual stock portfolio.

My biggest laggard was MSG which was essentially flat since I bought it earlier this year.

Overall, I’m very happy with my portfolio this year. I can’t expect this type of year all the time but I’ll take it when I can. There were 0 months where my portfolio decreased in size and 9 of the 12 months grew by more than 10k. I can’t complain about that.

Dividends

My last dividend update showed that I ended the year with $8317.30 in dividends. That’s an 18.42% year over year increase.

The dividends mainly come from tax-advantaged accounts which is ideal for growth. That means I don’t have to pay taxes on most of them and can enjoy the full benefit of compounding.

73% of my dividends came from tax-advantaged accounts. That number is down from 74% last year due to the growth of my taxable accounts. Now that I’m maxing out my 401k, HSA and ROTH IRA on a yearly basis, I have extra money to pump into taxable accounts every year which means this number might decrease going forward. That’s despite the fact that most of the securities I buy in those accounts pay a lower yield.

The 18.42% increase this year is great but I also like to see how it breaks down quarterly.

My approach to investing includes a lot of index funds and ETFs. Those typically pay out in quarter ending months and also often in December. That means Q4 is always my biggest quarter and that didn’t change this year. The first three quarters grew at a rapid clip but that growth slowed down in Q4. One of my funds that typically only pays out in December also paid out in June which limited growth in the final quarter. The overall result was still solid and every quarter showed growth so that was exciting to see.

Steve, my dividend employee also had a good year. I like to track my dividends on the basis of an hourly wage. It’s a fun little activity that helps me see how close I am to being able to live off my dividends if I ever wanted to do that.

Steve’s hourly wage was up every quarter and he earned $4.16/hr versus $3.51/hr in 2017. That’s not quite enough to live on but it’s improving and that’s all I can ask during this phase. The best part is all this money is reinvested right into stocks and bonds and will help this number grow even more in 2018.

Gross Savings Rate

One of the things I track is how much of my gross income I’m saving. This is an important metric and the long term goal is to be saving 1/3rd of what I earn.

I saved 31.3% of my gross income in 2017. This number goes up 36.1% when I add in employer contributions. It’s not quite 1/3rd of my income before contributions but not too far away.

It’s also a marked improvement over the 28.2% I saved last year. To be fair that number didn’t include January or February as I started tracking this data in March of 2016 and those months are usually not terrible and would likely bump last year’s number up.

Savings Rate

The savings rate is an important metric when it comes to financial Independence. The idea is to save as much as you can while maintaining the kind of life I want to live when I get there. There’s no point in being a miserable person now on the basis of some fantasy life I may be able to live in the future. I’m trying to find the life I want first then start saving for it.

I’m not sure any of us can be perfectly happy about everything but I think I’m in a pretty good spot right now. Hopefully the savings rate is there to help me continue this life later without having to work forever.

I saved 42.18% of my net income this year. That number bumps up to 48.72% when I include my employer contributions.

I had a pretty great time this year, I traveled a bit, got engaged and did a bunch of other cool stuff. That means my savings rate may not be as awesome as some of the other people in this community but I was pretty proud of the results.

That compares very favorably against the 38.5% I had last year but again that didn’t cover the full year. My spending didn’t change much this year from what I can see. I made a more concerted effort to avoid restaurants and save more towards the latter part of the year when I knew my savings rate was behind my goals.

In some areas, I’m sure it went up due to some engagement and wedding related expenses. The reason I was able to save more despite this was because of a boost in income due to a change in role at work. My income still isn’t anything to write home about but it definitely allows me to live a comfortable life and save quite a bit so I’m happy with it.

I believe it’s very important to keep a good work/life balance and my job is great for that. There’s nothing better than being able to leave your job at 4:30 and not be too stressed about anything. I’d take less money for that any day!

Listen to the bear guys. He has a wealth of knowledge. Speaking of wealth, I won’t be wealthy if I spend too much so let’s see how I did there.

Expenses

My savings rate is just north of 42% so the rest of the money is going out the door somewhere. That’s just typical money behavior, always jumping out of my wallet when I least expect it! Since I really like the way the Sankey lays out the expenses, I’m going to keep using it to show my outflows.

Most of my net income(gross income – taxes/FICA) is going into savings which is always good to see. My income this year was also boosted by a tax refund(which means I overpaid the year before) and some book income that kept coming in despite me being lazy. It’s nothing huge but I’ll take the extra few hundred bucks any day!

Besides savings, the rest of my income is going into these areas.

Rent is my #1 expense and that’s due to living in a relatively HCOL area. Dumpy apartments in this area start at $1200! That’s not San Francisco or NYC prices but it’s a expensive for what you get for that price. I pay a decent deal more than that but am lucky to split the rent with my fiancee. It’s not a 50/50 split but one based on our earnings and her contribution makes this place a lot more affordable from my perspective. It’s all one pool since we’re getting married but right now I’m tracking things from the perspective of my income so that’s how it’s shown here. I put a big emphasis on a comfortable and safe living place and like the fact that our place has nice walking areas for our dogs and is halfway between our respective employers.

2018 may bring some changes in this area as we’re looking for a house right now. That means the payment may go up as the prices of homes in this area are pretty high. We’ll be putting 20% down but the mortgage and property tax may still eclipse my current rent. We’ll see how that goes but at least I’ll be building equity and lock in a price as rent has been going up 2-3% per year.

The car is my #2 expense and includes my car payment, car insurance, taxes and maintenance. I’ve got just north of 6.5k left on my loan which is due to be paid off in 2019. I’ve been throwing additional payments at this thing despite the low interest rate. I like the idea of being debt free again. I may just pay it off entirely in 2018 and can’t wait to see what that does to my savings rate in 2019. I’ll still have car expenses but they’ll certainly be a lot lower after the loan is done.

Health is #3 and includes supplements, doctor visits, tests and prescriptions. I had some expensive tests done this year that put me within dollars of meeting my deductible. That’s great for the insurance companies but not so great for me. Thankfully, everything looked good so that’s excellent news. Health is certainly not something one wants to cheap out on as it’s one of the most important things to keep in check. Retiring early won’t be great if you feel like crap!

Restaurants are #4. I actually spent more money eating out than eating at home despite the fact that I eat only out once a week on average. That’s a crazy little stat. I probably eat at home 20x more than I eat out! I did take two trips this year to Nashville and Colorado. The first one included quite a bit of eating out. We stayed in an airbnb when we went to Colorado and that was pretty key in keeping costs down. We could get groceries and had a kitchen to use while there which limited eating out. My fiancee impacts this number as well. This number would be higher if she didn’t pick up the tab from time to time.

Groceries are #5 and this is something we split 50/50 with my fiancee. That certainly helps keep this number lower as well. This year, we mainly shopped at Trader Joe’s. That’s a change from last year which included a lot of Whole Foods trips. I still shop there occasionally but a lot less now. I find that the food in Trader Joe’s is similar in quality but it’s much cheaper so it’s definitely worth the switch. The only area where it lacks is in the quality of meat and veggies but those are still reasonably good.

Travel is next at #6 and included trips to Nashville and to Colorado to see the eclipse. I wrote about that second one here. Traveling is something I want to do more of but it’s difficult to plan things with the small amount of PTO my fiancee gets. We do plan to take an extended trip to Hawaii for our honeymoon this year and I’m pretty excited to explore that state.

I won’t go into detail on the other items but here are a few highlights. I got engaged this year which included a ring that my girlfriend picked out. It’s a pretty blue stone with some diamonds and didn’t break the bank. I spent entirely too much on my internet and phone bills but had those reduced mid year and spend a ton of time on both so can’t really drop them. Entertainment included the first down payment for the wedding venue, a category that will likely spike next year due to the wedding costs.

Pets are great and the cost there is a fraction of the benefit I get from owning a dog and a bunny. I spent entirely too much on Parking for work since I work in the city. That’s offset by the fact that I pay entirely too little for health insurance since my employer picks up the tab for most of it. I also spent some money on my side hustle and website this year. My book income covered the writing related expenses but my website had 0 income. I added some ads to the site this year to cover the costs of running the website.

Overview

This was a good year. The financial highlights are below.

  • My portfolio grew 33.98%. That was driven by contributions but also great performance. Thanks 2017 stock market!
  • My overall portfolio was up 24.3% and my individual stock portfolio was up 42.8%! I’m more than pleased with both numbers.
  • Dividends grew to $8317, an 18.4% increase year over year. Steve’s hourly wage is up to $4.16/hr. He’s still got a ways to go to be self-sustaining but he’s getting there.
  • I saved 31.3% of my gross income and 42.1% of my net income.
  • Rent, car expenses, health, restaurants and groceries were my top 5 outflows for the year. I have the opportunity to improve that next year and look forward to 2019 and the loss of my car payment.

We’re only a few weeks into 2018 but I’m still pumped from the year I had. It was a good year professionally as I transitioned into a more managerial role with higher pay and more responsibilities. It was great personally as I got engaged to an awesome girl and had some fun times with friends and family. You also can’t beat the level of returns I had this year.

I don’t know what 2018 will bring in terms of my portfolio. I do know that I have some great times ahead in my personal life. There’s the wedding later this year,a honeymoon, a potential house purchase and other things to look forward too. Then there’s the rest of my life after that to spend with an awesome person.

Beyond that, this year I plan to spend more time on this blog to try and grow the reader base. The goal is to get back into my side-hustle of writing as well.

Looking at this data and what I did in 2017, I see some great results but also see opportunity for improvement. It’ll be hard to beat 2017 in terms of returns but there’s certainly a lot of personal milestones(like getting married) that will make it an awesome year no matter what happens in the markets.

Thanks for reading and thanks for hanging out with me during this journey. This brings the 2017 YEAR IN REVIEW EXTRAVAGANZA to an end. I hope it delivered all the graphs you dreamed of but let me know if you wanted to see more.

Hope your year was as good as mine and here’s to a great 2018!

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21 thoughts on “Time in the Market’s 2017 Year in Review Extravaganza

  1. Haha, loved this post Time “thanks to the power of mathematics”… Congrats on a great year, super portfolio performance, massive savings rate and Steve now almost at the minimum hourly wage? 2018 should be a good one.

    Glad your medical tests all came back aces 🙂

    1. I’m definitely excited to see how 2018 goes. I don’t think we can expect anywhere close to these type of returns but anything above 0 would be welcome!

  2. Man! This is an awesome update. Probably one of the most detailed and well thought out updates I’ve seen. Amazing job overall managing so many things in your life and still have to save and invest.

    Congrats! on a great return on your investments and boasting your income. Work/life balance is so important as it is not just your time but also level of stress that needs to be balanced.

    Anyway, very impressive work! Will be looking forward to reading more of your posts.

    Take care

    1. Thanks Mr. ATM! I agree that work/life balance is key and one of the biggest things that comes with living a content life.

  3. A numbers explosion! Lots to detail to go with it… nice post. 2018 is all lined up to be a banner year for you, despite what the market might do. It looks like $10K in dividends could be a possibility this year if things pan out. Wouldn’t that be sweet? Cheers.

  4. A good year indeed! Congratulations on the engagement and that new managerial role.

    I hope Steve leaves work at 4:30 too considering his $4.16 an hour wage. What a trooper.

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