Friday 20 January 2017

Benchmarking my NW performance

My usual benchmark for NW performance is to compare it to the 'cut-off' NW reported in the annual BRW 'rich list'. However, that benchmark has a couple of deficiencies:
- the cut-off is for a fixed number of 'richest' Australians, which due to population growth becomes a more and more selective group, hence pushing up the 'cut-off'
- the NW estimates in the 'rich list' are estimates of debatable accuracy

I therefore view it as more of an aspirational target than a realistic benchmark of my NW performance.

The annual HILDA report that came out last year offers a more robust metric for comparison - Table 5.1 in the report provides Australian household net worth estimates (based on a statistically significant sample), for the years 2002, 2006, 2010 and 2014. The values of mean, median, top10% and top1% are provided in '2014' dollars (ie. adjusted for inflation).

For comparison purposes I used my monthly NW estimate from to calculate my average annual NW figures, and then used the online inflation calculator from the ABS to calculate the equivalent values in constant 2014 dollars.

Plotting these NW values against the mean, median, top decile, and top "1%" figures from the HILDA report show that my NW suffered more from the GFC (due to my use of gearing in my stock portfolio I presume), but bounced back by 2014. However, while my relative NW increased substantially vs. the mean (up 51%), median (up 50%) and top deciles (up 44%) between 2002 and 2014, it barely 'kept pace' with the household NW reported for the top "1%".

But looking at the 2010 figures, my relative performance was down slightly vs. the mean (down 9%), median (down 14%), and top decile (down 8%) groups, but substantially worse that for the top "1%" (down 43%). So I'm hopeful that going forward my NW should also gain ground vs. the 'top 1%' metric. I'll have to wait until the 2020 HILDA report to find out!

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