Saturday, March 11, 2017

Asset Allocation Update

As I mentioned in the monthly report we did a big asset reallocation recently.You can see the step down in the allocation to large cap Australian shares to about 35% in the graph above (this is gross assets rather than net worth). We increased the allocation to all other asset classes. Also on the graph you can see various phases in our recent financial history - the financial crisis and the recovery from it; saving up the cash for a house downpayment; buying the house; saving up cash in our offset account to pay off the mortgage. This month our mortgage interest is down to $1,217. In the first month after we moved in it was $2,189.... The plan when we pay off the mortgage is to redraw it for reinvestment making the interest tax deductible.

I didn't include our house in the graph. If I did, it would be about 25% of gross assets.

Friday, March 03, 2017

February 2017 Report

It was another positive month for the markets and us. We did a big restructure of some of our investments, which I'll discuss after this month's numbers. Here are our monthly accounts (in AUD):
Spending (not counting mortgage) was normal at $7.8k. Salaries etc. added up to $11.8k (after tax). After taking into account the mortgage payment of $3.8k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $650 less than this) - which shows up as a transfer to the housing account, we saved only $250 on the current account. We made $3.6k of retirement contributions, and saved a net $1.8k in added housing equity. Net saving was, therefore, $5.7k across the board. One reason for higher spending is that we are now spending $306 a week (for 3 days) for childcare and so far not getting any government benefit for this. Yes, people on our income can get a big subsidy for childcare here in Australia.

The Australian Dollar rose from USD 0.7580 to USD 0.7686. The ASX 200 gained 2.25%, the MSCI World Index gained 2.85%, and the S&P 500 3.97%. We gained 1.83% in Australian Dollar terms and gained 3.23% in US Dollar terms. So, we underperformed the Australian market and outperformed the international markets. The best performer in dollar terms the CFS Geared Share Fund ($11k) followed by Oceania Capital Partners (OCP.AX), which gained $4k. Every asset class  gained, with private equity the best performing asset class and Australian small cap stocks the worst.The worst performer was the CFS Global Resources Fund down $1.9k.

As a result of all this, net worth rose AUD 36k to $1.745 million (new high) or rose USD 45k to $US 1.341 million (ditto).

We shifted most of our Colonial First State managed funds and superannuation from the old now closed to new investors retail platforms to the newer wholesale platforms. I have no idea why these new platforms are called wholesale as you don't need to invest very much. The fees are lower on the newer platform. I did a little reallocation especially for my superannuation fund. This reduced our overall exposure to large cap Australian shares by 8% points of total assets. Total leverage (gearing) went down by a similar amount. All other asset classes increased their shares, especially small cap Australian shares. But generally we are now a bit more diversified and a bit less levered and cloe to what I think is an optimal allocation for us.