Net Worth Update – June 2016

After a wonderfully relaxing, almost month-long vacation – I am back. Did you miss me? I know I didn’t, but then I am with me almost 15 to 20 hours a day (depending on how much sleep I get). Now I am back, it is time for my second net worth update. My last net worth update was back at the end of 2015 where I had just cracked the $1.15m mark. Let’s see how the last 6 months have treated me…

Firstly, the share market (all ordinaries) over the last 6 months has been up and down a bit, but ended almost exactly where it started. At the end of December 2015 it was at 5344, and at the end of June it was sitting at 5310. That difference is often less than a single days movement – so I am calling it a flat 6 months.

Secondly, savings interest got a bit of a hit as the cash rate dropped from 2% to 1.75% in May 2016. This means that a large portion of my savings will receive less interest, as banks are normally quite fast at passing on any cuts to saving rates.

Lastly – actually lets just get into it. I can explain more later.

Net Worth – June 2016 – $1.191m

Initially $1.19 million looked like a $40k increase – which sounded fantastic. However that was really due to some favourable rounding. In December it should really have been $1.155 million, making an actual increase of about $36k this half.

Unfortunately this is not quite on pace for my 2016 goal of growing my net worth by $100k. However I have two secret weapons up my sleeve:

1. my bonus
2. salary sacrificing into superannuation

Both of these should lend a little bit of oomph to the net worth if other investments stay flat. Time will tell.

Asset Distribution

Onto the graphs, and first up we have the asset distribution graph.

As you can see the aim of increasing my share market holdings is coming along nicely; at the expense of cash and fixed interest of course. The blue line is also heading downward as more of my wealth is being put towards non-property asset classes. I am still hoping to get that green line over the 10% mark, preferably by the end of the year, but only time will tell. I always want to keep the green lower than property as most of my super is also in equities. For my diversification I am currently aiming for about (this changes a little every time someone asks me):

• 40% property (15% over)
• 40% equities
  • 20% super (about right)
  • 20% shares & bonds (15% under)
• 20% fixed interest and cash (about right)

As you can see property is 15% over weight, and equity about 15% underweight. I could have kept a loan against the house, and put more money into shares, but decided against it. In hindsight I probably should have taken longer to pay off the home loan and put more into shares. I have two reasons why I didn’t do that:

1. the GFC increased my risk aversion, and it has yet to fully settle back down, and
2. I am not sure if I would have saved as hard if I wasn’t watching that loan go down towards zero.

Calling it a mistake is going too far, but if/when I buy an investment property, it is not something I plan on doing again. I will keep the loan at a level that more accurately balances my asset distribution.

Speaking of investment property, I think all the advice and research I have done is leading me to hold off for a bit and see if we are indeed at the start of a bit of a cool down. That is one goal I think will get a red mark against at the end for the year.

Net Worth Totals

The second graph is the one with the actual numbers (all rounded, so don’t get too hung up over the details – we are thinking big picture here).

Up and to the right as some people say. I would have liked a little more up for that amount of right, but as mentioned the second half of the year has some increases yet to come. This should continue to be bolstered by my increasing passive income. I am hoping this is now heading toward $700 per month or more, despite the drop in cash interest rates.

The one problem with that total getting higher, is that it does not assist the visual impact of the other figures. For example the green shares line has a fantastic uptick when I change the scale, but compared to the total, it is quite small. The same is true for the orange super line. It is actually a slight curve upward over the years. It has just over a 20% increase each year (including contributions). This is definitely getting lower each year, as the contributions make less and less of an impact in percentage terms, but the compounding nature of reinvestment appears lost in that graph.

Finally, it is good to see some more of my capital being deployed. The ASX had a bit of a downtick in the middle of February and again at the end of March. This drop allowed me to purchase a few of the shares I was keeping an eye on for a nice little discount. The main reason I bought them was for their dividend yield, but I am not trying to avoid capital gains either. So when I watched the share price bounce back a month or so after I bought them, it felt good. I think I managed half of the “buy low, sell high” motto. Hopefully the next five to ten years will see the share price continue to climb.

Well, that’s it for this net worth update. If you enjoyed it, feel free to leave a comment below. And why not head over to my list of Australian Finance Blogs – I have just added a new one.