Thursday, January 2, 2020

Net Worth Update December 2019: $1,843,840.69 (+$52,935.13, +2.96%)

Welcome to my monthly net worth update! Here is how my assets, liabilities, and net worth have changed over the past month:

Beginning balance
on 12/1/2019
+ Cash inflow
+ $ P/L= Ending Balance
on 12/31/2019
% P/L% Equity
Current assets
Total current assets1,388,177.907,375.8333,371.111,428,924.842.40%77.50%
Tax-deferred retirement account251,729.581,975.036,834.71260,539.322.72%14.13%
Roth IRA96,719.902,887.8399,607.732.99%5.40%
Other non-current assets283.078.42291.492.97%0.02%
Total assets1,797,173.739,350.8643,672.881,850,197.472.43%100.34%
Current liabilities593.60122.690.00716.290.04%
Long-term liabilities
Student loan5,674.57(34.08)0.005,640.490.31%
Other non-current liabilities0.
Total liabilities6,268.1788.610.006,356.780.34%
Equity (net worth)1,790,905.569,262.2543,672.881,843,840.692.44%100.00%
Net worth: Bottom line up front, my net worth increased by $52,935.13, +2.96% this month due to marked-to-market investment gain (+$43,672.88, +2.44%) and net cash inflow ($9,262.25, 0.52%).

Here is the breakdown of my balance sheet:

Cash: Most of this sits in my savings and brokerage accounts, with a little bit in checking account just enough to pay the bills. The moving target is around $10-25k cash for dry powder in case of a market downturn. My cash reserve is rebuilding and remains low right now, so I will be a bit more selective with future investments.

Bonds: Most of my bonds are in Groundfloor limited recourse obligations (LROs), which are senior secured balloon loans for house flippers. I earn low double digit returns on these loans, which is pretty good, considering that most of these loans have a short term of one year or less. The Groundfloor loans have been doing pretty well. I still have a few hundred dollars in LendingClub loans, which I'm slowly winding down (no new investments and withdrawing any cash from interest and principal repayments). I also started an investment of $2,400 in Upstart unsecured P2P loans in July 2018. The Upstart investment is deteriorating; two of my three delinquent loans are written off this month, contributing to the negative return.

Stocks: This is the bulk of my net worth, held in taxable accounts to fund my early retirement and store wealth. Most are held in brokerage accounts with the rest in direct stock purchase plans (DSPPs). The goal here is to maximize after-tax growth.

Tax-deferred retirement account: This is my retirement account associated with my work, not to be touched till after age 59 1/2. It is currently allocated 50% EAFE and 50% US Small Cap. These two are the only stock fund options besides the S&P 500 index, to which I already have a lot of exposure in my taxable accounts.

Roth IRA: This is currently all invested in IJR to keep things simple. IJR is probably the best investment with all the desired characteristics: diversified, small cap, growth, quality, low cost. 

Home: Home value is from Zillow's Z-estimate, taken at the end of each month. My home value had been in a steady decline since I bought it in cash for $40,000 in March 2018. Then in June 2019, Zillow inexplicably increased my home value estimate by a whopping 17% compared to the prior month, to $42,816, the first time it is valuing my home at higher than what I paid for. This month, Zillow did not show an estimate, so I kept the same value from the last estimate available.

Gold: I currently have 10.77 troy oz of gold coins as part of my coin collection. Each month I multiply that by the spot gold price. I do not plan on adding to this any time soon, unless gold breaks below $800, then I will likely add some. If below $500, I will almost certainly add some. I do not plan on ever selling (transaction costs too high, and I do like to look at the shiny yellow metal from time to time).

Other non-current assets: Includes new 529 accounts I opened in anticipation of the passage of the SECURE Act paving the way to use 529 for student loan repayment. I could include other assets like furniture, car, clothes, books, stamps, coins, etc. However, since these assets are not income-producing and can also be a liability as some of them require cash expenditure to replace them, I choose not to include them here.

Current liabilities: These are accounts I owe and due within 12 months, mostly credit card accounts.

Student loan: This is loan I took out for college, now consolidated at a low 2.5% fixed interest rate. I had a variable interest rate until I consolidated my student loans last year and locked in a fixed 2.5% rate for 10 years in a graduated repayment plan. I am certainly in no hurry whatsoever to pay it back given such low interest rates. Stocks are expected to generate much higher returns. The extra leverage this affords helps to grow my money faster. My currently monthly payment is only $46.41, of which the cash (outflow) shown is applied toward principal which lowers the loan balance.

Other non-current liabilities: None at the moment.

Below is a chart of my net worth since I started tracking on a monthly basis. Due to my aggressive stock allocation, my net worth has mostly mirrored the stock market.

The bull market is still going strong, with the market constantly making new highs this month.

My monthly performance against the S&P 500 is shown below:

2019My Portfolio ReturnS&P 500 TRExcess Return
My portfolio ended 2019 with a 27.56% return, which is good on absolute terms, but badly underperformed the market's 31.50% return by 395 basis points. 

2019 was another banner year for US large cap growth stocks. Allocation to small cap, foreign stocks, and some value stocks detracted from my return. 

Eventually, the tide will turn and the same factors that have been a headwind for me will turn into a tailwind.

Thanks for reading, and wish you all a prosperous 2020!

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