2023 Portfolio Review

Compared to 2022 my main portfolio in 2023 did better absolutely but worse relative to the market.  As usual I will use VOO, Vanguard's S&P 500 index tracking ETF, as my market benchmark.  In 2022 my portfolio lost 10.79% but outperformed VOO which lost 18.17% by 7.38%.  In 2023 my portfolio was up 15.66% but trailed VOO which was up 26.13% by 10.47%.  For the two years combined I trailed slightly up 3.18% versus 3.21% for VOO.  

In October 2023 I doubled my positions in SCHD and VIG (two ETFs that buy stocks with growing dividends) and increased my position in VPU (Vanguard's utility sector fund).  In what follows I will account for these purchases as if they were made by borrowing from my cash position and repaying the loans without interest at the end of the year.  This is simple but a little biased.

At the start of 2023 I was 45.55% invested in VOO, 30.01% invested in individual stocks, 13.83% invested in ETFs (other than VOO) and 10.61% invested in cash.  During year my VOO position matched the market.  My stocks returned 5.44% underperforming by 20.69 contributing 6.21% to my overall underperformance.  My ETFs returned 11.20% underperforming by 14.95% contributing 2.06% overall.  My cash position returned 5.28% underperforming by 20.85% which contributed 2.21% overall.  This adds up to 10.48% overall underperformance in good agreement with the actual 10.47%. 

Only two of my stocks (JPM and KD) beat the market.  Seven had negative returns (ED, CVS, XOM, MET, NSC DGX, SOUHY and WDS).  One of my ETFs (VGT) beat the market while two (VDE and VPU) had negative returns.

Over the long term I continue to trail the market but perhaps with less volatility as I tend to outperform in bad markets but underperform in good markets.  This may be safer but leads to underperformance in the long bull market we have seen since the 2009 bottom.  Fortunately my approximately 50% position in VOO has kept me from trailing too badly.

Elon Musk

 I recently read Walter Isaacson's lengthy (670 pages with notes in hardcover) 2023 biography of Elon Musk.  This is a narrative account of Musk's life from his childhood in South Africa to his takeover of Twitter.  In my view while not without some points of interest the book is far too long and neglects the big picture.  I don't recommend it.

Elon Musk is of course an important and controversial figure in contemporary American life.  Among other things he helped create and grow Tesla and SpaceX two very successful businesses.  More recently he purchased Twitter.  But at times he seems his own worst enemy behaving erratically and constantly getting into trouble for little reason.  So far he has avoided disaster but his luck may run out at some point.  The purchase of Twitter seemed particularly ill-advised and could be a sign that he is having trouble keeping his life together.

Musk was born in South Africa in 1971.  At 18 he emigrated to Canada to attend college and soon moved to the US.  He was entrepreneurial cofounding Zip2 in 1995.  The company was purchased in 1999 for $305 million of which Musk's share was $22 million.  Musk then cofounded X.com which became part of Paypal.  Paypal was purchased by Ebay for $1.5 billion in 2002.  Musk next founded SpaceX and in 2004 was an early investor in Tesla which he soon came to dominate.  After some early struggles SpaceX and Tesla have both become very successful.   

What are the factors in Musk's success?  A lot of it was luck of course but on the other hand Musk gave himself chances to be lucky by taking risks.  It is hard to win the lottery if you never buy a ticket and Musk bought some tickets.  He was a tough sometimes abusive boss and that can encourage employees to work harder and accomplish more.  He had an advantage here in that rockets and electric cars are the sort of things many engineers want to work on and are willing to tolerate some workplace abuse for the opportunity.  

Another Musk insight is that products and organizations often contain a lot of fat, unnecessary parts and people that can be eliminated in the interests of efficiency.  If carried too far this can be idiotic as in the episode from the book covered in my previous post but in a lot of cases there are major savings available.  Musk also seems to have had reasonable good judgement about what people will find attractive in a product.  However his record here is more mixed as some features like the gulf wing doors on some Tesla's just aren't worth the trouble.

All of this along with Musk's chaotic romantic life are covered in the book but mostly in anecdotal form.  It is often hard to tell what is important and what isn't.  I would have preferred a shorter book with more analysis.  The book has some value, it does provide some insight into Musk and his good points and bad points.  The book is divided into 95 short chapters so you don't have to read it all at once.  Still in the end I expect most people can find better ways to spend their time.