Sustainable Net Worth Percentage Gains

[Bryan Hancock]

There is a thread on BP about getting to $100M with some interesting commentary.  A lot of the comments revolve around compounding rate and what is sustainable.  It seems that growing your net worth should have some sort of logical saturation point as your base of wealth grows.  For instance, it seems logical that making 20% is much easier when you only need to increase from $100k to $120k, but that should be harder to do from $1M to $1.2M and even harder still from $10M to $12M.  The reasoning would be that as your wealth grows:

1.  The places to park money diminish because there are fewer projects that demand that much capital and are willing to pay high rates for capital

2.  People are likely to have marginal propensity to want to grow their wealth past a certain point.  At some point they're content and slaving away for incremental dollars has little utility past some point

This board has some fantastic investors and is probably one of the biggest collections of active real estate investors in the world.  I was wondering what people's thoughts are on what a sustainable growth rate in net worth is.  Is 20% up to some number impressive and then it drops to some other number afterwards?  Is 20% too low for initial growth rates?  Where do you figure it stabilizes and what is the general net worth that this occurs?  Are there other barriers here?  Any thoughts?

[J Scott]

We were at 35%+ for the first few years when the amount of capital we were deploying was in the low 6-figures range.  As we've scaled (and as deals have been harder to find), we're finding 15-20% is about right.  That said, we're still in the 6-figures, and I'm quite certain that if we tried scaling to the 7-figures, we'd see a drop.

Personally, I think that a good active investing strategy should always yield at least 12-15%, but I could see anything above that getting difficult, at least with the strategies I'm most familiar with.  I'm sure there are some experienced investors who do things with their money that I've never even considered...