Wednesday 26 May 2010

Me versus the "rich list"

The annual Business Review Weekly's "rich list" came out today, with the estimated net worth required to make it onto the list of the richest 200 Australians rising to A$185 million (up 23% from A$150 million last year). The chart below shows how my net worth has been tracking compared to 1% of the BRW cut-off for the past few years. Pre-GFC my ultimate goal was to slowly increase my net worth in real terms until I caught up with 1% of the BRW rich list cut-off figure. The theory being that the richest 200 Australians should know a thing or two about investing their wealth, so it made a challenging but achievable benchmark.

The latest results show I've slipped back relative to this benchmark since 2007, which is rather disappointing, but probably unavoidable as my investment strategy involves geared investments in stocks and Sydney property - not the best choice in recent times!
I'm at a bit of a disadvantage when competing against the rich list cut-off, as the list is biased towards those who have done well (ie. those who under perform are automatically culled from the list of 200 and replaced by those who have done well). It would be more relevant to compare my progress to the total wealth of a fixed cohort - for example those 200 people that were on the list in, say, 2000. But unfortunately BRW readers probably aren't interested in the fate of those who have dropped off the "rich list" each year.

On the other hand, my annual salary income is probably a larger fraction of my net worth than most people on the BRW rich list, so in theory I should be able to boost my performance relative to the "rich list" by saving like mad. So far it hasn't worked out that way, with my savings having little impact compared to the diabolical performance of my investment portfolio.

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Anonymous said...

This may interest you: said...

Thanks, I'd seen that article before when Moomin posted about it.

While obessing about net worth can be bad for your level of contentment, I enjoy tracking my NW and use comparsons (such as to HILDA averages or the BRW cut-off) to evaluate how well my investment strategy is performing. I view collecting financial assets the same way as any other collecting hobby, and "keeping score" of my NW seems no different to tracking a golf-handicap or any other measure of performance at a chosen task.