Around the time we posted our December 2017 passive income & portfolio, I read a lot of great year-end reviews for other sites in the Dividend / FIRE community. Many people are continuing to make excellent progress as the bull market kept on roaring throughout 2017.
Now having two years worth of our passive income and related data, we’re able to compare 2016 vs. 2017 year-over-year (YoY). Let’s see what happened.
Where We’ve Been: We started Balanced Dividends in mid-2017. With only a post or two a month, I was initially spending a lot of time gathering past financial data to be able to perform this assessment. After gathering the data and setting up a few templates, I’ve been able to focus on content. Frequency of posts has increased and – hopefully – as well as quality.
To catch-up or view a particular month, you can read our past Passive Income & Portfolio updates.
Where We’re At: Since tracking, our net worth grew 26.1% in 2017 vs. 19.8% in 2016. From January 2016 through the December 2017, our net worth increased over 50% in 2 years. This seems crazy.
While growing our overall net worth is an important goal, we focus more on passive income that can be derived from our working capital. For us:
Passive income is a function of net worth, but how and where we put those assets to work is even more important.
Keeping this in mind, you’ll hopefully see where we’re coming from with our approach.
Key Analysis Highlights – 2016 vs. 2017
*Total passive income increased 9.1% YoY.
*Taxable passive income increased 7.1% YoY.
*Non-Taxable passive income increased 9.2% YoY.
*Within non-taxable, Roth (tax-free) passive income decreased 5.1% YoY, and Traditional/Pre-Tax (tax-deferred) passive income increased 18.4% YoY.
*Distribution of passive income from both taxable and non-taxable accounts remained consistent YoY (6% and 94%, respectively).
*Distribution of passive income from both banking/savings and investment accounts remained consistent YoY (almost nothing from non-investment accounts).
Overall, the last month of each quarter continued to account for the vast majority of all passive income paid. But you’ll begin to notice other months gradually experiencing increased distributions in the near future.
We’ll cover further in our 2018 financial goals post, but our focus areas:
- Taxable Accounts – increase passive income derived from taxable investments vs. non-taxable assets.
- Schedule and Frequency of Distributions – consider obtaining appropriate assets that payout during lower contributing months (NOT: March, June, September, and December).
- Liquidity – continue to be mindful of the massive disproportion of passive income from investment vs. banking/savings accounts.
- Type of Income and Diversification – look for new sources of passive income beyond traditional “portfolio” income.
More to come soon.
Looking Back and – More Importantly – Ahead
The YoY growth in both net worth and passive income feels great. This long bull market has been good to many investors.
Going forward, we just need to continue to be mindful that it can be lost just as easily. The larger percentage of a decrease, the even larger percentage of an increase would be needed to get back to breaking even. And this gap accelerates the larger the loss or percentage.
On the positive side, it’s buying time if/when we lose a significant portion of our net worth. We’re continuing to DCA and stick with our long-term objectives and asset allocation. And we will continue preparing to go lump-sum shopping at some point in the future.
But no one knows if/when though, as no one knows what will happen in the future.
Readers, how has your year-over-year financial picture changed? Are the results of the last 1 or 2 years shaping your thoughts for 2018, and beyond, any differently than prior years? Are you considering to plan for any potential changes in the market? If so, how?