Saturday, January 5, 2019

My Net Worth Update - End of 2018

My net worth increased from $1,174,539.92 on 12/31/17 to $1,292,823.80 on 12/31/18. In 2018, my net cash inflow (from active income less expenses) was $174,299.60. 

Organic growth = ($1,292,823.80 - $174,299.60) / $1,174,539.92 -1 = -4.77%.

Inorganic growth = $174,299.60 / $1,174,539.92 = 14.84%.

Total net worth growth = -4.77% + 14.84% = 10.07%.


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 negative in 2018 but comparable to the S&P500TR of -4.38%, with inorganic growth offsetting the negative organic growth. When organic growth far exceeds inorganic growth, my money would be working for me instead of myself working for money. In fact, if it ever comes to a point that inorganic growth contributes less than 1% to my total net worth growth, it might not be worthwhile to work for money anymore.

My liquid net worth of $1,064,292.53 is currently 82% of my net worth. My net worth is comprised of 2.0% cash, 1.3% bonds, 74.8% stocks, 14.8% tax-deferred retirement account (essentially all invested in stocks), 5.9% in Roth IRA (almost all in stocks), 2.9% home equity, 1.1% gold, and -2.7% debt. My retirement accounts make up 20.7% of my net worth. My leverage is 103%, which is very conservative. This will give me some flexibility to increase leverage in the next bear market selloff.

The chart below shows the growth of my net worth since 2011 (when I began tracking).

2018 is similar to 2015 with slow net worth growth due to a sluggish stock market. That may portend a strong growth year in 2019, or the bull market could come to a stop and a new bear market begins, giving me more buying opportunities. In any event, 2019 will be an interesting year.

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