My net worth increased from $1,292,823.80 on 12/31/18 to $1,843,840.69 on 12/31/19. In 2019, my net cash inflow (from active income less expenses) was $163,561.43.
Organic growth = ($1,843,840.69 - $163,561.43) / $1,292,823.80 -1 = 29.97%.
Inorganic growth = $163,561.43 / $1,292,823.80 = 12.65%.
Total net worth growth = 29.97% + 12.65% = 42.62%.
Total net worth growth = 29.97% + 12.65% = 42.62%.
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 big in 2019, in fact the biggest since I began tracking in 2011, but nonetheless trailed by 153 basis points the S&P500TR of 31.50%. The index is a real joy kill.
Inorganic growth of 12.65% helped my net worth increased a total of 42.62% for the year of 2019, biggest increase since 2013, when my net worth was much smaller.
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 $1,538,513.88 is currently 83% of my net worth.
My net worth is comprised of 0.2% cash, 1.4% bonds, 75.9% stocks, 14.1% tax-deferred retirement account (all invested in stocks), 5.4% in Roth IRA (essentially all in stocks), 2.4% home equity, 0.9% gold, and -0.3% debt (student loan). My retirement accounts make up 19.5% of my net worth. My leverage is 100.34%, which is extremely 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).
As I predicted a year ago, 2019 turned out to be an interesting year. The slowdown in 2018 prompted the Fed to reverse course and lowered rates for the first time since the Great Recession ten years ago. This was like pouring gas over a fire, making 2019 the strongest year of stock market return since 2013.
What does this portend for 2020? It's an election year. Expect President Trump to everything he got to keep the economy strong. Barring any black swan event, 2020 should be another year of strong return, probably 15%+.
Inorganic growth of 12.65% helped my net worth increased a total of 42.62% for the year of 2019, biggest increase since 2013, when my net worth was much smaller.
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 $1,538,513.88 is currently 83% of my net worth.
My net worth is comprised of 0.2% cash, 1.4% bonds, 75.9% stocks, 14.1% tax-deferred retirement account (all invested in stocks), 5.4% in Roth IRA (essentially all in stocks), 2.4% home equity, 0.9% gold, and -0.3% debt (student loan). My retirement accounts make up 19.5% of my net worth. My leverage is 100.34%, which is extremely 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).
As I predicted a year ago, 2019 turned out to be an interesting year. The slowdown in 2018 prompted the Fed to reverse course and lowered rates for the first time since the Great Recession ten years ago. This was like pouring gas over a fire, making 2019 the strongest year of stock market return since 2013.
What does this portend for 2020? It's an election year. Expect President Trump to everything he got to keep the economy strong. Barring any black swan event, 2020 should be another year of strong return, probably 15%+.
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