June 2007 Score Card — Part I: Net Worth

June turned out to be another solid month as our nest egg continued to grow in the past month, most of them coming from investments in our taxable accounts, despite a down month for the equity markets. For the month, the Dow Jones Industrial Average lost 219 points, or 1.6%, to close at 13,408 on June 29th; NASDAQ was almost flat for the month, dropping one point to 2,603; and S&P 500 declined 28 points, or 1.83%, to 1,502.

For the month ending on June 30th, our net worth, excluding items that related to house and vehicles, grew by $14,658 to $531,864, a gain of 2.27%.

The breakdown of the month of June is as follows:

• Credit card balance: The overall credit card balance dropped $8,182, or 13.53%, for the month to $52,279, largely due to the expiration of the 0% offer from Discover card. This number, however, will be almost doubled next month as I took yet another free loan of $49,000 from my Chase Freedom card. Since the money will be sitting in our high-yield online savings account, I am not concerned about the high credit card balance.
• Cash: What we have on June 30th in our bank accounts also increased as I gradually emptied the Treasury Direct account after canceling the weekly purchase of 4-week T-Bills. The total balance in our bank accounts is $78,096 as compared to $72,062 on May 31st.
• Taxable accounts: The biggest contribution for June came from our investments in taxable account, which added $11,722, or 4.87%, thanks to a strong month for China Life Insurance (LFC). For the month, the price of shares of LFC increased more than $7 to close June at $53.67 a piece. Among our largest holdings, shares of Taiwan Semiconductor (TSM) and PowerShares Golden Dragon China Fund (PGJ) also advanced. I did make a bad move, at least it appears so far, last month when I jumped into the IPO of Blackstone (BX) and bought 80 shares at $35.50. As of last Friday, the stock was traded at $29.27 a share.
• Retirement accounts: The impact of a lackluster month for the stock markets showed in our retirement accounts as we saw a gain of only $205 in total market value of our investments. The growth of the retirement accounts will slow in the next couple of months as my new job won’t let me enroll in the 401(k) plan until I complete the first three months. This, however, isn’t a concern as I can always make up the contribution once I am eligible to participate.
• 529 plans: Our daughter’s 529 plans continued to go up nicely, adding $340, or 4.28%, for the month to $8,30o, though most of the gain came from regular contributions (we put $300 a month into her 529 plans).
• Bonds: The biggest story in the bond category last month was that I finally decided to cancel the weekly 4-week T-bill purchase. Actually, that decision turned out to be a good one as the 4-week T-bill just recorded another disappointing rate of 4.581% APR in last week’s auction. Time to say “Siyonara” to T-bills.

For the first half of the year, our net worth has gained $58,213, or 12.68%, as comparing to what we had when 2007 began. The following chart shows what the big sell-off at the end of February has down to the growth of net worth. Other than that, the pace is very encouraging.

Thoughts on net worth calculation

As you can see from this and all other net worth posts I have published so far, I didn’t include any hard assets, such as house and cars, in the calculation. The reason is quite simple: I don’t know precisely how much they are worth, so including them will skew the number, positively or negatively. If I use the following net worth formula,

Net Worth = What We Own – What We Owe

then everything in the house that has value should be considered as part of “What We Own” to reflect the true value of the assets. Unfortunately, those assets contribute little, if at all, to the growth of our wealth because they are most likely to depreciate over time (our house may be an exception). Thus, I’d rather focus on the “grow our money” part of “What We Own” and include only investable assets in the new worth equation. Make sense?

As of June 30, 2007, “What We Owe” include $150,137 of mortgage and $20,784 of car loan.

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