How did you do in 2004?

[Tommy_Dolitte]

11.8%....vs a target of 6%...yeah I know....I'm ultra conservative... " )


"Slow and steady wins the race!"

 

[markplus4]

Netted 12% in 04 with a conservative portfolio...
--15% cash...just in case the big correction hit.
--20% TIPS
--10% high yield
--5% Investment grade corporates
--20% International...almost exclusively emerging market & small caps.
--30% U.S. value stocks...heavy yield weighting (REITS/Utilities/Oils/& a large dollop of small caps/fallen angels).

Getting my fanny spanked so far in 05!

 

[BigMoneyJim]

Re: How did you do in 2004?.

Wow, I think my net worth is up 39% for 2004. Half of the increase is debt eilimination and half is from a combination of new contributions and investment returns.

My debt was significant in proportion to my assets, and my assets were just slightly higher than my annual gross income at the start of last year, so the net worth increase isn't particularly useful for me for future comparison purposes, but it's a nice feelgood number for sure.

As far as investment returns, I edited my earlier post noting that Vanguard says I made 10.3% return, and I think they're probably right. My first rough calculations of 12-16% seemed high.

 

[John Galt]

Living off my investments, my net worth was flat in 2004.
This is okay with me. It went up almost every year
since I retired, until last year. That said, if I started to see a decline in net worth, I would get real motivated
to do something about it. "Flat" I can live with (I lived with my ex. for 32 years )
It's
a bit early for me to start drawing down my base. In fact,
if all goes according to plan (unlikely) I will never have to draw it down. Actually, this is more of a "wish"
than a "plan".

JG

 

[malakito]

Net worth increase of ~12%
IRR of investments per Q of ~8.5%
Mostly S&P500.

malakito

 

[Cut-Throat]

That's why I think it's more important to look at the balance sheet rather than the income statement, even though the latter feeds the former.  You could have a 20% return on your investments year after year and still go bust.

The main problem with looking at net worth increase, is that it is a meaningless number. IOW - A guy can have a net worth of $1 at the beginning of the year and at then end of the year he has 100 bucks. His Balance sheet has a 10,000 percent increase. It does not correlate to anything or any investment vehicle as far as performance.

Likewise, when you are in retirement and your portfolio is slowly, slowly shrinking (which it should be - unless you want your heirs to enjoy your money) - You will have a negative Increase in Net worth some years.

The only thing that remains constant during your periods of accumulation and withdrawal is your Average Annual Return. This is how you rate any investment, whether it be a stock, bond or CD.

Hearing someone say I increased my Net Worth 58,000 per cent might sound impressive, but it is totally meaningless and will not correlate even for that individual from year to year. In fact the number will go down, the bigger the pile you have.

it's a lot like saying it's twice as warm today as it was yesterday. Zero information!

 

[John Galt]

Net worth "meaningless"? Although I understand what Cut-Throat is saying, I can't help but wonder if this was
a slightly late CHP?

JG

 

[Cut-Throat]

Net worth "meaningless"?  Although I understand what Cut-Throat is saying, I can't help but wonder if this was
a slightly late CHP?  

JG

No John it is too early for a Cocktail Post on my end. How about yours? :

You did not read my post again. I did not say 'Net Worth' I said 'Net Worth Increase'. Net Worth is a very meaningful number. Net Worth Increase stated as a Percentage is not!

 

[retire@40]

The main problem with looking at net worth increase, is that it is a meaningless number.

I appreciate that if we are talking about starting with $1 and adding $100 to it. Even at that, the 10,000% won't happen year after year. I guess it makes more sense to talk about percentage of net worth increase only when it is associated with dollar amounts. Looking back at my net worth, I wasn't too concerned about net worth increase until I had $100K of net worth in the mid 90s. That's why I stated in a previous post what my moving yearly average was regarding my percentage of net worth increase over the past 10 years. And you're right in that the more net worth you have, the harder it is to obtain a high net worth increase percentage.

I also agree that once you are out of the accumulation phase, you only need to worry about controlling your net worth decreases. For example, after retirement, I may say "My net worth only decreased 2% this year from $1mil to $980K."

The reason I am more focused on net worth increase is because I know where my end game is and I know how much my net worth needs to increase each year to get to that point. It's not what you make, but what you save.

 

[JOhn Galt]

Okay C-T, I see your point. It's semantics I guess.

JG

 

[Beachbumz]

The main problem with looking at net worth increase, is that it is a meaningless number.

While I agree that the number can be skewed as in your example, it is FAR from a meaningless number. It is what tells people that they have finally reached FI. As it is a function of your investment returns, earnings (if any) and gifts (ie the piggy bank example) less your spending; it would be very difficult to make a comparison from person to person.

Since the question in the thread was "How did YOU do in 2004", I think the change in net worth can be a pretty good measure for most of us.

So, when I say that my net worth went up by about 25%, from 1.2mil to 1.5mil, after taxes and after spending all I wanted to, I think that I did pretty good (and was very fortunate 8)).

 

[Cut-Throat]

So, when I say that my net worth went up by about 25%, from 1.2mil to 1.5mil, after taxes and after spending all I wanted to, I think that I did pretty good (and was very fortunate  ).

Well ya sure!  - You gave me the amounts and that does mean something!

Hey kindergartners! this is a very simple point.

If I asked you - 'what would you like to have 10% of X or 90% of Y' ? - what would you answer?

 

[Beachbumz]

I Imagine the children would take either, assuming that X and Y are monetary amounts (as that is what we are discussing), they can't loose.

The fact is, your post was not accurate (IMHO). Increase in net worth is very meaningful to the person in question, which is what the thread was about. Whether or not they provided us with enough information to evaluate their performance is our problem. IOW, if a person says there net worth increased by X percent that is meaningful to them, if not to you.

Heck, if I lost 50% on all my investments, but I won the lottery, I would STILL consider it a good year.

Also, I disagree that everyones net worth should be steadily declining. At 37 years old I prefer that mine continue to rise so that my income will keep pace with (or exceed) inflation.

The Beachbumz

 

[Cut-Throat]

I hear the Geese Honking!

Bum don't be difficult.

The original poster said:

Just finished the 2004 calculations, and aside from some out-of-balance sectors that are due for rebalance in the first quarter, my portfolio looked like the below this year.  Actual performance was a little over  14% in 2004, after paying fees of about 0.4%.  

He was talking about 'Investment Performance'. If I said to you. Investor A's net Worth increased 28% and Investor B's Net Worth increased 16% - Which had the best Investment performance - You don't have enough information to determine.

The original poster was interested in your Investment performance as compared to his. Again, Percent Increase of Net Worth can not do this.

I am assuming that you took and Understood Jr. High Algebra?

 

[sgeeeee]

My net satisfaction went up 23% just reading this thread and witnessing CT try to teach junior high algebra. . .

 

[Beachbumz]

I realize that ESRBob was thinking investment performance when he asked the question "How did you do in 2004" based on his post. However, there were quite a few posts from people that based how they did on increase in net worth. This is a very important number for those in the accumulation phase and investment performance is only part of it. It is also earnings and LBYM, etc. Also, as one guy stayed, he was paying down debt, thereby increasing his net worth. While it is possible, it becomes more difficult to calculate 'investment performance' in these instances.
In my case, it would be damn near impossible and certainly not worth my time.

If you had stated that "percentage increase in net worth" is meaningless to YOU, then I would have concurred. As, I have stated before, comparing net worth increase, percentage or amount, from person to person serves little purpose; but when an individual looks at how THEY did, it is a great measure.

BTW I did pretty good in Jr. high algebra (top of the class). I could respond with a childish comment also, but I'll refrain....

The Beachbumz

 

[Cut-Throat]

sigh............... :

 

[retire@40]

The reason increase in net worth is important is because giving a ROI without also stating your increase in net worth doesn't necessarily show you accomplished anything.

For example, you may think that a 20% ROI is fantastic, especially if I tell you I made 20% year after year for 5 years in a row, especially if I tell you I started with $100K 5 years ago.

Here's the importance of net worth increase: The above paragraph fails to inform you that while I was having fantastic ROIs, I was also spending WAY beyond my means to the point where I spent all of the 20% each year plus all of the original $100K plus I had to finance some of my spending with credit cards that now have a $10K balance on them.

So, great ROIs for the past 5 years, but now my net worth is negative.

Conclusion: Tracking ROI is fun, but tracking net worth is crucial.

 

[Cut-Throat]

Conclusion: Tracking ROI is fun, but tracking net worth is crucial.

And who said it was not?

Tracking Net worth Percentage Increase is worthless.  It cannot correlate to anyone else or even yourself from year to year.

You guys also seem to have a problem with reading comprehension.

 

[retire@40]

Tracking Net worth Percentage Increase is worthless.  It cannot correlate to anyone else or even yourself from year to year.

You guys also seem to have a problem with reading comprehension.

I thought I comprehended your quote from a few posts ago saying

The main problem with looking at net worth increase, is that it is a meaningless number.

By the way, I also got straight As in algebra and calculus

 

[Cut-Throat]

By the way, I also got straight As in algebra and calculus  

A documented case of Grade Creep!

 

[Cut-Throat]

Does anyone here keep track of their IRR (Internal Rate of Return)? I'd be curious to know what the average IRR is for people who want to ER. I don't know if there is a source showing what the average IRR is for the average person in the US, but I would assume it's in the low single digits.

Here are my stats on a year by year basis:

1996: 11%
1997: 14%
1998: 15%
1999: 29%
2000: 26%
2001: 12%
2002: 8%
2003: 10%
2004: 16% (YTD)

And this is meaningless drivel.

 

[Jarhead*]

A documented case of Grade Creep!

No golf today. (Raining).
Just cranked up my computer, and ran headlong into this "battle of the Retire Early Nerds". Entertaining, but a few rules please.
Remember to go to your neutral corner on any knockdown. No rabbit punches, and no hitting below the belt.
Let's have a good clean fight, and may the best nerd win

 

[Beachbumz]

Well, we've gone from "net worth increase is a meaningless number" to percentage increase in net worth is meaningless to "tracking net worth percentage increase is meaningless". At least we're making progress.

The Beachbumz

 

[Cut-Throat]

You did not read my post again. I did not say 'Net Worth' I said 'Net Worth Increase'. Net Worth is a very meaningful number. Net Worth Increase stated as a Percentage is not!

Well, this was yesterday afternoon. - Remember reading comprehension.