Introduction

April 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 April, 2021:

Our net worth for the month was up 1.6%, which underperformed the S&P’s 5.24% 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.

The net worth report below includes an adjustment for the Money Commando True Wealth Index (MCTWI). The MCTWI for April, 2021 is 37%. This indicates that the stock market is likely substantially overvalued.

If the market was suddenly revalued at the long-term average of 15.94x earnings rather than the current 43.61x earnings, then your stock market investments would be worth roughly 37% of what they are currently worth.

I think this point bears repeating – the US stock market appears to be extremely overvalued based on PE ratios, and the stock market’s valuation is more than double its normal, long-term valuation.

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

Assets

Brokerage (+2.4% Month, +7.3% YTD):

Our investments did a bit worse than the S&P 500 but we were still up about $90k for the month. Part of our underperformance was the result of some put options expiring worthless.

Retirement Accounts (+3.3% Month, +18.7% 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 ~30% discount.

My 401k account passed $1M for the first time, and that’s a pretty cool milestone to hit. At a reasonable 7% return and with no additional contributions my 401k should be worth about $2.8M at 59.5 years old (when I can start taking distributions).

529 accounts (+4.6% Month, +16.8% YTD):

We are contributing $500/month/child into these accounts, and given that our kids are 7 and 5, 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 (-18.3% Month, -27.7% 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.

We’ve been moving money around to fund private investments, and that resulted in this account being down.

Private investments: (+0% Month, +36.4% YTD):

We have 5 separate private equity investments. Since there’s no way to value these investments I will continue to keep them valued at my initial investment amount unless/until we are provided information about an updated valuation.

No changes this month.

Stock options: (+0% Month, +9.6% Year)

No change this month.

The next block of options will vest on August 1, 2021 and should be worth $6,125.

Rental properties (+0% Month, +8.7% YTD):

I update the value of our rental properties at the end of each quarter.

No change this month.

Primary residence (+0% Month, +10.9% YTD):

I update the value of our primary residence at the end of each quarter.

No change this month.

Total Assets (+1.4% Month, +10.5% YTD):

Our assets increased in value by about $129k this month, which is very solid performance.

Total assets after adjusting for MCTWI (+0.7% Month, +10.7% 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.

Clearly we are doing very well here as well, again due largely to our real estate holdings (which were revalued in March).

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 (-28.4% Month, -76.4% 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, -0.8% YTD)

We are chipping away at these mortgages, and we’ve been paying off 0.2% – 0.3% of the balance each month. The payment looked a bit less this month just because of the timing of some of the payments.

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

Primary residence mortgage (-0.2% Month, -0.7% YTD)

We refinanced our mortgage in October, which lowered our payment by about $850/month. The loan promptly got sold and I couldn’t look up the balance last month. The balance on the loan is now correct.

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, -1.0% YTD)

We now have under $1.2M in liabilities, and we could possibly be under $1.15 by the end of the year.

Total net worth (+1.6% Month, +12.4% YTD)

The first 4 months of 2021 have been insane. At this rate, our net worth would be up by over 37% for the year. It’s hard to imagine that kind of performance continuing, and I suspect the rest of the year will be flat.

Conclusion

Nothing major to report this month. We continue to benefit from the stellar performance of both the stock market and the real estate market, but this crazy performance clearly won’t last forever.

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