A summery of 2021
I finished my bachelor's, got a new job, and all asset classes performed well. What more could I hope for in 2021. 2022 will become another exciting year!
Academic goals
At the beginning of 2021, I made the goal of finishing my bachelor’s with a B average, and I made that goal by getting one A, two B’s, and one D (not my favorite subject). Of course, I could have gotten a better grade in the last one, but I managed to achieve an overall desirable result in the end.
Investment goals
Having a large part of my portfolio in Microsoft, Facebook, Alphabet, and Evolution Gaming in the first half of the year ensured that 2021 became a fantastic year. My goal was to achieve a 12% return on my public portfolio. There are just a few days left of the year, and my portfolio is up by 27%. I have made several mistakes this year, and if I had managed to avoid the most expensive one, I could have made almost 30%.
Savings goals
At the beginning of 2021, I made the large goal of saving 240 000 kr. A lot of money but lower than what I achieved in the prior year. I expected to work less in the fall semester if I were to take my master's in finance. I didn't want to take a master's degree right after a bachelor's since I felt that I wouldn't perform at my best because of a lack of motivation.
By looking a the first half of the year, one can see that I had significant momentum, the sums were quite large, and the contributions were substantial.
What happened after July??
Compared to the previous year, I had to pay more tax than expected. A little over 14300 kr had to be paid divided in August and September. I made a larger deposit than I should have in July and transferred some of the funds back in August. In the last quarter of the year, I relaxed more and worked less when I knew that I would start at a new job in January.
Total cash deposits to the account from dividends and from savings were 202 145kr.
Deposits: 188 050 kr
Dividends: 14 095kr
Liquid portfolio
My liquid investments increased substantially this year driven by the large percentage return and deposits.
Illiquid portfolio
My apartment is my largest asset and a combination of low-interest rates and a decent location made this another great year of owning real estate. The value of the property has increased by 13.9% since the start of the year. I’m using the value estimate that a real estate agent gave me, while the estimate that I had in January was based on an index that followed the price development in my district. The price that I had in my balance was most likely a bit too low since I received a higher price estimate than I had expected.
If I were to put a number on that growth it would be 770 879 kr. That’s certainly much more than I made at my job. But have I become richer, not really. My apartment has not grown in size and I don't think that the apartment could produce almost 14% more in rent. If other equivalent apartments have risen as much I’m stuck with the same purchasing power measured in real estate.
One of my illiquid stocks had two equity issuances this year at increasing prices. The first issuance increased the value of my investment by 212 365 kr, and the second issuance made me an additional 222 000 kr. After two years and one pandemic, this investment is starting to produce some substantial gains.
The other illiquid investments were supposed to make a public offering this year, but it was postponed to the first half of 2022. No issuance this year, which means that I have not updated the value of my holdings. The company produced revenue for the first time, which is fun, and the company projects to become cash breakeven in the next year.
Show me the money!
Of course, the fun thing is seeing how much equity I gained in 2021. Some of the stock investments were boosted by receiving debt from student loans, these loans will eventually have to be paid back, and I made sure to subtract them from the equity in my stock portfolio. The unrealized gains tax increased this year from 146 000 kr to 280 000 kr, which I've also subtracted. Society's investment in me with student loans and school is starting to pay dividends. I'll have to pay my fair share of taxes when I eventually realize some of these investments.
Having saved 40%+ of my income in the last four years, it’s very “strange” to see the growth in equity. I spend approximately 300 000 kr per year and save the rest. It’s much easier to save first and spend the rest than to spend first and save the rest. Many people will consume everything and leave little to their investments and savings. Make sure always to pay yourself first.
Net debt
I measure net debt by subtracting investments and cash from interest-bearing debt. If I were to sell all of my financial assets to pay down debt, I would only have 211 897 kr left and be almost debt-free. It would have been fantastic to own an apartment and be almost debt-free, but I'm not going to do that. Leverage is a great tool to build wealth if you're not overextending. If you own high-quality assets that generate 3-5%+ FCF yield and they're able to increase free cash flow by 8-10%+ per year, you probably end up doing pretty well if you're paying low interest on the debt(of course, not financial advice).
What did I learn this year?
It’s very easy to look for confirmations that you have made the right decisions and to go more aggressive on the following decisions. I made a lot of money from investing in the gambling sector when the tides raised all boats, especially Kindred Group and Evolution. Based on those hits, I continued to put more money into Kambi than I would potentially have made If I were more grounded and aware of overconfidence. It’s very easy to say in hindsight, but it’s challenging to be aware when it happens.
Reducing risk in my portfolio is essential for me to stick with the portfolio long term. If I doubt that the business will thrive in the long run, I will eventually use too much mental capacity, wondering how the fundamentals will develop.
Being lucky, or working hard?
Not going to lie and say that all this is because I’ve worked hard. I have had an almost perfect starting point to build wealth, but I could have just increased my spending to inflate my lifestyle or worked less.
I've filled up my apartment with tenants to utilize its potential free cash flow generation. Before beginning my bachelor's, I worked 50-100 hours of overtime per month to increase my savings potential. I've ditched vacations and worked instead while I was studying. In 2018-2021, I saved 47% of after-tax cash flow, but if you subtract student loans and school costs, I have saved 43% of my after-tax cash flow.
If you're going to get rich, you will need to have a brilliant idea and work hard, or you could go my path and save a lot of your income and invest it. There is not an easy way, but it takes time, patience, and hard work.
These investments are starting to show results and are going to produce dividends for possibly the rest of my life.
Personal life
This year has been challenging in some ways, especially dealing with covid restrictions. Still, I can’t complain since I’m very fortunate to have been healthy and not been financially impacted by the pandemic. I’m lucky to have a great girlfriend whom I live with, and it’s fun to watch my niece and nephew grow up and gain individual personalities.
My girlfriend and I bought a cat about two months ago, and it’s a lot of fun. It bites and scratches, but it gives a lot of company. I never knew absolute terror until someone tried to bite and claw my feet in the middle of the night, but he is cute, so what are you supposed to do.
I’m very bullish on the year 2022. A new job where I’m at least going to know how many days per week I work and how much I will make per month. It makes it much easier to calculate how much I can save each month, and I’m probably going to enjoy life much more. A shorter distance to work, eight hours a day, and less physical work will probably give me more energy.
I look forward to beginning, and I hope to enjoy working at the new place.
Hard to believe that I entered with less than 600 k and achieved 1 million kr in December.
I wish you a great new year and hope you enjoyed this post. If you like reading my posts, I would greatly appreciate it if you subscribed. Watching the subscriber list grow is tremendous fun, and it gives me extra motivation to continue spending hours writing.