January 2021 went by so fast I almost forgot to do a review. Although January flew by, it didn’t feel that different compared to the end of last year. COVID-19 is still out there in force.
When I saw 22,000+ fans at the Super Bowl in Tampa, I was shocked! However, later learning they were all vaccinated gave me relief. Now it’s just fingers crossed the vaccine does its job. Let’s hope there isn’t a spike in cases a month later.
Waiting to get vaccinated is like one big marshmallow test. I’ve already accepted my family won’t be able to get vaccinated until around June. Therefore, we need to remain cautious.
At the same time, it’s probably going to get harder to wait as more people share they got vaccinated and more people post about their fabulous lives. Therefore, we must also make the best use of our time.
My beginning of 2021 review will focus on Family, Financial Samurai, and Finances. The three F’s of life!
January 2021 Family Review
My daughter is 13-months old and is trying to walk. We are in no rush for her to walk as that would mean two tornadoes in the house!
I clearly remember our son bonking his head and tripping every day for about a year or so once he started to walk. My lower back was always so sore from holding the back of his shirt as he tried to gallop.
My son is 3 years, 10 months now. We’re doing a lot of art projects. I’m also taking him to this amazing astroturf field where we practice kicking and dribbling the soccer ball.
My favorite activity is reading him a new Gerald & Piggie book by Mo Willems. Surprisingly, he is starting to read.
With so much homeschooling and 1X1 attention, I wonder if some kids will go back to school way ahead of the standard curriculum for their age? It really feels like you can learn so much more at home. Of course, learning depends on the support of adults at home.
Preschool Potential Part Two
The biggest excitement of the month was our son doing a video interview with two preschool teachers for Fall 2021 admission! How crazy is it that a 3-year-old had to do a 2-on-1 interview with two adults over video?
We got waitlisted last year, which was just as well since we wouldn’t have sent him. Getting waitlisted prevented an awkward situation. However, we’d like for him to get in this Fall.
The timing for going to school at 4.5 years old in August 2021 should be good. Hopefully by August, the vast majority of San Francisco residents and Americans will have been vaccinated. This will help us feel more at ease because the school had several quarantines this school year due to coronavirus exposure.
From a developmental point of view, our son should be ready. He needs to learn how to interact with kids his age and listen to other adult authority figures. Perhaps the biggest challenge of homeschool is making a child see the difference between parent and teacher.
If he doesn’t get into this school, we have an open invitation to return to our old neighborhood preschool. Therefore, we are not sweating the results. Although, the school we are applying to goes from Pre-K through the 8th grade. Therefore, it would be nice to have this type of visibility, especially if he enjoys it.
Will we be rejects once more? We will find out in about a month!
January 2021 Financial Samurai Overview
This site continues to chug along like normal. There are seldom any big swings in traffic on the upside or the downside. However, this also means I have a difficult time moving the needle on the upside given it’s just me and my wife part-time.
I’ve reviewed and updated roughly 100 previously written posts in January. However, I’ve still got ~600 to go! I need to pace myself because updating old posts plus writing new posts is starting to feel like a full-time job.
I’m also getting tired of responding to inbound inquiries. In the past, I would always hop at every opportunity. Now, I often forget to respond at all. This probably also has to do with a constantly flooded inbox.
I don’t proactively market Financial Samurai because I simply don’t have enough energy. Therefore, if any readers want to help spread the word, I appreciate it.
Here’s my free newsletter if you want to sign up. I try to make the newsletter a separate track with various nuances. Here’s also my iTunes podcast channel where I’ll record at least one episode once a month.
My favorite posts of the month are:
- Two Retirement Philosophies Will Decide Your Safe Withdrawal Rate
- The Best Time To Retire May Be Right Now
- Why There Are So Many Asian Landlords And Small Business Owners
I keep fantasizing about re-retiring by 2022 and laying on an empty beach in Hawaii. Before I re-retire, I will update the remaining 600 posts and hire a regular staff writer to pick up the slack.
January 2021 Stock Market Review
The first week of the year actually started a little rough for the S&P 500. See chart below.
Given I published a bullish note about stocks and real estate for 2021, I decided to buy VTI, the Vanguard Total Stock Market ETF during the first pull back. I wasn’t going to buy more stock, but like an addict, I couldn’t help myself.
Things were going well until there was another sell-off from January 27 to January 31. So I decided to buy more VTI.
Except for buying more Google and Amazon shares, I didn’t feel comfortable buying any other single stock names due to expensive valuations. I’m already way overweight the technology sector.
If I was smarter, I would have bought the Russell 2000 index, which is up closer to 16% YTD! I did try my hand at day trading again, which was a nerve-wracking waste of time.
My wife also contributed the maximum gift tax amount in each of our kid’s 529 plans. I already super-funded both 529 plans. The 529 plans are getting to a size that makes me question whether further funding is necessary.
Because the S&P 500 is sitting at a high, I feel good about our stock contributions. However, I also feel exposed because I’m at the maximum stock market allocation I feel comfortable with (~30% of net worth). One correction and we’re back to where we started.
Things feel extremely frothy with so many speculative investments going ballistic. This is why I feel uneasy, despite so much hope for the future. As a result, my plan is to build up my cash balance again. I anticipate another 5% – 10% correction. I just don’t know when.
According to Personal Capital, where I track my six investment portfolios, my overall portfolio is up 7.29% YTD through Feb 8, 2021. The reason for the outperformance is due to the outperformance of tech stocks once again.
I stated in my 2021 outlook that I thought there was a 65% chance the tech sector would underperform the broader market. So far, I’ve been wrong. Good.
January 2021 Real Estate Review
Given I bought a new home last year, I don’t plan to buy another physical property again this year. I’m already managing three rental properties, which is my absolute max.
However, if you have zero rental properties and only a primary residence, I would go hunting. I think rental properties, especially in big cities, are going to be a powerful one-two punch asset class. I expect to see capital appreciation and rent appreciation over the coming years.
The national real estate market was extremely strong in January 2021. According to Redfin and MLS data, home sale prices are up 15% YoY.
Therefore, on a relative basis, big city real estate offers better value because prices are not as hot as the national median. Yet, many tech employees in 2020 saw their tech holdings go up by ~40%!
I wish I had more money to buy a multi-family property in San Francisco. Rents are starting to tick back up. I’m confident there will be a huge rush back to city living and folks moving out of their parents’ homes by 2022.
I feel more at ease with my real estate exposure, despite it being roughly ~40% of my net worth versus ~30% for stocks. One of the reasons why is because I believe with greater confidence real estate will perform in 2021/2022.
Besides being well-positioned to benefit from the eventual rush back to San francisco in 2022, I’ve still got 14 private real estate syndication investments across the country. After some hospitality investments survived through the worst of 2020, I’m hopeful their businesses will improve.
In other investments, I sent in my first capital call of 20% to a venture debt fund. It’s the third venture debt fund my business school friend has started and I’ve invested in all three. If anybody cares, I can write more about venture debt investing in a future post.
One Financial Indicator To Be Aware Of
Due to so much bullishness, Treasury bonds have been selling off. As a result, the 10-year bond yield is almost at 1.2%. I predicted the 10-year bond yield to average 1.25% for the year.
A rising 10-year yield and a steepening yield curve are good signs for future economic growth. At the same time, a rising 10-year also taps the breaks on economic growth because it results in higher borrowing costs.
With the way the recovery is going, the 10-year bond yield could go back to 1.5%. 1.5% is the level where I think the stock market and real estate market may start getting concerned. Therefore, watch the 10-year carefully.
The one thing you can do is refinance your mortgage rate before mortgage rates go even higher. If you believe, like I believe, there will be a 25%+ S&P 500 earnings rebound in 2021, the chances are high (~75%) rates will continue to inch up.
The 15-year fixed, followed by the 30-year fixed mortgage offer the best value at the moment. Mortgage rates HAVE NOT moved up in lock-step with the rise in the 10-year. But they eventually will.
You can check the latest mortgage rates with Credible. Multiple lenders will compete for your business and offer you no-obligation quotes. Also check with your existing lender.
January 2021 Went By Fast
I’ve had more than a month to think about my 2021 forecasts and I’m sticking to them. 2021 should be a good year for stocks and real estate. However, we should all expect to see a correction at some point in the S&P 500.
My kids are growing up too fast. Although the daily tantrums and crying are hard on the nerves, I will miss them when they are over. Therefore, I must cherish every moment now.
My #1 financial goal over the next three months is to build up my cash hoard again. My #1 personal goal all year is to get back into great shape. Let’s not waste a single day.
How was your start of the year so far? What are some of your goals for 2021? Has your outlook on the stock market or real estate market changed? Commissioned featured image by KongSavage.com.