Tuesday, March 03, 2015

Moominvalley Monthly Report: February 2015

The Australian Dollar was finally stable this month rising half a cent to 78.09 US cents. World stock markets rose strongly. The MSCI World Index rose 5.61%, the S&P 500 5.75%, and the ASX200 6.89%. In Australian Dollar terms we gained 4.92% and in US Dollar terms gained 5.57%. So we underperformed both the Australian and international markets but the latter only slightly. Still in absolute dollar terms this month had the highest investment income on record at $65k ($US57k), 55% more than any previous month.

All asset classes in our portfolio apart from hedge funds and private equity gained with small cap Australian stocks being the best performer (7.59%). Colonial First State Geared Share Fund gained the most dollars ($37.7k) followed by the Unisuper ($6.5k) and PSSAP ($3.9k) superannuation funds. I can't be bothered to work out rates of return for individual funds :)

However net worth fell $48k to $1.272 million not counting housing equity and fell $US31k to $US0.994 million. This was a result of the $111k second installment of our house downpayment. Including housing equity net worth rose to $1.468 million ($US1.147 million). The monthly accounts (in AUD) follow:

Current non-investment income (salary etc.) was $14.3k and retirement contributions were $3.3k.  Total investment returns of $108k also include the value of the gain in our house's value. As our house was valued at $785k and we only paid $740k I have credited a total gain of $45k, most of it occurring this month.

Spending on the current account was $11.9k, which include $2.8k in settlement costs and spending on our trip to New Zealand. We also paid car registration this month, which is an $1100 cost... The $693 spending in the housing account is additional costs, which the lender added to our mortgage loan. We have so far made two mortgage payments of $1589 each and so the total transfer to housing was $114k... So far there have been no interest payments on the mortgage. They would come under housing spending when we do make them. The house is currently being painted and we are booking the mover, arranging insurance etc.


bigchrisb said...

Well done on getting a house settled. Having recently been through it, its a pretty high stress time, with lots of work to do.

A couple of questions on the house for you:
- Did you consider renting the property for a period before moving into it? In a quirk of the ACT (leasehold rather than freehold property), stamp duty becomes an immediate tax deduction. Given you are paying about $30k in stamp duty, renting it out temporarily would save you at least $12k out of pocket.
- Any reason you don't attack the mortgage more aggressively? That debt is not deductible - I've been paying mine down rapidly, so that I can re-draw the excess payments as a deductible loan (in my case to refinance margin loans).

mOOm said...

Interesting ideas. The first would be a huge hassle, the second worth thinking about. Do you have to formally ask the bank that the redraw is for investment purposes?

bigchrisb said...

No, you don't. Hence its not callable, and its typically at better interest rates than margin.

Just make sure that you use a split, pay it out, and redraw it - if you have the one account with a mix of investment and house debt, it gets very messy for you and the ATO.

mOOm said...

When we set up the mortgage the bank guy gave me lots of options including multiple offset accounts and redraw etc. etc. but I didn't really understand the differences between them and just went with what seemed simplest to me which was turning our checking account into a single offset account. So, when we are settled in the new house I think I will contact him again and try to understand the different options again. It would be great if you could point me and the blog readers to some more info on how to set this up.

bigchrisb said...

There is a bit of info on the ATO webpage. I'll try to find it later for you. One thing to be careful is that you must keep paying the interest on the investment portion of the loan - the ATO issued an explicit ruling that interest on the deductible portion of the loan could not be capitalised.