1Q2020 Financial Samurai Review: A Brutal, But Beautiful Quarter

Phew! It feels so good to have survived the first quarter of 2020! With the global pandemic raging on and the return of the big bad bear, March surely had to be one of the longest months of our lives.

What started off as a banner quarter with solid investment gains and record high online revenue turned into a nightmare as stocks melted down, families were forced to stay at home, fear and uncertainty engulfed us all, and thousands of people started dying from COVID-19.

Damn you COVID-19! You have temporarily ruined my dreams of a brighter future!

1Q2020 Financial Samurai Review

Given every day seems so long now, for this year, I've decided to go from an annual review to a quarterly review. Because so many things happened this quarter, I know if I don't record what happened, I will forget. Because of all the uncertainty, I also think writing quarterly reviews will help me better prepare for the upcoming quarters.

I'm thankful the stock market has bounced back so strongly in April, however, we'll have to wait until July to see whether we came out of this mess intact. For now, let’s review.

Health (1/5) – Ill For So Long

I went through the longest sick spell of my life. I caught a cold from my son in early December 2019 and didn't completely shake it until the beginning of March. There was a short interval when I was cold-free. But I was shocked when two weeks later I got another one. I don't remember ever having had more than one cold a year in my adult life.

The hardest part about being sick was not being able to snuggle and kiss my baby daughter during her first three months after birth. She could barely see my face because when I did hold, change, and play with her, I always had a mask on. I feared I would spread my sickness to her, and I did. She developed a cough for five days.

The second hardest part about being sick was not being able to sleep soundly. I was already sleep-deprived due to baby night time duty. However, during my off days or the hours I could sleep, I'd often wake up two or three times a night due to a bad cough. I also developed tremendous chest pain due to all the coughing. Each time I coughed I felt like there was a sharp needle trying to puncture my lungs from the inside out.

The final difficulty of being sick was wondering for a couple of months whether I had COVID-19 as the hysteria grew in February. Maybe I did given I had a dry cough for at least two months. Actually, I hope my family and I did get COVID-19 because that would mean we are hopefully now immune.

One evening during the worst of my sickness, I wished I could donate a million dollars to the Financial Gods to feel better. Then, as the stock market started to tank in early March, and my stock losses started mounting. my cold finally went away. How strange! Sorry if my donation served as a catalyst for the meltdown.

Wealth (3/5) – A Disappointment & A Surprise

Despite being relatively well-positioned for a downturn with only about 20% of my net worth in equities, I still ended up losing hundreds of thousands of dollars. It hurt, but at least I was finally feeling healthy again.

The biggest shock was temporarily losing tons of money in municipal bonds. I had purposefully bought a lot of California municipal bonds after I sold a rental property in mid-2017 to diversify and get more defensive.

The decline in municipal bonds was my biggest disappointment because they hadn't acted the way I expected during a bear market. It was a maddening feeling as I did not anticipate economies purposefully shutting down, thereby, hurting municipal revenue. Thankfully, the Fed came out with some bazookas and announced it would do whatever it could to support the bond market.

Because so much of my attention was focused on the collapse in equity prices, I thought my net worth was down closer to 6% given 20% of my net worth was in equities and the S&P 500 was down about 32% at one point.

However, I underestimated the significance of my diversified bond position, which was between 2X – 3X larger than my equity position across my three public investment accounts. I also underestimated the stability of my index-tied structured notes, which hardly moved during the downturn.

Below is one of my public investment portfolios with minimal muni bond fund exposure that moved between -6% to +3% in the quarter. Despite the portfolio barely moving, it sure felt like I was losing all my money with so much focus on equities.

1Q2020 Financial Samurai review

Selling my largest rental property in 2017 really was my ah-ha moment to get more defensive because it sold for a lot more than what I tried to get in 2012. In 2012, people complained that it was on a busy street next to one of the busiest streets in San Francisco. But in 2017, my one and only buyer didn't care. He loved everything about the property. I couldn’t believe it. The sale felt like complete luck!

By the end of 2017, the markets and the economy felt like it was 2007 again so I wanted to protect my wealth and get more defensive.

As a result, my net worth grew 6.5% in 2018 when the S&P 500 closed down 4.4%. But then my net worth only grew 18% in 2019 when the S&P 500 closed up a whopping 31%.

In other words, when times are good, my net worth underperforms and vice versa. When it comes to my investments, I really strive for peace and tranquility since it's already stressful enough being a full-time dad. Further, I’m only shooting for single digit returns because it’s enough to fund our lifestyle. I hate losing money.

For 1Q2020, my net worth closed up 2.5% compared to down 20.6% for the S&P 500 according to Personal Capital. Despite having a defensive asset allocation, the bigger reason why my net worth closed up was that I spent a lot more time trying to generate online revenue after I announced in mid-2019 that I was going to focus less on retirement and more on entrepreneurship. Unfortunately, given my net worth barely moved, I felt like at least six months of my effort was a big waste of time.

I've left all my real estate investments below what I think is fair market value. For example, despite a smaller home on a smaller lot with an inferior view that's next to a super busy street selling for a handsome sum in late-March 2020, I have left the prices of two properties I own in the neighborhood at 10% lower.

Given a lot of my net worth is in private investments, it's hard to gauge my true net worth performance. It could very well be down closer to 10% if we mark to market. What I do know was that at one point, my net worth was up closer to 7.5%. How sad to lose so much progress so quickly.

Financial Samurai (5/5): Kept On Going

Despite the cold, the sleep deprivation, the newborn, the coronavirus, and the stock market meltdown, I kept on publishing a new post three times a week and a newsletter once a week.

I was proud to have not given up during such a difficult time by forcing myself to write between 6:00 am – 8:00 am and after 9:30 pm. But I also got some much needed help, as I will share in the section below.

I also felt emboldened to do my best to help the Financial Samurai community make sense of the extreme chaos that was occurring in 1Q. After all, my tag-line is “Slicing Through Money's Mysteries.” It was more important than ever to provide guidance, calm, and sensibility compared to all the doom and gloom you’d hear elsewhere online.

1Q2020 also solidified my belief that I have the stamina and the desire to operate Financial Samurai for years to come. The acquisition offers I received in 2018 and 2019 were tempting. However, even after 10+ years, I still enjoy writing and connecting much more than the money. The money generated from the site will continue to be a side product not a focus.

But I have to admit, with interest rates plummeting, having a high margin business the government can't force to shut down during a pandemic is nice.

Ideally, I'd love to keep Financial Samurai going until my son and daughter tell me they want to have nothing to do with living a free, helpful, and wonderfully creative life. The world is brutally competitive and stacked against those without great wealth, fame, and connections. All of our preschool rejections (6 total) is a testament to our family’s lower placed tier in society. At least we got into our neighborhood one!

A small family business is one of the greatest insurance policies for our children. However, if they want to try and get good grades to try and get into an overpriced university to try and make a name for themselves, I won't stop them.

Family (5/5): Why The Quarter Was Beautiful

If you ask me what I most remember from the 2008 financial crisis, the first thing I will tell you is taking a family picture on my parent's balcony in Oahu before heading down to the beach for our 16-person wedding.

I can't recall many details of the financial destruction. Despite sitting on the sales/trading floor at a major bank, the good memories of our wedding overwhelm the bad memories of the financial crisis.

However, I do remember being fearful of losing my job as we went through seven rounds of layoffs. And I do remember Lehman Brothers going to zero on a Monday when the government decided not to bail it out that weekend. But to remember the bad times, I really have to think hard.

During the 2020 coronavirus crisis, perhaps the same thing will happen 10 years from now if I don't reread this post (hello 52-year-old self!). I hope my grandkids can one day read this post too about family life under lockdown.

My son and I have bonded a little bit more, but he is still extremely attached to his mother and will often rebuff my love like Jekyll & Hyde. The rejections still hurt, but not as much as they did 6-12 months ago because I'm getting used to it and I also get to spend time snuggling my daughter! Each smile she flashes recharges my battery by at least a tick. When mom is spending more time with the baby, it's only natural for our son to want mom more.

Son in quarantine counting out the days until he'll be free
Son in quarantine, marking down the days until he'll be free to go to the playground again

Although being a stay at home parent to two children under three is difficult, especially when we’re forced to shelter-in-place, I am filled with joy, gratitude, and love every day. I feel extremely grateful that my daughter is healthy because you just never know, especially with “geriatric” births (over age 35). I also had low hopes of having a second kid because it took almost three years to successfully have our first.

If given the option, I would have gladly paid another millions dollars to ensure that my daughter was born healthy. Perhaps this is my way of making myself feel better about all my equity losses.

Here's a big shoutout to my wife for keeping our kids safe, nurtured, warm, and loved every day! She has endured even longer marathon days because of the constant feeding 24/7. Thank you! You're the best!

Passive Income: (5/5): Holding Up So Far

I haven't noticed the cuts yet, but that's partly because I haven't received all my dividends yet. I'm sure they will happen in 2Q2020. I had a record high passive income quarter to go along with a record high spending quarter due to all the childcare and food expenses.

The main reason why passive income was so high was due to my real estate crowdfunding investments, which saw a large $177,000 distribution in February. To stay conservative, I included only an estimated $28,000 in actual returns since I'm assuming much of the distribution was principal. Once I get the 2019 annual report, I will make any necessary adjustments.

Cash: Still earning 1.7% on my cash which is great compared to <0.75% for the 10-year bond yield and 0% – 0.125% for the Fed Funds rate. Starting in late February, I decided to buy stocks on the way down. By end of March, I used 90% of my cash to buy stocks to get my equities allocation up to 25%.

Stocks: I expect dividend income will go down 15% – 20% as dividend payouts get cut to preserve cash at least a couple quarters. I mostly have an S&P 500 index fund in my various portfolios and individual tech stocks that pay no dividends except for Apple. I plan to focus on building my cash reserves for the rest of the year unless the S&P 500 gets below my 2,400 target again. Then I will be buying again.

Rental properties: All tenants have paid their rent on time for the three months in 1Q2020. Unfortunately, my vacation property got shut down mid-March and will likely stay shut down in April and May. I expect to lose ~$3,000 in net operating income in April and $500 in May (Resort shuts down for 2 weeks for cleaning and also b/c it is the quietest month). I'm assuming the Resort will reopen in June, but I can't be certain. Even if it does, I'm guessing the volume will be lighter than normal.

Real estate crowdfunding: I received a $177,000 payout in February due to a couple of deals closing, which is much more than I had anticipated. Unfortunately, one of the investments the equity fund is in is a Dallas Airport Hotel that is definitely going to experience problems due to the lockdowns. I don’t expect to get anymore more distributions for the year. I also don't expect my investments to fully pay off until 2022 or 2023, so hopefully, that will give the investments enough time to work through any coronavirus-related issues.

There is likely opportunity in the commercial space right now with the lockdowns as new projects improve terms to attract capital. Check out CrowdStreet, my favorite platform for individual commercial real estate deals focused on emerging 18-hour cities.

Financial Samurai Real Estate Crowdfunding Dashboard

Bonds: Income remains the same, just the yields are lower. My biggest scare was municipal bonds selling off 10%+. Thankfully they bounced most of the way back. I don't invest in bonds to get rich. I invest in bonds to earn income and dampen my public portfolio volatility.

Book sales: How To Engineer Your Layoff book sales have been very steady. Although I expected a larger uptick given more furloughs and layoffs are coming. If the United States averages 6 million unemployment claims a week, and the lockdowns last until mid-May, we will have roughly 47 million unemployed by then. To get the best severance package, it's important to try and get laid off in the earlier rounds. By negotiating a severance now, you will also be helping managers save other employees who may really need a job.

Expenses (1/5): Way Up

For a frugal family, we really blew up our expenses. And you know what? I'm OK with it because I've had frugality disease forever. Having a newborn was as good a time as any to try and spend more on a better life.

Childcare expenses went up by about $9,200 a month because we decided to hire a night doula 5-6 nights a week. My wife has been on night duty with our son since 2017. For the first six months of our son’s terrible sleep habits, I only lasted about 4.5 months because I wasn't able to coherently write without sleep. Therefore, I decided to use the wealth we gained over the ensuing 2.7 years to make our lives easier the second time around.

Although $9,200/month is a lot, it's not going to last forever. Further, I was so happy to have spent the $27,600 on childcare help instead of watching it go down in the market. Still, I’m looking forward to our daughter sleeping for longer stretches so we can save on this steep expense by end of 2Q.

Since 2009, I've practiced consistently taking some profits in the stock market to pay for a better life. When I do, it always feels like I’m getting something for free because I view stock market gains as funny money.

In 2015, I took profits to build a new master bathroom. At the end of 2016, I took profits and bought a safer vehicle. In 2017, I took profits to pay for a hot tub, which has been my best investment ever now that we’re under lockdown. And in 2019, we sold about $1 million in stock to buy a slightly bigger house with cash. If you don't regularly practice taking profits to pay for life, there's no point working, saving, and investing.

Food expenses went up by ~$1,500/month partly because we increased our food delivery frequency and amount. I wanted to minimize going to the busy grocery store in order to minimize catching the virus and help with congestion for those who prefer going to the grocery store. Therefore, we ordered groceries through Amazon Prime and restaurant food with Uber Eats. It also felt good spending more money to support delivery workers and local restaurants. You guys rock!

We had the unavoidable expense of paying the full $1,950 preschool tuition for March even though our son didn't go for three weeks. We also paid the full tuition for April, despite the school being closed for the entire month. Even if the school opens up on May 4, we probably won't send him for a couple weeks just to be safe. It's been fantastic he hasn't gotten sick in a while.

Except for a pair of new tennis shoes I ordered online for $120, I haven't bought anything for myself. I don't think my wife has bought anything for herself either. We're just too busy taking care of our kids.

After tax, we essentially spent 100% of our investment income, which has never been done before. It's a little bit disconcerting to not save, which is why I was striving to increase our capital to generate more investment income by 2023.

The Most Brutal And Beautiful Quarter

Although the first quarter was tough, my wife and I appreciated every day we got to spend time with our kids. If there was ever a time to self-quarantine, it would be when you have a baby and have to stay home most of the day anyway. Protecting her health as she strengthens her immunity during her first six months of life is important. We were worried how our son's constant sickness from preschool would negatively impact her. Now we don't.

One thing that could have potentially made 1Q2020 better was if we both were getting paid a full-time salary while on three months of parental leave. Now that would have been sweet! I know plenty of families who are still getting paid well and not having to do as much during lockdown. If you have a job that is still paying you a full salary, please appreciate it!

Alas, we will likely remain unemployed for the indefinite future with no healthcare subsidies or retirement benefits. We also don’t qualify for stimulus checks. Survival is completely up to us.

Although this situation is concerning, I’m also excited to fully battle test our retirement funds and various income streams during a bear market. Ever since my wife and I left work, the economy has been good. If we can get through this year, we can probably get through any year just fine!

Here are some goals for 2Q2020:

  • Reduce news and social media consumption by 50%. The reason why I felt worse than I should have in 1Q was due to following so much coronavirus and stock market news on Twitter and elsewhere. The news and social media simply magnifies the hysteria and I'm not a hysterical person.
  • Rebuild my cash hoard to feel more secure. I used up about 90% of my cash to buy stocks and pay for higher expenses. So I won't be buying any stocks so long as the S&P 500 is above 2,400. I have enough exposure. If the S&P 500 gets back to 3,000, I will reduce equity exposure back down to 20% of net worth. If the 10-year bond yield gets back down to 0.5%, I will trim bond exposure.
  • Start regularly paying down my mortgage. Given mortgage rates have dropped after I refinanced in 2019, it makes sense to pay down more mortgage debt even though my interest rate is only 2.625%. I don't want to go through the process of refinancing so soon. But if you haven't refinanced, you should given mortgage rates are at all-time lows.
  • Step up daytime childcare duties by one hour in the morning and one hour in the afternoon to allow my wife to nap more during the day.
  • Build a mini-playground in our backyard since all the playgrounds are closed. I will buy a slide, a house, a small basketball hoop, and a tricycle. We'll also get lots of sidewalk chalk.
  • Continue to publish three times a week, a newsletter once a week, and a podcast once every two weeks on average.
  • Talk to Fundrise to see how eREITs are being affected and whether there's opportunity as well given their funds have historically outperformed when stocks are down. Fundrise platform performance has historically done well when stocks sell off.
  • For every post I publish or movie I watch, I will do three sets of 20 pushups and three sets of 60 sit-ups. I will also go for at least a 30 minute walk every day to maintain my sanity and blogging body.

Here's hoping that things get much better by the end of the second quarter! April and May are probably going to be the toughest months for most people in terms of employment and cash flow. I'm confident that all the government stimulus announced so far will finally reach millions of people soon.

Hang in there folks!

How did your 1Q2020 go? What were some wins and losses?

55 thoughts on “1Q2020 Financial Samurai Review: A Brutal, But Beautiful Quarter”

  1. Sam,

    Thanks for your work. Enjoy reading your blog. Beyond the structured notes, which assets classes held up best for you at the market bottom? Do you think there are asset classes beyond cash and shorting/hedging that will hold up if there is a debt crisis the the Fed cannot successfully backstop.

    For me it was pretty crazy seeing how much my income investments were down at the current market bottom around March 23rd. The PFF preferred stock ETF was down almost 34% on March 18th and MUB (CA Muncipal Bonds) was down 14%. Even gold was down significantly. Luckily I have about 80% of my portfolio in cash because of luck-timing. Unfortunately I didn’t get much into the stock market or bonds during mid March and am now impatiently hoping for another pull back. The market is performing way better than I expected. I guess the stimulus and fed actions have really helped. The investment class that seems to be performing well for me are two bridge loan funds. One of them is is the W Fund. They both pay around 7% and have LTVs below 60%. But they wouldn’t have to right down asset values until they saw foreclosures, so deterioration in account balances would be delayed. It is nice for me because I cannot panic and sell out due to volatility.

    Hope you and your family remind healthy. Best of luck

    1. US Treasuries did the best! Not only did they hold up, they went up!

      I couldn’t believe how terrible munis performed. I was pretty flummoxed. Thankfully, they’re almost back to even. But lesson learned!

  2. Adam and Jane

    Hi Sam, in 2013 I saw your comments on RB40’s site and I clicked on the link to your site. I recalled reading about your passive income post and I was BLOWN AWAY by the income amount and by the many different income streams.

    I still enjoy reading your passive income post and I am still blown away by what you created!

    Our individual NY munis dropped a bit, still 3.55% above cost basis, but we bought the chickens for its eggs anyway. We dont plan to sell and it will return the face valve when it is called or when it matures. Most of my muni bonds were purchased around PAR or at most $102.

    After 32 years of service in the same company, I finally retired at age 55 late last year 2019 with a $72.6K pension and $8,250 retiree medical credit. My wife was force retired in 2016 with a 52K pension and retiree medical credit too. We also have no money in the stock market since 2000.

    Our yearly passive incomes are:
    1. 2 Pensions $124,800
    2. 2 medical retiree credit for health insurance-$16,500 (not taxed)
    3. Tax free NY muni bond income $106K or $151.5K pre tax (30% Fed, NYS, NYC taxes)
    4. 2 401Ks interest from fix dollar investments-$80,000 (cant withdraw until age 59.5 but we dont need it now)

    Yearly Passive Income is $372,800 or $93,200 per quarter.
    Yearly Expenses is $55K or $13.75K per quarter.
    Also, we have 8 years of living expenses in cash earning .1% in FDIC acct.

    At 62, we will also take our combined Social Security of $38K for a total yearly passive income of $410K.

    Life always throws a curveball!

    We thought we were careful but somehow, wife and I got the CORVID-19. I had fever for 10 days and wife is going on 14 days with fever and cough. We are still taking tylenols and our doctor checks on us everyday via text or by phone. Doctor also used video chat to see us in the beginning. She has over 50 CORVID-19 patients and all with slightly different symptoms. We cant get tested and our doctor is sure we got the virus.

    We also learned that 5 of our former retiree co-workers and other friends died from covid-19. One retiree got it on a cruise ship. We took over 18 cruises and NO MORE cruising for us!

    My sister-in-law works in retail and she was furloughed so we will need to help her with her bills.

    Another cousin in retail was furloughed.

    All the money in the world is useless w/o health!

    Adam and Jane

    1. Dang, congrats on winning the lottery with the pensions! If you got that for life, that’s all you guys really need. Of course, working for 32 years is putting your heart and soul into your company.

      Here’s to you two pulling through COVID-19 and then developing immunity! I will definitely test myself for the antibody once available.

      Health over wealth for sure.

      1. Sam, I just read the article that was on cnbc – ‘I retired at 34-and lost $600K due to pandemic.’ It was interesting. I am in my early 60s and still working in tech. I retired in 2012 from a major tech company with a great pension and immediately went back to work in tech again. My father had retired early after a career in the Middle East oil companies. He had saved a lot of money, only to lose most of it in unwise investments goaded by relatives in India. So I grew up knowing it was important to work hard and save. Luckily with a MBA from USC when I arrived in LA in the early 80s I got a great job that allowed me to contribute to a good 401K and the company provided a great pension and medical benefits.

        I do not believe in FIRE. I think that has downsides that young people do not understand. With the pandemic, I also lost $500K in paper money and it has since made up for the loss in the recent market come back. I do expect a recession and possible loss of 20% or more of my retirement funds. However, the pension I receive and the paycheck from a great job helps me a lot as I still have a kid on college. I have worked from home for the past 20 years or so. I network with colleagues, friends and family all the time. Plus I keep a routine for work, managing health and until the pandemic I used to travel a lot. I moved from SF area when my kid left for college and bought a house in Las Vegas. I love the dry heat here plus the low cost of living. If I get lonesome, I drive to LA to spend time with family and friends.

        Besides my investments in the stock market, I also have invested in Real Estate in CA. I own some of the properties on my own and some with my sister so that I am not so highly leveraged. I sold one of the properties late last year and am holding on to the cash in a credit union that offers better rates than a bank. As always I look for real estate opportunities in Vegas or LA or the Bay Area and will buy when I see one. So from now on only real investment houses for me.

        As a single Indian American mom, I have been blessed with good jobs, friends, family and eternally grateful for the opportunities that led me to invest and learn about making my assets work for me. I did not see many women in your comments section. That’s why I wanted to write to you.

  3. Did you get or will you get in 2020 more cash as part of the buy out of Bulldog Gin? Did they meet the 2019 goals so that perhaps you get more cash to invest in a down market?

    1. I’ll have to check. I did get a K-1. Did you?

      I’m at my equity exposure limit of 25% of net worth after using 90% of my cash to buy stocks. I’m good.

      How did you do in 1Q?

  4. Money Ronin

    Wow! You’re doing great with a increase in net worth for Q1. That probably puts you in the top 0.1% of returns. If you want some serious hate mail, publish that on CNBC.

    I was “happy” with my -8% change in net worth for Q1 given the S&P 500’s 20% drop as of March 31. My loss was buffered by my real estate portfolio which I did not revalue. I may need to mark that down in Q2. Real estate is half of my net worth.

    My passive income will definitely take a tumble in Q2 given that it’s mostly rental income.

    Still, I’m just happy to be healthy and hope to survive the financial crisis with modest losses.

    1. Thanks, however, given how conservatively my publicly investments are structured, if I didn’t outperform in 1Q2020, there would be serious problems with my structure. Remember, I underperformed in 2019. I just want steady single digit net worth grow rates a year.

      GL for the rest of the year!

  5. After finding this post I feel like I have been missing out on so much that I could have learned in this past decades had I found this site sooner. Thanks, Sam for your insight and your realness in your experience. This quarter review is exactly what I needed in order to make adjustments to my financial plan and portfolio. Thanks once again and I hope you and your family stay safe and healthy.

    1. No worries. It’s just money at the end of the day. There will always be a next time if you keep on living! FS has been around since 2009 and it has been a good ride. I hope there is more opportunity in the future.

  6. Peter Brady

    Hello Financial Samuari,

    I’ve enjoyed reading your blog for some time now, i wish i read your post about jumping in on the S&P500 at 2400 a little earlier and i would have followed your thoughts and acted faster, the markets have swung massively up since then, great entry point!

    I’m still looking to get involved with them but i have the FOMO as they seem to only be going up, whats your opinion for entry points in the S&P now? I cant seem to find good, sensible advice online and its all a mix of “dead cat bounce” and “FED goes BRRRRRRRRRRRRRRRRRRRRRRRRR”.

    I would love to hear your opinion about what you think will happen over the next few months and at what S&P levels you would advise to invest at?

    Thanks in advance for any help or information/opinion you provide

    I’ll keep on reading the blog


    1. Gotta love the Fed saving us and helping us make money! There is definitely going to be a correlation with the speed of the bear market and the recovery.

      I would NOT be chasing the S&P 500 here at 2,850. My hope is that the market discounts bad 1Q earnings and abysmal 2Q guidance. But you just never know. The risk reward is not in our favor now.

      I’m focusing the majority of my time looking to buy real estate from overleveraged sellers. I want to find the real estate version of stock sellers when the S&P 500 was below 2,400.

  7. Had the same mystery cold in February. Hoarse voice for many weeks after and persistent dry cough that hasn’t gone away. I have talked to many who had this and described it as weirdest cold they had their whole life. Something just wasn’t right about it. Now I wonder if I had corona and have permanent lung damage hence the persistent cough.

    Love that photo of your son.

    My win was not losing in the market. Losses are less income and worse-dashed plans and hopes compounded by the inability to make other plans because you have to be in defense mode ALL THE TIME. Mentally it’s wiped me out. The lockdown. The uncertainty. The “cold”.

    My big gain is discovering that I don’t think I ever want to retire. Being at home all the time is boring and exhausting.

    I am not a patient person. I find the current market frustrating. With the fed money printing, nothing is behaving as it should. 16 million unemployed and more than likely severely hampered earnings and the stock market is up? Money being printed like crazy and gold etfs not moving? I don’t understand anything about this market. Today they’re saying that despite quarterly earnings being way down the 500 will continue to rally and be at 3000 by year end. I feel like I can’t learn anything from this and it’s making me feel anxious and down and further unable to get a handle on my future and plan a path forward.

    1. We’re up to 20+ million unemployed today. Will probably get to 40 million by Mid-may.

      Thanks for recognizing the photo of my son. It’s really tic tac to signs he’s been practicing after we taught him the game. But it reminded me of a prisoner in a jail cell counting down the days.

  8. Once again, great article! Just curious, what’s the justification on paying down additional principal on your mortgage given the 2.6% interest rate?

    Thanks and be well!

    1. I have always consistently paid down extra principal. Now that I’ve invested a lot in the S&P 500 when it was declining, I don’t plan to invest more at 2,700+. Therefore, it’s just building cash and paying down debt.

  9. Canadian Reader

    Great article Sam! Thanks for sharing so much detail and the personal touch makes you so relatable :)
    You did well in Q1! All the more reason to keep reading your site.
    Our Q1 was down -17% during max fear week, but has since recovered to -4%, so not too bad. We are 60% exposed to equities.
    I admit to getting scared and rushing quite a bit more of my cash into GICs at 2.95%- which feels like a mistake now. I should have transferred even more into the market or held onto the cash for whatever other opportunity could come up. I think real estate in my home town could take a bit of a beating…although my husband and I decided back in 2014 that the landlord route wasn’t for us. I also wish I would have transferred more CDN cash currency to US. But my husband trades mainly in USD so he thinks it will be okay. Time will tell!
    I was thinking about the illness you described- which sounded viral- and the nurse in me came out and wondered if you had considered getting vaccine boosters in adulthood? Most people don’t and most are okay- but it could be something to consider.

    1. I wanted to get the pneumococcal vaccine, but I had to get it when I was feeling 100% and only had like a 2 week window until the coronavirus pandemic hit!

      I still plan to get it. I totally had a virus, but no fever. Stay well!

  10. Thank you for your quarter review. So nice to read comments how people are managing their portfolios. I moved to self manage my 401k instead of have it in the standard age adjusted portfolio last year, with good returns and I rebalance once a year. I just had an appointment with the 401K rep at work in early Feb who said my portfolio was too conservative and I should have more in stocks but I didn’t change anything since I was skeptical about the market. And glad I didn’t! Now my 401k is down 8% while my employer sponsored account which I don’t managed myself is down more than 13%. I just wish I had gone with my own thoughts to go even more conservative this year but the rep threw me off so I kept my portfolio where it was at and didn’t change it….I’m still looking to rebalance for this year but feel like I need to ride this out and wait…

  11. Nice job. We took a similar approach to you and our net worth declined approximately 3% in 1Q2020.

    We don’t have a mortgage. So having 40% of our net worth in our home, helped. We’ve been moving towards a defensive position for a couple of years. Started with selling a condo we were renting out in 2017 and then shifting towards bonds last summer.

    Going forward, we are pretty aggressive. We moved our non home wealth to 90% equity (mostly S&P with some REITS, Small Caps and EM mixed in) and 10% bonds at a weighted average S&P price of 2425. The market moved faster than I expected and we got in at various times between 2250 and 2500. It was stressful to make those decision on when to move back in.

    We are in our late 30’s and hopefully won’t stop our accumulation phase for at least another 10-15 years. S&P at 2400 seems like a good long term deal for us.

    1. Sounds good to me. Yeah, the S&P 500 gapped down to 2,300 that day.. so that was a nice time to buy.

      If I were you, I’d set a goal of trying to make your primary residence 25% or less of your net worth by growing your net worth in other areas.


  12. Sam, thanks for posting, it’s great to read a real look at how people are doing right now. I also had a second child during Q1, and it was refreshing to hear your perspective. It has been a uniquely bad time to have a baby if we’re being honest – we can’t ask family or hired help to come into the house right now because of virus concerns. It’s been difficult to work each day on a couple hours of sleep and trying to get little naps in all day. But, we’ll come out of this as a stronger and more resilient family. I’m trying to figure out work-from-home for the employees I manage, and trying to keep my division running well so the C-suite doesn’t think they need to do layoffs (we’re doing OK, but down roughly 20% right now). Financially, our net worth was down 25% at the bottom, about 15% now. We were about 90% invested, so I’ve put some extra cash into the market over the last month, and i’m glad I had 1-2 years of expenses in cash to be able to do that. This crisis has reminded me that flexibility and having financial slack is important, both for returns and for my mental health.

    Plus, in some weird cosmic way, I like to think that my baby will develop some fortitude having been born in the middle of this craziness. It feels like a lot of major points in my life have been marked by market crashes – born in 87, family moved for a new job during 2000, graduated college and got my first job at the worst of the financial crisis, and now my baby is born in 2020. New foolproof plan – I’m going to start market timing based on big events coming in my life…

    Thanks again

    1. Congrats on your little one! Yes, being born in/during the corona crisis is unique! There will always be a story to tell.

      I like your thought of the crisis bringing your baby fortitude.

      I was really worried about my constantly sick son getting all of us and my baby daughter sick as well for the first 3 months of her life. Now I’m not. Now, her immune system can fully develop before he gos back to school. This is a BLESSING!

      But paying 100% of April tuition is not.. when there is no school. Oh well!

  13. Sam, I love the site. Your cold story is all too relatable. I had something similar to your spell of illness once. Subsequently, I experienced an increase in the frequency and depth of any colds. It took years but I eventually realized that things I had been eating my entire life (with zero issues) no longer agreed with my immune system and were sapping it of strength. Just something to be aware of– I’m certainly no expert but have heard similar stories from others over the years. Of course, young children + sleep deprivation doesn’t help; of that I’m well aware! Please keep up the great work!

    1. Good to know about the foods. Can you share which foods weren’t great for you?

      Given the virus seems to hurt overweight folks more, I’m totally focused on getting in better shape this year. Thx

      1. Hi. In 2001, I was on margin and all in tech. Nasdaq drops 70%. I am wiped out. Nothing was left. Then came depression and anger. Eventually, I realized I was still breathing. That’s when my world changed. Wasn’t dead. It just felt that way for 5 years. I still loved my wife and I had my health and started again
        This is an amateur bear market. 30%. Give me a break.

  14. Great idea for a quarterly review! The 1st quarter has already felt like a entire year! It was a good reminder to review my quarterly statements and see the damage. I am down right around 10% and happy with that result. Biggest loser was the S & P 500 which was down 29% for the quarter. Even with this brutal quarter the S & P 500 is up 10.5% for the last 10 years. I am still expecting one more big drop in the market, but it wouldn’t bother me if it doesn’t happen. Overall I am optimistic the market will rebound in a couple of years. About 2 years ago I stopped putting money in equities, but I changed that allocation mid March and putting my contribution and match 70% in equities. I also re balanced in Mid March to a 70% equity 30% bonds. It could be a bumpy ride, but optimistic over the long term our economy will recover.

    1. Funny thing is, I think the collective investment community is expecting at least one more big drop before year and and is ready to buy. There is SO MUCH cash on the sidelines, I feel that drop may never happen.

  15. Thanks for sharing your quarterly review, Sam! Brutal and beautiful is the perfect way to describe it. Your posting consistency on Financial Samurai is really impressive. I also appreciate your insight on the markets during this pandemic. It’s awesome that you built a high margin blogging business that can’t be shut down along with all the other non essential businesses.

    As for my 2020, my portfolio and net worth was crushed along with the rest of the market. However, I am holding and remaining patient as I have a long time before “retirement.” Otherwise, this quarter was the most successful quarter ever for my blog. I broke through a page view threshold I have been trying to break through for a while. I hope the trend can continue.

    Thanks for the read!

    1. Congrats on breaking through the pageview threshold! Progress is the best feeling. So addicting and something I miss during my early days in 2009-2010. So fun to grow fast. Alas, I’m content with being a steadier ship now battling through the big waves.

  16. With a terrible quarter your portfolio investment outperformed the main benchmark. This means an excellent strategy.

    What do you think about the future of real estate crowdfunding with a recession in our front?


    1. I’ve been relatively conservative since the end of 2017 after selling a rental property because I didn’t want to sell what ended up being a good investment and then lose the proceeds in the stock market.

      I’m bullish on real estate with the S&P 500 down between 15% – 25%. Asset rotation shift into a defensive asset that provides shelter and income.

      I’m 100% focused on finding RE opportunities in 2Q. I want to find the RE seller who is equivalent to the equity seller when the S&P 500 declined to 2,300.



  17. Hey Sam,

    Thanks for sharing your experiences with us…I really enjoy your perspective and appreciate your candidness in all of this…sharing your successes as well as your failures. I make no judgement either way…just glad you are able to share …hope you have as much fun making it as we do reading.

  18. I’m glad you were able to keep up with blogging while ill (and sleep deprived). I know for me that it would be difficult to focus if I couldn’t shake a cold for months.

    This quarter has been pretty crazy, but what it’s taught me is to always diversify your portfolio and to keep ample emergency savings on hand.

    I’ve had my hand in stocks, index funds, P2P lending, and my wife and my business, so when some were hurting (mainly the market), the others are making up for it.


  19. I can honestly say that one thing the crisis did was force me to address 3 glaring weaknesses in my overall investment and savings strategy. Two of these I dealt with just before things took a major turn for the worse and one of these I am now in the process of addressing.

    The 3 things:

    1. Build up our emergency funds, (In Q4 last year I sold part of a mutual fund and put the money in a CD and High Yield Savings account that was equal to at least 2 years worth of living expenses).

    2. Moderate our asset allocation to something more appropriate for our age and risk tolerance, (On February 24, we moved 90% of our 401Ks into bonds and stable value funds). This took us from 84%/16% Equities-REITS/Cash-Bonds to currently a 42%/58% mix. By cutting our equities in half, our drops were half the market drops. YTD, our total portfolio is only down 6%. I did not participate in the latest run-up with the money we moved but will leg back in a bit when the next dip presents itself.

    3. Increase liquidity. We have a lot of equity in our home but no way to leverage it right now unless we sell the house. We are in the process of obtaining a HELOC at very favorable rates and terms to give us an extra layer of liquidity in case my wife was to lose her job.

    These changes are helping me sleep a little better through all of this chaos. Being I am retired and in my early 60s, these moves seem appropriate for this time in our lives.

  20. Financial Freedom Countdown

    This was indeed a wild quarter with me canceling all my vacation plans (including to China) booked a year ago to the crazy stock and bond markets to the news flow.

    I substantially increased my news consumption but pivoted to reading more of the research papers and treatment options. After I got most of the supplements and equipment to battle this at home, I feel a lot more relaxed.

    Started my cash out refinancing so I have bazookas to throw and pick up distressed assets if they become attractive enough.

  21. That’s a great quarter. Most people did a lot worse.
    Nice job being conservative. Also, great job writing and keeping the pace while you’re sick.
    That’s hard.
    I’m trying to cut down on the news too. It’s too much negativity. I was all stressed out in March.
    Stay healthy!

    1. I would stay away if that is what you want to include to your bond allocation. They won’t perform defensively in this crazy time. If you want offense, then I would just focus on equity.

  22. I had a huge portion of my portfolio in bonds and watching it go down was not easy. I watched my Vanguard Global Credit Bond Fund (VGCIX) sink like a stock. And that made me think whether bond is doing what it was supposed to do.
    Any thoughts on what should be our bond position going forward? Should we reduce the bonds and move some to cash / money-market?

    1. I’ve come to believe that if we are going to invest in bonds, we might as well just invest in US treasury bonds alike IEF and TLT.

      I don’t invest in bonds to try to make a lot of money. I invest in bonds to temper volatility and make a little bit of money. What happened in the first quarter with muni bonds really pissed me off and I am going to use my bond position to pay down more mortgage debt.

      The goal for this money is peace of mind. And paying down debt is the best peace of mind.

  23. What a wild quarter it’s been. Thanks for sharing so much with us. Being sick for so long must have been so tough. I’ve been hit with one cold after another since September but fortunately have also been well lately. Boy is it so much easier to do everything when you’re not sick.

    Congrats again on your daughter and what a positive way to look back on a difficult financial quarter. Babies grow so fast so you’re right that if there was a time to be stuck at home it would be when you have a cute little baby to enjoy. Glad she’s healthy!

  24. Great one Sam. Two things motivate me here.

    1. Inspite of bad health you kept writing and kept the blog rolling. That is surely something.

    2. The way you have kept proper record of all the categories and rated it beautifully; I believe that is a big motivation to keep a proper record of everything- whether health or wealth.

    Keep rolling

  25. Sorry to hear you were ill so long! I can’t imagine trying to write for weeks while being under the weather. I don’t do well with a lack of sleep and our first baby is on the way so I’m curious how it’s going to affect my blogging.

    Happy to see some 5/5 in your review and here’s hope the rest of the year turns out better!

Leave a Comment

Your email address will not be published. Required fields are marked *