Record Return – What is your best financial return?
Some Of The Finance Topics I Think About
If you just want numbers, jump down to the end of this post for the record return numbers. Otherwise let me jump back and have a look at the many bits and pieces that make up a persons financial picture. I am sure I don’t have them all listed, and am surprised people don’t think about their finances every single day given how broad the topics are. On any given day I can find myself thinking about any or all of the following:
- House prices
- Official interest rate
- Investment loan rates
- Bank interest rates
- Bond returns
- Share dividends
- Franking credits
- Taxation of one form or another
- Superannuation and contributions
- Performance of individual shares
- Larger global financial issues (eg: fallout from Brexit)
- Financial rules (eg: salary sacrificing)
- Bank account balances
- Bills that have come in
- How to avoid stupid fees
- Land valuations and rates
- Managed fund performance
- Inheritance
- Cost of living
- Currency rates
At least one of those will cross my mind every day. Truth be told, it will often start a chain reaction that will bring a number of other topics to the front of mind. That will then send me down a rabbit hole of thinking and reading. It must be similar to the people who read a Facebook post only to find themselves an hour later on Wikipedia trying to understand what makes those Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo in the first place!
A Little Bit On Diversification
Record Return – Diversity
Before I run off in a different tangent, this post was going to be about my record return. I know it was only a month ago I posted a new worth update. However since then something happened that I wanted to share. It is defiantly an outlier moment, but also a good reminder and lesson about why diversification is important. So firstly what happened?
Well – every month I tally up the numbers from a collection of different sources. House values, mortgage balances, land valuation, various super balances, shares, bonds, cash etc. If you are an accountant you would probably call this assets and liabilities, or some new fangled lingo like that. It is this that I use to get my net worth that I report on. In doing that, every month I see some areas grow, other stay the same and other shrink. This all works itself out over the long-term and across the different assets (many of which have sub assets) to make what is hopefully a nice steady increase.
I will talk more about diversification another time, but the main point is that when you have money invested in multiple different areas, no one area controls too much of the performance. When things go badly in an area this is fantastic, as you only lose a small amount. When things go well in an area you still see a benefit, but only in that area. By diversifying your investments, you are sacrificing the massive wins to avoid massive losses (potentially wiping you out).
The Record Return
What made the last month so special, is that every single investment area performed well. Not a single one was negative. I track 14 of them, and other than a few that were flat (typically things that don’t get recalculated often, like land valuations) they all increased! The increases ranged from 0.6% up to 21%. So what do those increases mean when added together? In the long-term, probably not much as a number of them will be negative next month. However in the short-term, they provide an amazing amount of motivation to keep working on growing that nest egg. Seeing that every one of them can perform well is great motivation. Knowing that the combined performance resulted in such good gains brought a smile to my face.
If you made it this far I guess you want to know the number, although the actual number is only important to my relative situation. There are people for whom a tenth of it would be fantastic, and others who would make ten times, one hundred times, or even more every month. That is one reason percentages are so important. Last month my investments increased just over $26k. That is my largest ever increase in net worth in one month. If my rough maths is correct, that would make a approximate annual return of around 30% for my net worth. Of course it is only one month, two months before that I made a $7k loss, and 12 months ago was my first five digit loss since the GFC (lets minimise those 5 digit negative returns). Still, more positives than negatives overall is what I am aiming for long-term. I just thought this mile stone should be celebrated and noted.
Now my noting is done, it’s time to go and start cooking some “record return dinner” to celebrate.
Quick Question:
- What was you best or worst month (or year)?
- Do you prefer percentages or dollar amounts (or do you pick the one that makes the outcome look best)?
