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Net Worth Update October 2007

November 4th, 2007 at 03:07 am

My net worth as at 31 October decreased by -$3,590 (-0.31%) during the month to $1,158,905 (AUD), largely due to a decline in the estimated valuation of our real estate assets. The real estate valuations bounce around from month to month, affected by what mix of houses were sold during the month, so it's only the long-term trend that matters. The balance of my half of the mortgage increased by another -$929 to -$363,063 as we continue to redraw some of our advance payments to cover the interest payments while DW is working part-time (until DS2 starts school in a couple of years). My leveraged stock portfolios increased by a net $2,816 (0.68%) to $416,955, but would have been around $5,000 (1.2%) higher except that my large block of IPE shares went ex dividend on Wednesday. My retirement account increased by $2,785 (0.85%) to $332,322. This figure is also a bit understated (by around $4,000) due to a delay in the processing of my employer's contribution for the month of August.

Copyright http://enoughwealth.com 2007

Calculating the Decline in Net Worth from "All Time High"

August 7th, 2007 at 05:05 am

I normally update the component figures (stock portfolio, retirement account) of my investments daily, but only calculate month-to-month changes in my net worth. Having had a couple of down months in a row I was interested in calculating where my net worth is in relation to my personal "All Time High" (reached on 20th June). I track my investments using an excel spreadsheet, so to calculate the current situation in relation to the "peak" value I need to know both the maximum value in a column of data (easy using the "MAX()" function) and the latest value in the column. The second figure isn't quite as easy to automatically calculate - there's no simple function (you might expect "LAST()" to do this, but no such luck), so you need to use a fairly complex function:
=INDEX(B3:B6500,MATCH(9.99999999999999E+307,B3:B6500))
This for numeric data in column B, where the data is in rows 3 to 6500. For example, today's data is in row 1408 and my spreadsheet is currently setup with dates out to my expected retirement in 2027 (row 6500).

To check how the current value compares to my "All time high" value I calculate:
=INDEX(B3:B6500,MATCH(9.99999999999999E+307,B3:B6500))/MAX(B3:B6500)

Using this calculation in my various spreadsheet tabs (one for each portfolio component) shows that my current situation is:
Current Property Equity = 98.23% of all time high
Current Retirement Account value = 94.84% of all time high
Current Stock Portfolio value = 88.85% of all time high

Overall, current net worth = 93.87% of all time high

Although I'm fairly sanguine about recent drops in the stock market and the post-boom slump in real estate prices (they've been stagnant in Sydney for the past 4 years, and the prospect of further interest rate rises means the recent mild recovery is likely to come to an end), it highlights the fact that I really haven't suffered a major decline in my net worth. Even back in '87 when I only had a tiny investment portfolio, mainly invested in stocks, the "crash" only wiped about 25% off my net worth at that time (I also had a "defined benefit" retirement plan which wasn't affected and I didn't count in my net worth calculations - just as well as my employer converted the plan to a defined-contribution scheme prior to laying off a large chunk of the workforce in the late 90's).

It makes me wonder how well I'd cope with a total melt-down across all asset classes (such as happened in the great depression). What if my stock portfolio was down to only 10%-20% of it's peak value, property was unsaleable (and valuations down 50%), and I lost my job? Hopefully the decline would be gradual enough to have some chance to unwind my geared positions - selling off shares to eliminate my margin loans and selling our investment property in time to pay off our home loan with whatever equity remained. The tricky part would to know when to "pull the plug" on debts. The temptation would be to first view a decline in asset values as a correction (10-15% down), and then as a bear market/housing slump if the decline extended to a 20-40% drop over many months or years. In such cases selling out would be the wrong move, while holding your position (or even buying more at the "bottom") would be a good long-term move. But, if such a recession turned into a full-blown depression then a buy-and-hold mentality could easily lead to bankruptcy.

One can only hope that the world's central banks know enough to avoid a global depression, just as one hope's there won't ever be another "world war" and that global climate change doesn't need to be factored in to personal financial plans! In the absolute worst case my "Plan B" is to move the family up to my parent's farm - they have a spare shed we could live in, a rainwater tank and bore water, so we could grow our own food. This is also the "plan" in case of WWWIII, SARS or bird 'flu Wink

Net Worth Update July 2007

August 1st, 2007 at 07:13 am

My net worth as at 31 July dropped by $23,420 during the month to $1,126,770 (AUD), due to a perfect storm of asset classes all declining simultaneously (so much for non-correlated asset classes). My leveraged stock portfolios decreased by a net -1.39% last month due to the overall weakness in the stock market. Whilst the estimated valuations for my share of our home and investment property also decreased slightly by -0.85%. The valuation of my retirement account decreased quite significanlty during July (-3.23%) as there were declines in both domestic and international stock funds, listed property funds and bond funds.

Given today's large drop in the Australian stock market I don't expect this month to turn out to be a net positive either...

Copyright http://enoughwealth.com 2007

Net Worth - PF Bloggers Progress for June

July 10th, 2007 at 08:46 am

http://enoughwealth.com/2007/07/net-worth-pf-bloggers-progre... the latest round-up on how the various PF (Personal Finance) bloggers who post their Net Worth each month are progressing.

Net Worth Update June 2007

July 9th, 2007 at 06:29 am

My net worth as at 30 June dropped by $12,554 during the month to $1,149,990 (AUD), largely due to 12 months prepayment of $13,425 interest on one of my margin loan accounts. My leveraged stock portfolios decreased by a net -2.80% last month due to the overall weakness in the stock market. Whilst the estimated valuations for my share of our home and investment property increased slightly I decided to retain the previous month's valuation as I have indicative figures for the next month showing that this was just a temporary blip in average sale price for our suburb, and prices will have reverted to the previous level by next month. The overall property equity decreased slightly due to our mortgage loan balances increasing fractionally (by 0.03%) due to our monthly redraw of $2,000. The valuation of my retirement account also decreased slightly during June (-0.24%) as it is largely invested in domestic and international stock funds.

Copyright http://enoughwealth.com 2007

Net Worth - PF Bloggers progress for MAY '07

June 9th, 2007 at 03:55 am

http://enoughwealth.com/2007/06/net-worth-pf-bloggers-progre... the latest round-up on how the various PF (Personal Finance) bloggers who post their Net Worth each month are progressing.

Net Worth Up $46,415 in May

June 1st, 2007 at 02:41 am

My Networth as at 31 May totalled $1,162,544 (AUD), an impressive overall increase of $46,415 (4.16%) for the month. My leveraged stock portfolios increased by a net 4.06% last month, and the estimated valuations for my share of our home and investment property increased 3.91% compared to the previous month, showing an acceleration of the mild uptrend that began earlier this year. The property gains were slightly offset by our mortgage loan balances increasing by a net $1,082 (0.32%) due to our monthly redraw of $3,500. Although we'll continue redrawing some of our advance mortgage payments each month to help meet our mortgage repayments after DW returns to work part-time, the amount required will reduce to only $1,000 per month. The valuation of my retirement account went up only slightly during May (0.72%).

So far this year my Net Worth has gone up by $129,761, which is 92.68% of my goal for the entire year! It's a pity that this rate of increase is unsustainable. At the current exchange rate of 0.828 USD to the AUD, my Net Worth is US$962,587 - so my milestone is to pass the one million mark in US dollars. If both the AUD and Sydney property prices keep rising, I may reach this in the next month or two.

http://enoughwealth.com

Net Worth - PF Bloggers progress for APR '07

May 6th, 2007 at 07:07 am

Here's the latest round-up on how the various PF (Personal Finance) bloggers who post their Net Worth each month are progressing.

Monthly Net Worth of PF Bloggers for APR 2007:

Blogger Age Net Worth $ Change % Change
http://englishmajormoney.blogspot.com 2x $14,275.00 $818.00 N/A
http://www.bloggingawaydebt.com/ 2x -$34,651.00 -$860.00 -2.6%
http://www.bluntmoney.com 2x $226,157.72 -$9,530.38 -4.0%
http://www.consumerismcommentary.com 30 $90,495.55 $2,128.60 2.4%
http://crazy-money.blogspot.com 27 $261,669.00 $13,583.00 5.5%
http://enoughwealth.com 45 $1,116,129.00 $45,141.00 4.2%
http://thefinancialladder.blogspot.com xx $152,414.85 $294.00 0.2%
http://www.thefinancejourney.com 25 $164,531.00 $10,643.00 6.9%
http://itsjustmoney.blogs.com 32 $167,715.62 $3,807.60 2.3%
http://www.lazymanandmoney.com/ 2x $176,700.00 $7,691.00 6.9%
http://www.makelovenotdebt.com 2x -$59,903.97 $1,060.45 N/A
http://www.mapgirl.net/mfc 3x no Apr data no Apr data N/A
http://moominhouse.blogspot.com/ 4x $426,078.00 $8,883.00 2.1%
http://moneyblogsite.com 25 no Apr data no Apr data N/A
http://www.mymoneyblog.com 28 $133,672.00 $7,147.00 5.6%
http://www.networthiq.com/people/myopenwallet 37 $335,541.00 $8,500.00 2.6%
http://www.networthiq.com/people/savvysaver 27 $198,001.00 $3,962.00 2.0%
http://seekingwealth.wordpress.com xx $27,026.71 $6,937.08 N/A
http://tiredbuthappy.blogspot.com 30 $171,122.00 $25,830.00 17.8%

nb. Some ages have been adjusted as follows:
exact age provided = listed as given
"20's" = listed as 2x
"early 20's" = listed as 22
"mid-late 20's" = listed as 27
and so on.

If you have any corrections, let me know asap after the post and I'll edit immediately. If it's more than a few days after the post, email me and I'll make the change the following month.

http://enoughwealth.com

Net Worth Up $45,141 in April

May 1st, 2007 at 03:15 am

My Networth as at 30 April totalled $1,116,129 (AUD), an impressive overall increase of $45,141 (4.21%) for the month. My stock leveraged stock portfolios increased by a net 5.10% during April, and the estimated valuations for my share of our home and investment property increased 2.10% compared to last month, continuing the mild uptrend that began last month. The property gains were slightly offset by our mortgage loan balances increasing by a net $1,082 (0.30%) due to our monthly redraw of $3,500. We're continue redrawing some of our advance mortgage payments each month to help meet our mortgage repayments while DW is on maternity leave for another two months. Unlike last month's big drop in the valuation of my retirement account, this month my retirement account balance went back up $10,919 (3.37%).

So far this year my Net Worth has gone up by $83,346 (8.07%), which is 59.53% of my goal for the entire year.

http://enoughwealth.com

Real Estate Appears to be Picking Up

April 24th, 2007 at 05:56 am

Owning our own home plus an investment rental property (albeit with large mortgages) means that my net worth is dependent in large part to the vagaries of the Sydney property market. The latest average house prices for the adjacent suburbs where our home and investment property are located shows considerably higher averages prices for house sales than were reported for the previous month:



Combined with the recent strength in the Australian stock market it looks like this month will give a boost to my net worth. Hopefully todays CPI figures will mean the interest rate on our mortgages doesn't increase again (our house is a variable rate loan, and the rental property is a 5-year fixed rate loan, with four years left to run). It may also help breath some life back into the property market - new house construction is running below the required rate to meet increased housing demand, which is starting to make rents increase. Any confidence that interest rates have now peaked will encourage both investors and home buyers back into the market, which should form the basis for the next increase in house prices in Sydney. Housing in Sydney tends to run in a 7-10 year cycle, and it's now been almost three years since the last peak in house prices.

Of the three goals I set at the start of this year (see side bar), my Net Worth and US Stock Portfolio goals are on track, but unfortunately my goal of getting down to my ideal weight by 30 June is not progressing as well as I'd planned.

In some ways diet and saving plans are similar - you pick your ideal behaviour and make an effort to stick to it until it becomes habitual or "automatic" behaviour. Unfortunately it seems easier to eliminate "junk spending" than it is to eliminate "junk food". I think the problem is that while you can arrange for your "essential" expenses (utility bills, home loan etc) to be paid automatically and can therefore focus on eliminating spending entirely (eg. "no spend" days), some basic level of food consumption is needed to maintain health. Food intake can't just be set on autopilot - every time you eat there is the chance you'll choose junk food instead of a more healthy food. I find that I'm most successful in sticking to a healthy eating plan if I have a fixed menu of healthy items for my breakfast, lunch and dinner - that way I CAN completely exclude eating anything that isn't "on my list".

Ah well, time to start writing down what I eat every day and tracking it on my diet spreadsheet...

[url]Enough Wealth[/url]

Reviewing Net Worth Progress

April 11th, 2007 at 09:07 pm

Apart from a monthly update using NetWorthIQ, I also update a spreadsheet with my net worth data each data. I get daily values for my stock portfolios, margin loans, and retirement fund. The real estate valuations and mortgage loans are only updated monthly. This suits me as it only takes a few minutes each morning and its fun to see the daily gyrations in the various values. I find that I've gotten used to daily ups and downs, so that even fairly large "crashes" don't worry me as I treat it as just part of the "noise" in my investment returns.



My retirement fund is pretty well on track to provide for a comfortable retirement, so what do I compare the total NW to? I've chosen a couple of indicators that are shown on the chart below.

Firstly, I've used a logarithmic scale for the chart, so that projected ROI of 7%, 10% and 13% are straight lines. These values are my personal view of what would be "poor", "likely" and "good" returns over the long term for my ideal asset mix - assuming an inflation rate averaging 2.5%. The grey scale at A$1m is adjusted for the actual CPI data from 2002 to 2007, and projected forward at an assumed rate of 2.5%.

Secondly, I've plotted available data from the annual HILDA reports to show what the top 10% NW is for a single-person of my age at that year (actually HILDA only reports household data, so I've taken half the household value as an approximation for the single-person NW).

Thirdly, I've plotted available data from the annual HILDA reports to show what the top 25% NW is for a household with head of household of my age at that year.

Finally, I've plotted 1/100th of the annual BRW "Rich 200" list cut-off value. I scaled it to 1% so the figure is in the region of my NW. I think that the annual cut-off figure of the "rich list" is a good indicator of what returns the best investors are actually each year - with some upward bias as those whose do badly drop out of the "Rich 200" list, and more successful investors are added to the list.

Overall I'm quite happy with how my NW has been tracking in terms of both absolute return (averaging more than the expected ROI of 10%pa) and in comparison to the "rich list". In fact I've slowly been creeping up on the "rich list" data points - at this rate I might make it on to the list if I live another 200 years or so!

It's rather depressing to see how the NW of even the "top" 10% and 25% of Australian households has been progressing - it seems to be keeping pace with my "poor" average ROI of around 7%. This is probably due to "choice" of asset mix these households are making -most likely just a stake in their own home, a mortgage, and their compulsory superannuation being invested in the default "balanced" option. It would be interesting if the HILDA studies included details of asset allocations.

It will be interesting to track my continued progress against these "KPIs" in future years - since 2002 we've had the real estate boom go bust in Sydney, while the stock market has had a phenomenal bull run for the past 3-4 years.