1. Net Worth Goal: Reaching $500k We made progress on this goal as net worth again rose over $450k. Net worth rose by $US33,685 to $US466,625 and in Australian Dollars rose $A21,318 to $A495,461. The US dollar gain is my largest ever. USD results were strongly boosted by the rise in the Australian Dollar.
2. Alpha Goal: Alpha of 8.5% The point of this goal is to earn at least an average wage from risk-adjusted excess returns. Using a regression on the last 36 months of returns gives a beta of 0.71 to the MSCI or 0.58 to the SPX. Alphas are 5.26% and 10.32% respectively. A more sophisticated time-series method yields a beta of 0.91 and an alpha of 9.62% for the MSCI index, which meets our annual goal. The risk adjusted excess return for April based on the latter analysis was 2.58%. Multiplying this by net worth gives an income of $11,624. For the year so far the risk-adjusted excess return in dollar terms has been $21,952. Using the estimate of alpha the smoothed annual income is $43,300. In Australian Dollars terms returns are somewhat lower, while they are higher using the S&P 500 as a benchmark.
3. Increasing Non-Retirement Net Worth by More than the MSCI Index The point of this goal is to make sure that we only spend out of non-investment income and excess returns and don't use the normal market return on investments to fund spending. In other words, this makes sure we have positive saving. Non-retirement accounts rose by 10.07%, while the MSCI index rose by 5.65% So far this year these accounts have grown by 3.99% in excess of the MSCI return.
4. Achieving Break-Even on U.S. Taxable Accounts At the end of the month we were $559 from the breakeven point with a gain of $5,379 for the month. The rate of return on these accounts was 7.68%. Following the month's close we met this goal. The chart shows the remaining gap to reaching breakeven over the last year and a half:
5. Making More Money from Trading Than in 2008 Realised gains this month were $915 and so far this year $2,062. I've now had three positive months in a row. Futures trading though has not been going well, but I have been making money trading stocks and options. Last year I made $9,500 from active trading. Currently, I'm lagging behind last year's performance but I think the goal still may be achievable.
Background Statistics
Income and Expenditure
Expenditure was $3,996 in line with recent numbers. Spending included $334 of implicit car expenses - depreciation and interest. Snork Maiden was paid three times this month and Moom paid his New York State Taxes, which we treat as negative income :(
Non-retirement accounts gained $21,661 with the rise in the Australian Dollar contributing $6,201. Retirement accounts gained $11,911 but would have gained only $7,108 without the change in exchange rates.
Investment Performance
Investment return in US Dollars was 7.75% vs. a 5.65% gain in the MSCI (Gross) All Country World Index, which I use as my overall benchmark and a 4.87% in the S&P 500 total return index. Returns in Australian Dollars and currency neutral terms were 4.47% and 5.21% respectively. So far this year we have gained 2.58%, while the MSCI and S&P 500 have lost 4.04% and 5.03%, respectively.
The contributions of the different investments and trades are as follows:
The returns on all the individual investments are net of foreign exchange movements. There are no clear patterns this month in what gained and what lost. The biggest gain was in the CFS Geared Share Fund which is our biggest investment. Australian listed hedge funds such as Everest Brown and Babcock and Platinum Capital began to recover from steep discounts to book value.
Asset Allocation
I completed the switch from bonds to stocks this month and we are now as long stocks as I think we will ever be.
Allocation was 40% in "passive alpha", 71% in "beta", 3% allocated to trading, 5% to industrial stocks, 3% to liquidity, 3% to other assets and we were borrowing 25%. Our currency exposures were roughly 55% Australian Dollar, 23% US Dollar, and 22% Other. In terms of asset classes, the distribution was:
Due to the use of leveraged funds, our actual exposure to stocks was 113% of net worth.
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