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.
Background
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.
For reference, our account ecosystem has several moving parts, but we’re able to get data from the accounts and services we use via Personal Capital and other spreadsheets for further analysis.
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.
Related: Land(less) Landlording: How and Why We Use REITs
*Distribution of passive income from both taxable and non-taxable accounts remained consistent YoY (6% and 94%, respectively).
Related: FTW! Is it Possible to Invest for Today AND Tomorrow?
*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.
Key Takeaways
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?
Related:
2018 Goals Overview: What Do You Want To Do This Year?
Tax Reform & Your PFUI: Applying the 10 Heuristics
5 Ways to Balance Account Types To Balance Life’s (Un)known Milestones
How We Got To Averaging +$1,000 a Month In Passive Income
Our favorite free financial tool is Personal Capital. We use it to track our net worth, manage our spending & savings, and to monitor our investments. It’s simple and free to use.
Hi Mike, I’m being conservative. Holding more cash than normal and being selective with where I put new money in equities. I have no idea where the market is going in the short to mid term, but I’m happy to enjoy the gains of the past few years and let them ride rather than pushing a significant amount of new money into the stock market. I’m not selling stocks other than some selective pruning and re positioning of the money. I will watch how the year progresses and adapt as necessary. Nice post. Nice summary of your situation. Thanks for putting it together. Tom
Hi Tom – thanks for your comments. Likewise, we’ll be mindful of additional capital allocation in equities. I mentioned recently we’re also allocating new 401k contributions to a short-term bond fund for the time being. We’re not really touching existing equity holdings though, as we also want to to continue to benefit from any capital appreciation as well as income received. A few potential changes to come though. – Mike
We sure have been in a bull market for a while now and it’s pretty “easy” to have gains these days simply by staying invested. But, as you know, that’s easier said than done. Many in our DGI community have sold some or all of their holdings waiting for a crash/correction to occur. One thing about being a long term investor is knowing that declines will happen. The problem is that no one knows when. So like you were invested in 2016 and 2017 the best bet is to simply stay invested. It’s impossible to time the market and buy or sell at the perfect time. That does not happen. Stay invested, diversify, ride out any near and mid term pain and simply collect those ever increasing dividends. I agree with one of your takeaways…. Like you, for 2018 I also want to increase passive income derived from my taxable investments.
Thanks for you input, Keith. Good points.
We’re also going to hold on to our current holdings. To balance as necessary, we’re just redirecting new, additional capital. Hopefully, we’ll continue to enjoy the gains while attempting to take into account the unknowns of the future.
Thanks again for stopping by. – Mike
Hi Mike, I would appreciate a good pull back in the markets so I can buy stocks at better valuations. I can say that now, I am still working but as I get closer to retirement I will be more conservative. Congrats on the 26% net worth in 2017 Nice!!
Hi Steve –
Thanks for the comments. I’m on the fence with a potential pullback. I’d love for the current bull to keep going, but I’m also with you on the buying opportunity. During a dip, we’ll consider to begin shopping.
Thanks for again for reading. – Mike
Hi Mike. ‘All systems go’ for you. Terrific increases in net worth and passive income. I’m looking forward to see how you’ll choose to generate investment income in those 1st and 2nd months of each quarter.
One thought on the Liquidity takeaway… I lean heavily on the investment income side versus banking/savings income… while the banking/savings is certainly more liquid, I don’t think liquidity is too bad for the investment side, and for taxable accounts I really like the better tax treatment of investment income (dividends) compared to banking/savings income. Here’s to an even better 2018!
Hi Engineering – thanks very much for you input.
The first and second month of the quarter will be interesting :). I don’t want to buy a security just because of its distribution frequency, but that will be at least one factor. Related to your comment on tax treatment, I’m primarily interested in quarterly payers to avoid being taxed at our ordinary income rate. But we’ll still look at other assets across both investments and bank/savings. Taxes are important, but not the only or primary driver.
Thanks again for reading. And indeed – hope everyone has great year in 2018. – Mike
Awesome year! I am keeping strong on my dividend account, but have changed my 401k building more of a cash position
Hi Evan – thanks for your comment! I hope things are progressing well for you in your investment plans. I just read your post on your gold purchase. Thanks again for reading.
Great job Mike! I like that you are more focused on the income stream then total net worth.
Our financial picture has excelled greatly like many others. I actually stopped using tracking tools like personal capital as I think it was more mentally draining then anything. I had a bad habit of looking everyday which I do not think is how a wise investor should act.
I did however begin tracking everything in a spread sheet which I love. I update it once a month which is perfect for me to not over complicate things but make sure I am staying on track. This was eye opening and showed how much of a roar the market has been on.
Like the post you read on my site I think it is a great time to plan when the market has been so red hot for so long. Mostly I am grateful that I am now well positioned in my personal life.
My wife and I both made a successful transition from college to real world and in my opinion gave ourselves a head start and options as we approach the back end of our 20’s.
Thanks DM – appreciate your feedback.
I hear you on the tracking aspect. It’s important to be aware of what’s going on, but I also found myself earlier in the year checking and checking. Hell, during trading hours I was checking my phone for prices, etc. It got overwhelming. The spreadsheet does slow things down a bit. We’re currently doing both.
Glad things are going well for you and Mrs. DM. You should give OTF a try with her if you haven’t already! – Mike
I have no significant plan if there’s a change in the market. My biggest concern if there was a major change is losing my job, so my plan for that is just to put away as much money now as possible. I’m not really concerned about losing my job, though.
Also, YoY is a new term for me. Just looked it up (year-over-year or year-on-year depending on who you ask) and it’s an interesting concept.
Hi Joe – thanks for sharing your thoughts. Good point on the potential of employment status changing at any time. Mrs. BD and I could both be shown the door by our employers at any time for any reason. Similarly, we’re not too concerned about our current employment situations, but it’s always a possibility to keep in in mind.
YoY – regardless of the naming preference – is useful. It’s not the “ultimate” metric or key performance indicator, but I’ve found it to be a consistent way to measure progress.
Thanks again for your comments. – Mike
That’s a huge net worth increase YOY! Congratulations and keep up the great work! Love the charts- is that all from personal capital? We don’t have Personal Capital in Canada 🙁
Thank you, GYM!
The two charts in this post are actually from Google Sheets that I manually threw together. I use Microsoft Excel sometimes, too.
We do get a lot of the data from Personal Capital for tracking purposes. If you review any of our Passive Income & Portfolio monthly updates, you can see graphs from Personal Capital in the Portfolio section of the posts (in the second half).
I’ve heard the same from other people in the community that Personal Capital is not available yet – hopefully they will expand. I’m surprised they’re not there yet.
Thanks again for reading. – Mike
hey mike. well done. i just put together a fictional 45 stock portfolio i’m calling my “bulletproof dividend portfolio.” the names are in the last post i put up but i forgot to include kinder morgan, who have announced their intent to rapidly increase their payout over the next 2 years. i’m doing it as an experiment to prove or disprove something to myself about the outperformance of dividend growers. essentially i’m also seeking the future dividend aristocrats as they go from growth to cash flow machines who can afford to raise payouts all the time. favorite one of these is mastercard. i own 19 of those 45 in various proportions but am slowly moving the portfolio towards “safer” equities with large moats. i put it together on motley fool and it also gives the payout dates if you want them.
happy new year, amigo, and keep up the good work.
Hey Freddy – thanks for the comments.
Your sample portfolio sounds nice – I’ll check it out. That’s a very interesting concept as well – identifying companies on the verge of turning into aristicrats. I look forward to reading it later.
Thanks again and Happy New Year to you as well. – Mike
Hey there. This has me mulling over if I should start recording passive income from “traditional” accounts. I normally track the changes month-over-month on taxable investments since I am looking at what I can readily use (and not DRIP) when the time comes. I’m always looking for ways to see more of the bigger picture, so I might have to add an “Overall Passive Income” tab to my spreadsheet.
Hey HP – thanks for your comments!
I also started out tracking only certain accounts month-over-month, but I’ve found it helpful to track anything that seems meaningful. As you mentioned, it can help you see the big picture.
But there a few income streams I’m not formally tracking just yet (more to come soon 🙂 ). Thanks again for reading. – Mike
Ohh, I’ll have to check it out when you post it! Thanks for the follow-up.