It is time, yet again, for the monthly airing of my private financial laundry. My goal is that by maintaining a journal of my savings, I will provide enhanced motivation to save. It will also serve as a record, so that I can look back and analyze.
In January, things came roaring back. I ended up back at $188,000 after dropping down to $179,000 at the end of 2018.
I remain “overweight” foreign stocks. See Media Pin of the Week – More GMO, Weekly Media Pin – Grantham on Graham, Best Foreign Value Factor ETFs, Resource Roundup: More CAPE, and Foreign Value Factor ETFs Update. I got killed even more than you home-biased valuation agnostic, new era, type investors.
I have about a quarter of my portfolio that I run in a little systematic trend strategy. That strategy flipped back to 100% stocks as of the beginning of February. Referring to it as a “trend strategy” is probably a bit grandiose. Basically, if the market is expensive and in a downtrend, I am out (with that account).
I do have another very small account that I am experimenting with using another systematic trend + value system in and one of the signals I use is related to the yield curve. It is still 100% long.
That being said, let us turn to the savings update. As discussed recently on my blog, I try to use the revelations of behavioral finance/psychology to structure my financial affairs. See I’ll Have What He’s Having – Behavioral Personal Finance. I therefore automate my saving and spending to a great degree. As a result, I know that I contribute a little over $3,000 per month to new investments as sort of my “baseline.”
That baseline savings rate will be tweaked from month to month. I use some other sort of mental accounting tricks to save more and some months I really hit that. Other times something like a trip to the ER for my son will pop up and impact the savings. Nothing material happened in February so I saved a little over $3,000.
As I’ve noted before, The Capital Speculator does a helpful summary of asset class returns on a monthly basis. In February, the Russell 3000 was up about 3.5%, with emerging markets stocks about flat and foreign developed (EAFE) up about 2.6%.
The market increases combined with my new savings to put me at a little over $194,000.
Total Net Worth
As a reminder, I usually only include liquid investments in the monthly figures, as I don’t think it is very helpful to start marking my real estate and other illiquid assets monthly. I have a deferred compensation arrangement, which is essentially an annuity or pension. If you have a similar asset, I think this is a solid valuation methodology.
I started playing with the TNW calculation the other day and it looks like it would add between $200,000 to $350,000 (ish) to my stash, depending on discount and inflation rates, future raises, my lifespan, and a few other assumptions.
One other thing I will mention is with my personal residence I sort of cross-checked the price based on sale comparables with Zillow and then tried to back into a comparable valuation using rents (and a cap rate). In my sort of urban market there is a good blend of rental data and sales, so I feel ok about that. I then took a pretty big haircut (~15%) to the valuation based on illiquidity and the very large transaction costs involved in selling real estate. If I were a real estate developer, putting together a personal financial statement for a loan (or to pump my financial guru status on my blog), I could probably reasonably claim around $600,000 in total net worth.
But for my purposes, I’m going to go with a current estimate (~$108,000 deferred comp. + ~$100,ooo RE + $194,000 securities) of ~ $402,000.
To sum up, February continued the bounce from a nasty December 2018. I continued the savings grind. My overweight to foreign stocks continues to fail to perform. I am getting close to $200,000. That is a little bit exciting. Based on a historical 10% CAGR that would throw off over $1,600 per month in gains and income. These greenback workers may soon be really helping my family “pull the rope!”
I also took a stab at my total net worth. I am going with an estimate of $440,000. I will update this again in about a year.