2022 Review: The Black Swan, Fund, and More

I know I haven't been updating for a long while, but the reasons include but are not limited to moving to Canada, various health issues, tech layoffs, being busy with the fund, and more.

However, patting my own back, I surprisingly achieved my goals for 2022.

The Black Swan

While many economists and traders warn about hyper-inflation and stagflation last year, most people still didn't expect the FED to firmly raise the interest rates. It is a black swan event, well to me at least.

I'm extremely happy to pick up Incerto by Nassim Taleb, among which The Black Swan might be the most well-known, but the other ones are as good as if not better than The Black Swan.

The takeaways fit the current economic situation very well (downturns are great for self-examination amirite πŸ™ƒ):

  • For a complex system like economics, things can go either way because of the randomness. This not only applies to daily fluctuations, but also the larger scale questions of will the market crash, and especially the when and the how.
  • The Barbell Strategy has a lot of merit to it, especially now when the traditional stock/bond portfolio both go down instead of supposedly hedging each other.
  • Don't time the market with the majority of your portfolio because things can always go wrong. Just see the tech employees who hold on to all of their RSUs but can barely pay taxes now.
  • The counter-example is from successful stories like the actual winners from the WSB GME saga. They didn't spend their life's worth on the bet, but they added a lot of leverage using options but have limited downside (can't lose more than the premiums). If things didn't work out, it's fine and there is still enough capital to bet on the next one. If things do work, it's an exponential payoff worth much more than the money lost on previous bets.

I'm fortunate to be able to stick to some of my personal discipline:

  • Always sell RSUs once vested because if they can go up, they can also go down.
  • Resist the temptation from the likes of ARK. I only had a very small position at the beginning of the year.
  • Keep a decent cash reserve, and used leveraged ETF to still keep similar levels of exposure to the stock market.
  • My real estate investing mainly focused on cashflows in markets with good economies to support, so they are really not affected by the macro this year.

Real Estate

Speaking of real estate, a lot has gone wrong this year:

A flip project was broken into, burglarized, and set on fire so that the fire department had to come to put the fire out. It was not easy to deal with this, but we have proper property insurance and we hired insurance adjuster to deal with the insurance company so that we will be able to recoup most of the cost to build it back up.

A reputable property manager disappeared. Thankfully, his business partner, another reputable real estate agent took over the mess and sorted it out.

A fund that I invested in as a passive investor didn't go as planned. Fortunately, the partner who did the fundraising is helping a lot with the legal actions. Secondly, I initially viewed this as a more risky investment so we didn't invest too much with the expectation of things could go wrong. Thirdly, it's still real estate after all, there will be some value to be salvaged, like the land and the buildings, so we won't get nothing in return (hopefully).

They all turned out ... ok. I didn't lose too much but it was a lot of unexpected stress which coincided with my moving to Canada and some sudden health issues.

I survived, and that is what matters. I survived these because one-year-ago me was very conscious of risks and controlling those risks. Risk management and exit strategies are what really kept me in the game. You should hope you won't ever need them, but in my case, it's the difference between bust or not.

The Fund

I'm very fortunate to be a part of a short-term rental fund where we raised $1M+ and acquired 22 units in Indianapolis and Atlanta. Despite the many difficulties, we pulled through and already got 18 of the 22 units online, already getting $36k in revenue and being cashflow positive.

While it's still too early for learnings, this does bring me to my goal of 30+ doors and continue scaling up. I thank my team for keep pushing to overcome the many unforeseen obstacles, and again, thanks to the market, business model, and deal analysis so that the fund wasn't too affected by the macro.

On a Personal Note

As mentioned in the beginning, this is a terrible year for me. This is like Murphy's law suddenly triggered in the same year, everything can go wrong did go wrong (almost).

While I much prefer not going through the hardship, this does teach me the lesson of the importance of managing risks, not only financially but also risks of everything in life.

Here's to a better year, oh well, at least better than 2022.

Minwei Xu

Minwei Xu

Software Engineer at Facebook and Indianapolis Real Estate Investor
Bay Area, CA