Friday 30 June 2023

EOFY review - me vs 'Mr Market' and 'the Rich'

I won't be able to calculate my monthly updated NW estimate for June until early next week, so I spent a little bit of time updating some comparisons I had previously made of my NW performance vs the ASX200 index (monthly adjusted close values from yahoo finance) as a proxy for 'Mr Market' and vs 'the Rich' (the cut-off amount in AUD used for the annual AFR (previously BRW) Australia 'Rich 200' list), To be able to compare these figures I have divided to 'rich list' figure by 200 (my 'stretch goal' was to eventually reach 1% of the cut-off, but I seem to be stuck at about 0.5% for the last few decades), and to plot the ASX200 figures on a secondary axis. All plots are linear and start from 0, so the trends should be comparable.

The green line is the ASX200, the blue line is my monthly NW estimate, and the red line is monthly interpolation of the annual Rich 200 list cut-off.

My total portfolio performance is broadly in line with the 'rich', although my exposure to equities and use of gearing (via margin lending) up until the GFC meant that I was outperforming 'the rich' right up until the GFC gave me a real world lesson in the risks of using gearing.

The sudden increases in my NW estimate in Mar 2014 and Feb 2023 are due to receiving my hobby farm/lake house as a gift (early inheritance) from my parents in 2014, and then updating the estimated valuation for that property in 2023 (when I settled on the purchase of my investment apartment and decided to include monthly updates of all real estate values in my NW estimate).

One other notable thing is that my decision to shift all our superannuation investment from the 'high growth' option to a more conservative option when the Covid pandemic first broke out in China, and then move it back to our long-term asset allocation when things had settled down, was one of my (rare) better investment decisions.

When I can move my superannuation into 'pension phase' at age 65 (to reduce the superannuation tax rate) I'll use the mandatory minimum annual pension distribution to pay off my investment apartment mortgage while I'm still working. Current 'plan' is to keep working full-time until about 70 (by which time I should have completed my PhD and built up some clientele for my financial planning business) and then work part-time for as long as I feel like it (possibly until 80ish) and then sell off business for whatever it is worth (currently the standard for financial planning businesses seems to be about 4x annual revenue). This might provide another 'uptick' to my NW graph (but the business may end up not being worth anything).

How my NW tracks will mostly depend on how the stock and property markets perform over the next few decades (and if I stay healthy and employed).

Subscribe to Enough Wealth. Copyright 2006-2023

No comments: