Summer has finally arrived after what felt like the longest, wettest winter and spring in New York history. In the second quarter, the S&P 500 rallied 4.1% inclusive of dividends, bringing YTD performance to an impressive 19.5%! Despite continued tensions surrounding a trade war, Iran, and rates, solid macro trends, a strong consumer, and sound stock fundamentals have contributed to a great year so far.
I am hopeful that the remainder of 2019 is flat to slightly up. I don’t believe there is a near term catalyst for substantial gains in the stock market, except if the Fed decides to cut rates. Given inflation, GDP, and employment numbers are as strong as they are, I believe the case for gradual rate rises still remains. The timeline for these gains has been pushed out to late 2019 or early 2020.
Portfolio Update
My portfolio has remained stable since the last update. My Wealthfront account is still a 4.0 risk level. I still hold the same REITs and AMZN in my taxable investment account. For Amazon, I still have an outstanding limit order to sell my remaining shares at $2,000. I invested the cash in my account into preferred stock ETFs that pay monthly dividends and exhibit minimal volatility. In my Roth IRA, I added a position in Zoom Video Communications. I have a long term view on this stock and believe it’s a great growth story. Thematically, I continue to focus my single stock investing in my Roth IRA, both to keep the amount invested small and to maximize tax-advantaged gains over the long term.
As of my last update, I had just moved my taxable account to Interactive Brokers. After using it for a couple of months, I am a huge fan of the platform. On average, the borrowing costs on my algorithmic trading strategy have decreased by about 15%. My trade commissions have decreased from $4.99 per transaction to between $1 and $2. These savings are small but will add up over time. The platform’s analytics and reporting are certainly geared toward a more professional audience. I’ll write a full review of Interactive Brokers in the next month or so.
2019 Goal Update
My financial goals in 2019 are as follows:
- Increase net worth by 50% (DONE)
- Generate passive income of $2,500 per month (71% of the way there!)
- Achieve an FI ratio of 75% (Almost halfway!)
- Adhere better to my specified budgets, especially dining out and discretionary shopping
Net Worth: -2.67% in Q2, +63.06% YTD
My net worth decreased a bit in the second quarter, despite overall gains in the market and significant passive income. The reason for this is simple: taxes. My job’s accounting software failed to accurately withhold taxes from my paychecks in 2018. As a result, I had a very large tax bill that took quite a chunk out of my net worth. Lesson learned. This year I will increase my withholdings to minimize the likelihood of a surprise come next April.
Passive Income: $5,358 in Q2, $7,450 YTD
My passive income flows really hit their stride in the second quarter. Another one of my real estate crowdfunding investments started paying dividends. The cash in my business acquisition account yields 2.25%, so that’s actually a decent portion of the total income. Dividends from my REITs and within my Wealthfront account also began to really add up this quarter. I’m hopeful that this passive income run rate should continue for the rest of the year.
Using my trailing three-month average (to smooth out month-to-month variations), my current FI ratio is 33%. If I achieve the goal of $2,500 per month in passive income by the end of the year, I will be at a 46.5% FI ratio.
Having a large amount of cash sitting in a high yield savings account has produced significant passive income wait to find the right acquisition target. I’m fine paying that opportunity cost if it means finding the right business and blazing a new professional path.
Cash Flow
Admittedly, this is where I need the most help. I track all my cash flows and budgets with Mint, but I still haven’t gotten great at keeping my expenses within the budget’s limits in certain categories
in my Q1 update, shopping represented 23.4% of my expenses. As I predicted, this percentage has come back down to reasonable levels. I still want to decrease my spending on unnecessary purchases, but I’m happy with the progress that’s already been made.
It’s one of my 2019 goals to prioritize travel. To that end, I was able to get a Companion Pass on Southwest by takling advantage of one of their credit card offers earlier in the year. As a result of this wonderful travel perk, I have planned four trips through the rest of 2019. It’s going to be a busy year!
A lot of my expenses during the quarter were travel related because I took a trip to Portgual and Ireland (for a wedding). Portugal is incredible, by the way. If you ever get a chance to go, make sure to stop by Pasteis de Belem and get yourself some Portuguese custard pastries.
Keep in mind this chart is my spending only. It does not account for any savings during the period. Since I save almost my entire bonus, my overall savings rate hovers in the 60-70% range. For that reason, I find it’s more informative to show only spending.
Wrap Up
After paying my taxes, the second quarter was still pretty good financially. I remind myself constantly to stay focused on the goals above and disregard the daily movements of the market. I finally feel like I’ve made significant progress toward my annual goals. There’s still much to do, but I believe I’ve built a sound system for saving, investing, and spending that will serve me well over the long term.
Happy experimenting!
Disclaimer: I am not a financial advisor or financial planner. All investments, allocations, investment ideas, and opinions presented in this blog are solely those of the author and should not be construed as investment advice. Please consult a financial professional to get advice tailored to your needs.
