UPDATE: I made a mistake when I initially posted this. In my spreadsheet, I double counted one of our credit card liabilities. We were still down for the month, but not quite as much as I originally wrote here. The updated numbers are $37,014.97 and €32,497.78 respectively. I'll leave the post as-is though since from a high level it remains correct.
Our net worth dropped in December to $36,153.59 or €31,741.52. That's a one month change of about -4.75%.
Since the majority of whatever wealth we have is in the form of stocks, we were hit hard by the sell-off in equities. Anyone paying attention to the markets this past month would have seen the kind of fast paced elevator down that market pundits have been scaring us about for years. Our savings rate didn't spare us from the damage.
We're still well up from a year ago though, and that's the perspective I want to keep in mind. Equities are for long-terms positions. I'm not a trader, and month to month moves whether up or down can only cause heartbreak if you get too emotionally invested in them.
This month had a few novel transactions worth mentioning. I got my Christmas bonus, which I always appreciate. At the same time, we had to pay our estimated taxes to the German government for the fourth quarter, so it was basically a wash. We also received a bit of Christmas money from relatives and a larger sum from a relative specifically earmarked to support a hobby of my wife's.
Year-End Review
So how'd we do this year? Our net worth is up around 33% in dollars from one year ago. That's entirely savings-rate based since our equity positions have been all over the place. As that net worth number grows, any year over year growth is going to come increasingly from investment performance.
Investment Performance
And my investment performance this year was bad at a YTD drop of 13% (I'm only considering my taxable brokerage account). Some of it was just the way the markets moved. For people following the US markets, it was a volatile year with big drops in February and then the last months of the year, but if you were invested in just about anything outside of the US, ho ho ho, you had a rough year.
How could I have known that at the exact moment I'd begin investing in German companies, it was at the peak of the German market? I began buying in October 2017, and this chart is the daily chart of the DAX from the past year:
It's actually uncanny how some of my German purchases happened at the exact tops of their cycles. The companies seemed cheap when I bought them, and they seem cheaper now, but that doesn't mean anything in the near term. The German companies were a drag on my performance over the whole year, even when I was doing well in other parts of the portfolio.
Some of the bad performance was from me trying things and discovering I don't have the temperament for them. I tried shorting some stocks, and I tried day-trading a few times. They're not my thing, and I'll avoid those activities in the future. Doing either triggers too much adrenaline and fear in me. Regardless of investment performance, I just don't want to live like that.
I also changed investment strategies in the middle of the year. I did a lot of backtesting and research to come up with a reasonable strategy, and I implemented it. I'm trying to control risk as best I can with smart position sizing and clear sell rules, but I do recognize that this strategy can be extremely volatile. As we get older, I have some ideas for how to reduce risk further within this current strategy, but for now, I'm being aggressive within my rules.
Recognizing my previous mistakes, I wrote a long document explaining the strategy and the rules. I've already referred to this document at times when I doubted my current approach, which makes this one of the best decisions I've made all year money-wise.
Savings
For our savings, we were somewhere around 25%. It's not exceptional, but it's not horrible either. I'd like to get this number up in 2019, but there are some genuinely life-improving expenses that may need to take priority if they become a possibility.
In 2018, the big overarching expenses were our rent as well as a trip we took to the US. Moving doesn't feel worth it. Rents are going up in Germany, and by staying put, we get to keep our rent stable while prices rise around us. I've looked at smaller apartments in our neighborhood, and their prices are approaching ours despite their smaller size. We could move further away, but our life satisfaction would plunge. Plus, my wife doesn't want to move, and neither do I.
After deliberation, I am going to the US this summer. I bought tickets using credit card points, and my wife and I will take our trips separately. I'm not thrilled about that entirely, to be honest, but the cost savings are enormous to having more focused trips back rather than larger multi-family tours. She can also work while I'm in the US and vice versa, so there's less opportunity cost.
We saved a bit on our tax preparation costs too. There are some tax people recommended to expats like us who speak English, but ouch they can charge a lot. They're very good, so don't get me wrong, but at some point you have to ask if what you're getting is worth the unusually high price. In our case, we were getting our taxes back in two weeks (fast) and we could communicate in English. But we speak German, so why not find someone less expensive who's good enough?
We could also do our own taxes, but for now I'm more comfortable with a professional in Germany on our side, and I'll keep doing my own US tax return.
So there's a wrap-up of the year for this abroad saver. I've learned a lot this year, and here's hoping for a more effective and smarter 2019. Cheers and have a happy new year.
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