Introduction

This was a good month for our net worth as we rode the stock market higher. Without further ado, here is our net worth report for March, 2022:

Our net worth for the month was +2.6%, which trailed the S&P’s +3.58% return. Our mix of cash, real estate, and equities means that our performance should be less volatile than the stock market – we should underperform when markets are up but outperform when markets are down.

Money Commando True Wealth Index

I track our net worth in both the “real” numbers and the Money Commando True Wealth Index (or MCTWI for short). The MCTWI is a quick and dirty way to provide a more stable and “true” valuation of the stock market by adjusting for valuation (that is, PE ratios that are higher or lower than the long-term market average).

As a reminder – the MCTWI tells you how much your stock investments would be worth assuming “normal” valuation rather than the current valuation in the market.

My net worth report above includes an adjustment for the Money Commando True Wealth Index (MCTWI). The MCTWI for March, 2021 is 72%. This indicates that the stock market is likely overvalued.

If the market was suddenly revalued at the long-term average of 15.97x earnings rather than the current 22.19x earnings, then your stock market investments would be worth roughly 72% of what they are currently worth.

Let’s take a closer look at our assets and liabilities.

Assets

Brokerage (+1.8% Month, +0.1% YTD):

We are basically even for the year, which is impressive given that the S&P was down about 5% through the end of March. Of course, we have been adding to our investments throughout the year, and that makes our invest returns look better than they really are.

Retirement Accounts (+0.5% Month, +0.6% YTD)

This includes a 401(k), two IRAs, and two Roth IRAs (one of each for my wife and me). The only account we are currently contributing to is the 401(k), as we aren’t eligible to continue to the IRAs.

Of course, any withdrawals from these accounts will be taxed at our marginal income tax rate, which means we should probably be valuing these accounts at a ~40% discount (to account for federal and CA state taxes).

My 401k account is comfortably above $1M, and approaching $1.5M which is pretty cool. I estimate that, even with no further contributions, this account should be worth at least $3M when I am able to pull money out at 59.5 years old. With regular deposits the account should be worth at least $4M+. And, depending on how things go, I would expect to hit $2M in the next 3 years.

529 accounts (-2.0% Month, -6.6% YTD):

We are contributing $500/month/child into these accounts, and given that our kids are 8 and 6, we are approaching the point where we have enough money in these accounts and it will make sense to stop contributing.

Assuming both of our kids go to college, both accounts will be completely liquidated in about 20 years. Based on my calculations, these accounts should pay for 90%+ of the total 4-year cost at a state university. The remaining amounts will be paid out of our then-current cash flow.

Checking (-24.0% Month, +65.9% YTD):

Our goal is to keep about $50k in cash in our checking account. This is due to an abundance of caution. I work in an inherently unstable field (sales) and my income varies widely from month to month. Keeping a good chunk of cash in our checking account helps me sleep well at night.

Private equity: (+0% Month, +0% YTD):

We now have 6 separate private equity investments. Since there’s no way to find the current value of these investments I will continue to keep them valued at my initial investment amount unless/until we are provided information about an updated valuation.

Stock options: (+0% Month, +0% Year)

No change this month.

Rental properties (+5.7% Month, +5.7% YTD):

I update the value of our rental properties at the end of each quarter. The housing market continues to skyrocket and the value of our investments is doing the same. This certainly shows the value of diversification, as we made more off our real estate investments than off of everything else combined for Q1.

Primary residence (+2.8% Month, +2.8% YTD):

I update the value of our primary residence at the end of each quarter. I don’t really care too much about this value, as we hope to live in this house forever, but it’s better that it’s going up than going down.

Total Assets (+2.3% Month, +1.9% YTD):

I hope to get something around a 1% increase in our assets each month, which would be something a bit north of 12% per year. We are bit behind this goal right now, but who knows what the rest of the year holds.

Total assets after adjusting for MCTWI (2.5% Month, +2.2% YTD):

To get this number I adjust our brokerage, retirement accounts, and 529 accounts based on the MCTWI. Our checking, private equity, stock options, rental properties, and primary residence values are NOT adjusted for the MCTWI.

You’ll notice that the increase in our assets adjusted for MCTWI were slightly higher than our non-adjusted asset value. This would indicate that valuations came down a bit over the course of the month.

Liabilities

Just a note on the numbers below – since these are liabilities, a negative number (reduction in liability) is good, while a positive number (and increase in liabilities) is bad.

Credit cards (-11.6% Month, -77.1% YTD)

We pay our balances in full each month, so the ebb and flow of our balance is more reflective of when our payment is made than anything else.

Rental mortgages (-0.2% Month, -0.5% YTD)

We are chipping away at these mortgages, and we’ve been paying off 0.2% – 0.3% of the balance each month. The numbers here were a bit off in January due to an issue with how I was tracking the loans in Quicken – this makes it look like quarterly and year-to-date numbers are about the same.

At the rate we are paying off our mortgages we are 20+ years from retiring these loans.

Primary residence mortgage (-0.2% Month, -0.6% YTD)

At our insanely low interest rate I don’t see any reason to pay this off early. I expect we’ll hold this mortgage for the next 29+ years.

Total liabilities (-0.2% Month, -1.2% YTD)

Liability reduction is much steadier and more predictable than the increase in the value of our assets. I expect that we are about 20 years away from being debt free (unless we decide to accelerate our payments for some reason).

Total net worth (+2.6% Month, +2.3% YTD)

We are still hanging just shy of $10M in net worth. I am very confident we will significantly exceed $10M this year due to an expected large commission check later this year.

Conclusion

January and February were tough months for the market, but things bounced back in March. We are up about $200k for the year so far, which would put us on track to gain $800k by the end of the year. I would be more than happy with that.

How did everybody else do this month?  What’s your asset allocation, and how does it compare to your ideal allocation?