Monday, January 5, 2015

My Net Worth Update - End of 2014

My net worth increased from $430,747.65 to $574,595.14 from 12/31/13 to 12/31/14. In 2014, my net cash inflow (from active income less expenses) was $104,165.19

Organic growth = ($574,595.14 - $104,165.19) / $430,747.65 -1 = 9.21%.

Inorganic growth = $104,165.19 / $430,747.65 = 24.18%.

Organic growth corresponds to growth in my net worth from interest and dividends (passive income) and capital appreciation without infusion of new money; inorganic growth corresponds to growth due to new money infusion.

Ideally, I would like to see increase in my net worth primarily from organic growth, to be sustainable in the event I no longer have earned income. At this rate, it will probably take me another 4-5 years before organic growth exceeds inorganic growth.

9.21% organic growth is a bit disappointing, which underperformed the S&P 500's total return of 13.69%. My 2014 returns are dragged down by a one-third allocation to international stocks, in a year where the EAFE returned -5% and Emerging Markets -2%. Instead of chasing return, I will continue to overweight international stocks, which offer much better value compared to US stocks right now. The valuation gap will close eventually, if not in 2015.

My liquid assets of $440,620.01 is currently 77% of my net worth, comprised of 5.8% cash, 4.0% bonds, and 90.2% stocks. My retirement accounts make up 26% of my net worth. My leverage is 106%, which is pretty conservative. I wouldn't sleep too soundly if it were much higher.

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