My net worth increased from $643,161.31 to $883,575.44 from 12/31/15 to 12/31/16. In 2016, my net cash inflow (from active income less expenses) was $128,638.20.
Organic growth = ($883,575.44 - $128,638.20) / $643,161.31 -1 = 17.38%.
Inorganic growth = $128,638.20 / $643,161.31 = 20.00%.
Total net worth growth = 17.38% + 20.00% = 37.38%.
Total net worth growth = 17.38% + 20.00% = 37.38%.
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 my net worth increase primarily from organic growth, to be sustainable in the event I no longer have earned income. My return was satisfactory in 2016, although inorganic growth was a bigger contributor to my net worth growth. When organic growth far exceeds inorganic growth, my money would be working for me instead of myself working for money.
My liquid net worth of $734,012.06 is currently 83% of my net worth. My net worth is comprised of 3.1% cash, 1.4% bonds, 70.8% stocks, 23.4% tax-deferred retirement account (essentially all invested in stocks), 1.4% gold, 0.6% other assets, and -0.8% debt. My retirement accounts make up 26% of my net worth. My leverage is 101%, which is extremely conservative. This will give me some flexibility to increase leverage when the next bear market comes.
Very impressive! I am still in the early stages of my investment career but seeing some figures like this gives me the confidence that I can achieve it one day too. I am probably still young enough (25) to be able to achieve this. But hey, a combined increase of 37% is nothing to scoff at! Well done
ReplyDeleteThanks for commenting! Incidentally, I too started investing at age 25, about 7 years ago, with zero net worth, so if your net worth is above zero you are already off to a good start. As long as you save a high percentage of what you earn and invest it regularly in both good times and bad, you can surely achieve this and much more.
DeleteNice work JTTF. I wouldn't be too disappointed with 15% returns. If you can keep that up for 10yrs, you may want to move to Wall Street, :). Keep it up! Long way to go to $1B...! jk.
ReplyDeletePID
Yes, 2016 was a good year for me, but this was after a horrible 2015 where I badly lagged the S&P 500 by 11 percentage points (http://journeytototalfreedom.blogspot.com/2016/01/my-net-worth-update-end-of-2015.html), as I got hurt by my value tilt and foreign stock exposure. I don't think I'm Wall Street material any time soon. :)
DeleteI definitely still got a long way to go to $1B. But as the saying goes, the journey of a thousand miles begins with a single step. :) At 12% annual rate of return, I should get there in 58 years. At 10% annual rate of return, I should get there in 69 years (still possible within my lifetime). The destination is cool (what would I do with $1B?), but it's the journey that counts!
Awesome results. Your net worth increase is inspiring.
ReplyDelete