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 November, 2021:

Our net worth for the month was down -1.1%, which was slightly worse than the S&P’s -0.83% 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 November, 2021 is 54%. This indicates that the stock market is likely overvalued.

If the market was suddenly revalued at the long-term average of 15.96x earnings rather than the current 29.4x earnings, then your stock market investments would be worth roughly 54% of what they are currently worth.

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

Assets

Brokerage (-2.3% Month, +11.6% YTD):

Our brokerage accounts did a few percentage points worse than the S&P this month but we are still up 11.6% for the year.

Retirement Accounts (-0.2% Month, +33.7% 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 ~40% discount (once you include state and federal taxes).

My 401k account is comfortably above $1M, which is pretty cool. I estimate that, even with no further contributions, this account should be worth about $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+.

529 accounts (+6.0% Month, +41.3% 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 (+146.8% Month, +139.4% 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 had a bunch of cash in our account because we finished a cash-out refinance and had not yet used all the money to pay down one of our other mortgages.

Private equity: (+0.0% Month, +63.9% YTD):

We now have 6 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.

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

No change this month. A new block of stock options actually vested this month, but because the stock price is higher than the current fair market value there is no value in the newly vested options.

Rental properties (+0% Month, +18.5% YTD):

I update the value of our rental properties at the end of each quarter. No update this month.

Primary residence (+0% Month, +31.3% YTD):

I update the value of our primary residence at the end of each quarter. No update this month.

Total Assets (-0.3% Month, +22.2% YTD):

Our assets were down about $31k for the month.

Total assets after adjusting for MCTWI (+0.1% Month, 23.9% 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.

This number was positive because typically when the stock market drops it’s not because profits have suddenly dropped, but because the PE of the market had decreased. The MCTWI adjusts for this change in PE, so you’re more or less left with the underlying performance of the business.

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 (-13.7% Month, +18.1% 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 (+10.3% Month, +7.5% YTD)

We are chipping away at these mortgages, and we’ve been paying off about 0.3% of the balance each month.

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

As I mentioned above, we did a cash-out refinance but hadn’t yet used the additional money to pay down other mortgages, so the net effect was to increase the total money borrowed. This will adjust back down by the of December.

Primary residence mortgage (-0.2% Month, -2.0% 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 (+5.6% Month, +3.4% YTD)

I don’t like to see our liabilities increase, even though I know it’s just temporary blip this month.

Total net worth (-1.1% Month, +25.3% YTD)

I was hoping we’d hit $10M in net worth for the year, but that looks pretty unlikely. However, it’s very possible that w could see our net worth go up by $2M for the year, as we are already up $1.84M.

Conclusion

I’m already looking forward to December, which is always our biggest investment income month of the year

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