I started my first corporate job in 2006 and in about ten years of earnings (single income) and savings my net worth crossed the magical Million Dollar mark. If you’ve read my money trail page you know my earnings trajectory. So what do I have to show for as my net worth for my earnings over the past 12 years ? I have it all condensed for myself and for you to see how I manage it. I started looking at my net worth only after I got introduced to the concept of Financial Independence as late as 2017. But I did some extra work by looking up my accounts all the way back to 2014 to understand 2 things (a) how have I done in terms of net worth progress and (b) how concentrated or diversified my assets are.
The chart shows my net worth at the end of years 2014 through 2017 as well as year to date numbers for 2018 updated at the end of July. My assets are grouped in three main color groups: the grey and dark grey are my equity investments including asset in 401k as well and in an after tax brokerage accounts respectively. The sum of grey group is my aggressive asset class. The light blue and dark blue are short term reserves in 401K account and cash and CDs held in bank accounts. The sum of blue group is my conservative asset class. And finally the purple bar on top shows my home equity for the primary residence we purchased in 2015. Since our moving to Asia in 2017 the primary residence has been an income generating rental property making it our third asset class.
The green bars show the change in net worth every year. We have had a very juicy few years and as for most investors 2017 was the strongest and we ended up adding $588 K to our net worth. You’ll also notice that while the grey group (equities) made up majority of my net worth, my sentiment has changed in 2018 and I’ve become quite conservative and have valued capital preservation more than asset growth. I sold most of my the equities held in after tax brokerage account and used it to pay off my mortgage. Even though I fully understand that paying off my mortgage was a financially incorrect decision based on my IRR evaluation of keeping the mortgage vs paying it off, my sentiment pretty much took over. I rebalanced my 401k portfolio as well to switch to a very conservative portfolio. All of the move asset rebalancing was done in January 2018 and since then I’ve pretty much been out of the market. Last checked although S&P, NASDAQ and DOW had suffered corrections in early part of the year, they’ve mostly recovered. I keep watching the market but am staying mostly out. I will update the YTD bar monthly so any changes in my asset class or my sentiment will be reflected in the chart.
The chart below shows the performance of my 401k over the last decade. 13.1 % annualized rate of return has been pretty awesome and my risk appetite has suddenly dropped. The growth in my 401k portfolio looks flat since Jan 2018 when two things happened (a) I moved from 100% stocks to 90% Vanguard short term reserves and (b) I switched jobs so no more contributions going to my 401k account (I do have a similar retirement plan in my new job here in Asia).
Only time will tell if my move to a very conservative portfolio (about 2.5 % return) was right or wrong, but its a decision I have made based solely on my personal circumstances. I’m a few years away from ending my corporate job (4.5 to be precise) and therefore a more conservative approach. Whatever happens, I know I’ll be content with my decision and not regret missing out if Mrs. market continues to fly higher.