Wednesday, May 02, 2018

April 2018 Report

A very active month financially. The Australian stock market rebounded quite strongly and now looks pretty bullish to me. I also started trading futures again, which so far had the opposite effect on the results for the month :)

The Australian Dollar fell from USD 0.7680 to USD 0.7540. The MSCI World Index rose 1.08%, and the S&P 500 0.38%. The ASX 200 rose 3.92%. All these are total returns including dividends. We gained 2.86% in Australian Dollar terms and 0.98% in US Dollar terms. So, we underperformed the Australian market and to a small degree the international markets but outperformed the U.S. market.

The best performing investment in dollar terms was CFS Geared Share Fund up AUD17k. The worst performer in dollar terms was IPE, down AUD3k. My holding is now quite large (more than 1% of the value of the company - it's a very low value company) and the price is quite erratic. The best performing asset class was large cap Australian stocks, which gained 2.84%. The worst performing asset class was private equity, losing 2.04%, the only asset class to lose money this month.

A new item that I am reporting from this month is trading income. This includes trading in futures and options etc and interest on cash dedicated to trading. It doesn't include any trading done on fundamental grounds. This month I lost money - USD1,987 - which isn't surprising as I was experimenting with different models and approaches and learning to trade more confidently. I pretty much reversed that on the first day of this month, but anything could happen. Less than 3% of net worth is dedicated to trading at this point, which mainly means a deposit of Australian and US dollars used as margin for derivatives. The plan for this month is to consistently trade one futures contract according to the trades that the model provides, while learning about entering trades more optimally and setting stops or using options as hedges (much wider hedges than I was using last month).

We made a bit more progress towards the new long-run asset allocation:

Total leverage includes borrowing inside leveraged (geared) mutual (managed) funds. The allocation is according to total assets including the true exposure in leveraged mutual funds. I have reduced the allocation to cash, because assuming I will be trading, there will always be plenty of cash in the trading account plus the ability to borrow, though the latter can be reduced in a financial crisis. Commodities now includes managed futures, trading, and gold.

The "improvement" in allocation, came partly due to market movements and partly due to investment activity. We invest AUD 2000 monthly in a set of managed funds, and there are also retirement contributions. Then there are distributions from funds and dividends. During the month, I also:
  • Invested in a venture capital fund.
  • Bought more IPE (private equity) at below net asset value.
  • Sold out of Leucadia National (LUK) and bought more 3i (III.L, private equity) and China  Fund (CHN).
  • Bought more units in the Winton Global Alpha fund (managed futures - in the commodities category).
  • Transferred cash into my trading account and did a lot of trading of futures and options while developing my trading model.
As a result the allocation to private equity and commodities increased quite a bit.

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