Calculating my net worth in a volatile market

Yellow haired man sits on top of a pile of large coins using his laptop

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There are a number of different ways people go about calculating the overall worth of the assets they own.

These don’t vary that drastically; it’s mainly a collation and addition exercise, but it can prove quite the psychological juggling act, especially when people’s investment values are (presumably) falling at considerable rates in the current markets.

I use a stupidly simple technique to avoid the psychological stress of watching my investments shrink so quickly. It’s one I think anyone in the early stages of their FIRE journey could do with adopting.

Although I don’t think this would work if you’re close to your FI number.

I don’t calculate ‘value’; I only calculate the actual contributions I’ve made.

Now, when markets are on the rise, this may look as though your investments aren’t worth as much as they actually are, but on the flip side, at times like these, you’re only concentrating on what you have contributed and ignoring the current losses.

Also, if FIRE is all about the long game and being passive with your investments, then I shouldn’t care about monthly market movements.

Why do I care about today’s value if I’m still 20-30 years off selling my holdings?

This early on in my investment journey, the value of my investments is more of a ‘*quick glance* “Oh, that’s nice”‘ acknowledgment, rather than a fretting over X% rise/fall (that can come later).

I won’t lie, seeing it rise like it did over the last few years was a great thrill. But given we’re constantly told to expect a number of drops/ recessions over 20-30 years, I never get too tied up in ‘values’ and would rather focus my efforts on increasing earnings, expanding my knowledge and focusing on savings rate.

You may be someone that has an exact FI number and date for early retirement, so calculating the exact amount each month may be a prudent and rational approach. But for people like me who are more into the FI than the RE, and are new to the game, it could serve some people well to adopt this into their spreadsheets and save themselves the mental anguish.

I’m fully aware that this may change as I get older and further into my investment journey, or decide I want to try and retire sooner, but for now this way serves its purpose.

Of course, everyone is different and that’s the beauty of the FIRE movement and one one of the reasons I’m a huge advocate for it and an admirer of anyone who follows it to the greatest detail.

Then again, maybe I’m too lazy to try and figure out exact amounts, with long winded Excel formulas, to bother calculating it to that level of detail.

Whatever your approach, it’s always wise to try and avoid the mental gymnastic of investing in volatile markets like these as much as possible.

This is just my simple – and currently effective – way of dealing with what’s currently happening.

I’m not bullish on the market, I’m bullish, long term, on humanity and THAT is why I’ll never sweat the small stuff.

Stay safe out there, and keep reminding yourself why you invested in the first place.

 

2 thoughts on “Calculating my net worth in a volatile market

  1. Interesting take- I do a spreadsheet on the first of each month and take the value of the asset/cash/stock at that moment (or nearest working day there was last a price). It definitely shows a lot of bumps up & down, and have to say it also doesn’t really show my savings(or savings rate), since if its a good month on stock market, it totally overshadows my spending (or lack of). I wonder if I should add another column, so I have something to compare with….

    Liked by 1 person

    1. Yeah I can imagine calculating the value means each month can look considerably different from the next. I’d rather just know my savings rate for now and maybe consider moving to the value later down the line.
      Yeah you could have a savings rate column alongside your net worth value column…best of both worlds 🙂

      Like

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