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Saturday, 2 April 2011

Net Worth Update: March 2011

A rise in the estimated price of our home this month increased my equity in our property portfolio by almost $16K this month, but the gain was offset by stock market decline affecting the values of our retirement account and geared stock market investments. The drop in my stock portfolio equity was also exacerbated by having to draw down on my portfolio loan account to fund a replacement water heater and stove cook-top during the month.

Property sales figures indicate our property valuations will have declined about $3K for next month, so the stock market will have to continue to rise during April if I'm to keep my net worth above the million dollar mark. Of course in USD terms this would look better, with the Aussie dollar reaching new highs against the greenback in the past week.

Australian property prices have weakened in most regions over the past few months, although so far Sydney home prices have been holding up. It seems likely that inflation and interest rates will rise over the next 1-2 years, while house prices will stagnate or drop 5%-10%. So, in real terms property is unlikely to make a contribution to my net worth for a couple of years.

In the next couple of days I'll have to decide whether to tender any of my BHP shares for their off-market buy-back. I'll have to look up the cost basis for my holding to work out how much I'd end up if I sold them on-market and paid capital gains tax. The buy-back comparison is hard to value as the final tender price isn't definite (although you can set a minimum price), the after-tax value also has to take into account the split of the buy-back price between capital return and fully-franked dividend components, and also the likelihood of the buy-back being scaled back. So even if I tendered all my BHP shares into the buy-back I'd end up only selling a portion.

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*__________$13,890____-$13,307______n/a % 
Retirement_______$374,659_____-$1,081____-0.29 % 
Properties_______$973,163_____$15,796_____1.67 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$360,902______-$150_____-0.04 % 

Net Worth______$1,000,809______$1,738_____0.17 %
* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

My version of net worth calculation only includes major assets (including my home equity) and debts. Cars, boats etc. and household goods are not included. Monthly credit card balances are also not included as I pay my credit cards off in full each month. I also pay the uni HECS fees for my Master of Astronomy course as I go, so I don't have any outstanding uni HECS debt. I haven't allowed for any capital gains tax liability that would be incurred if I sold off our investment property, shares etc.

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