My net worth increased from $1,843,840.69 on 12/31/19 to $2,288,160.79 on 12/31/20. In 2020, my net cash inflow (from active income less expenses) was $99,719.84.
Organic growth = ($2,288,160.79 - $99,719.84) / $1,843,840.69 -1 = 18.69%.
Inorganic growth = $99,719.84 / $1,843,840.69 = 5.41%.
Total net worth growth = 18.69% + 5.41% = 24.10%.
Total net worth growth = 18.69% + 5.41% = 24.10%.
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 (organic growth) of 18.69% was in line with the market's 18.40%.
Inorganic growth of 5.41% helped my net worth increased a total of 24.10% for the year of 2020. It has become a lesser contributor as my net worth increased over the years.
When organic growth far exceeds inorganic growth, my money would be working for me instead of myself working for money. Since I have retired last year in July, inorganic growth won't be much of a factor to my net worth in the years to come.
My net worth is comprised of -1.1% cash, 0.8% bonds, 78.4% stocks, 13.8% tax-deferred retirement account (all invested in stocks), 5.5% in Roth IRA (essentially all in stocks), 2.0% home equity, 0.9% gold, and -0.3% debt (student loan). My retirement accounts make up 19.3% of my net worth. My leverage is 100.25%, 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).
Inorganic growth of 5.41% helped my net worth increased a total of 24.10% for the year of 2020. It has become a lesser contributor as my net worth increased over the years.
When organic growth far exceeds inorganic growth, my money would be working for me instead of myself working for money. Since I have retired last year in July, inorganic growth won't be much of a factor to my net worth in the years to come.
My net worth is comprised of -1.1% cash, 0.8% bonds, 78.4% stocks, 13.8% tax-deferred retirement account (all invested in stocks), 5.5% in Roth IRA (essentially all in stocks), 2.0% home equity, 0.9% gold, and -0.3% debt (student loan). My retirement accounts make up 19.3% of my net worth. My leverage is 100.25%, 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, 2020 turned out to be another year of strong 15%+ return, though not in a straight line to say the least. The COVID-19 crisis was a godsent gift for the financial markets. I took advantage of the downturn to sell high dividend stocks realizing little capital gains and immediately reinvesting in low or no dividend stocks to reduce my future tax liabilities.
What will 2021 bring? While the market is at all time highs and by no means cheap, the new bull market that began on March 23, 2020 is still young. The path of least resistance is up.
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