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The CPI is produced by the Bureau of Labor Statistics and is often maligned as an unrealistic gauge of inflation. More Net Worth Benchmarks To ConsiderĤ) Consumer Price Index. Whatever industry you are in, there is an index or an ETF for you to use. If you work in finance and own your bank’s shares as part of your annual bonus, then maybe indexing yourself against XLF is a good idea. Then consider ETFs such as PJP, IHE, XPH. If you work in the real estate industry and invest in REITs and homebuilders, then you should consider benchmarking your financial performance to a homebuilder ETF such as ITB, XHB, or PKB.

TRAJECTORY WEALTH TRACKER FREE

What rate of return over the risk free rate (equity risk premium) do you require? My simple formula is to take the latest 10-year bond yield and multiply the figure by 3 or 4.Īnnual returns of Stocks, 3 Month Treasury bond, 10 Year Treasury Bondģ) Sector Specific Exchange Traded Funds (ETFs). You need to figure out a reasonable multiple on that bond yield because you are guaranteed to return the yield if you put all your money into Treasuries. The risk free rate of return is the 10-year bond yield, which changes every single day. Wherever you live, just use your country’s largest stock index as a benchmark.Ģ) Risk Free Rate Of Return Times A Multiple. The S&P 500 represents 14 different industries, thereby thoroughly representing the economic health of our nation. If you live in America, the easiest and most common net worth benchmark is comparing your portfolio’s return with the 500 largest stocks in the country. Here are the best net worth benchmarks to consider so you know you’re on track to achieving financial independent.ġ) The S&P 500 Index.

Net Worth Benchmarks To Gauge Performance Let’s review various net worth benchmarks you can follow to gauge your net worth performance. And shooting for a 6% return (a ~40/60 stock/bond portfolio) will likely protect you from losing more during bad years.

Losing $45,000 is not a big deal if you’re making a decent salary and are willing to work for many more years.īut if you have a $5,000,000 portfolio and are approaching retirement, shooting for a 15% return is unnecessary. If you can comfortably live off $300,000 a year, then you only need a 6% return. If you’ve escaped the rat race, the last thing you want to do is have to get back in, especially if you have young children.įor example, you can invest your entire $300,000 portfolio in the S&P 500 to earn potentially $45,000 (15%) or lose $45,000 one year. Further, there’s no need to swing for the fences when hitting singles and doubles can provide for a healthy lifestyle. The more money you have, the more risk averse you tend to become. After such strong returns in the stock market, real estate market, and many other asset classes, a correction could easily happen. However, being up 6% is great if the stock market, bond market, and real estate markets are down 10% one year. That sounds like a pretty low hurdle nowadays. With the 10-year bond yield at around 2%, my net worth target return is only about 6%. Now in my 40s, my goal is to try and earn a return equal to at least 3X the risk-free rate of return. This is easier to do the less money you have thanks to aggressive savings. When I was in my 20s and early 30s, my net worth goal was to always grow my net worth faster than the S&P 500.

Trajectory wealth tracker