What I Get Out of Tracking Spending Categories

Ramit Sethi advocates only tracking about four categories of spending and is critical of couples who do more fine-grained tracking. For the last few years I have been tracking 15 top level spending categories and 27 more detailed spending categories. So, what do I get out of this. I think the following:

• I can track which items have grown fast and maybe we should cut back on. This has resulted in saving money on car insurance, health insurance, and mortgage interest.
• Some things that I think we are spending a lot on, and should cut back on are actually not that big. For example, our current spending on restaurants is AUD 3k per year or 1.7%. My spending on bus, Uber, taxis etc. is AUD 4.5k per year or 2.5%, which is less than half our spending on transport. These are two of my three areas of "luxury" or personal spending. The other is spending money on subscriptions online etc So, being able to see these numbers makes me feel more comfortable about my spending in these areas.
• Perhaps some things seem small and we can consider raising them, like our spending on charity at only 0.4%.
  
• Well, yes it's neat to see what we are spending money on and comparing to other people :)
  

May 2023 Report

In May, markets were mixed. The MSCI World Index (USD gross) fell 1.00% while the S&P 500 rose 0.43% in USD terms. The ASX 200 fell 2.30% in AUD terms. All these are total returns including dividends. The Australian Dollar fell from USD 0.6605 to USD 0.6479. We lost 1.07% in Australian Dollar terms or lost 3.09% in US Dollar terms. The target portfolio lost 0.06% in Australian Dollar terms and the HFRI hedge fund index is expected to lose 0.12% in US Dollar terms. So, we under-performed all benchmarks apart from the ASX 200.

Here is a report on the performance of investments by asset class:

The asset class returns are in currency neutral returns as the rate of return on gross assets. I then add in the contributions of leverage and other costs and the Australian Dollar to the AUD net worth return. We underperformed the target portfolio benchmark mainly because of negative returns on hedge funds in particular. Private equity had the most positive returns and contributed most to the return for the month, while gold and futures also performed positively. Australian small caps were the worst performers.

Things that worked well this month:

• 3i (III.L) gained the most (AUD 18k) followed by Cordish Dixon PE Fund 3 (CD3, 8k), and Winton Global Alpha (7k).
  

What really didn't work: 

• Cadence Capital (CDM.AX), Regal Funds (RF1.AX), and Cadence Opportunities (CDO.AX) lost the most: AUD 18k, 13k, and 11k respectively.
  

The investment performance statistics for the last five years are: 

The first three rows are our unadjusted performance numbers in US and Australian dollar terms. The MSCI is reported in USD terms. The following four lines compare performance against each of the three indices over the last 60 months. The final three rows report the performance of the three indices themselves. We show the desired asymmetric capture, positive alpha, and higher Sharpe Ratio against the ASX200 but not the USD benchmarks. We are performing about 4.4% per annum worse than the average hedge fund levered 1.77 times. Hedge funds have been doing well in recently.

We are now very close to our target allocation. Our actual allocation currently looks like this:

About 70% of our portfolio is in what are often considered to be alternative assets: real estate, art, hedge funds, private equity, gold, and futures. A lot of these are listed investments or investments with daily, monthly, or quarterly liquidity, so our portfolio is not as illiquid as you might think.

We receive employer contributions to superannuation every two weeks. We are now contributing USD 10k each quarter to Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. It was a very quiet month. The only additional investment move I made was:

• I bought a net 250 shares of PMGOLD.AX.
  

Fixed My Margin Loan Interest Rate

I fixed my margin loan interest rate for the next year at 7.69% instead of a variable rate 9.15%. I am paying the interest in arrears. At the moment I can't see the RBA really cutting interest rates by an average of 1.5% over the next year. It's the first time I have done this. One reason for that is that my balance is relatively low at the moment and I expect it will increase, so I won't have the problem of early termination. I am withdrawing AUD 15k every quarter to invest in the Unpopular Ventures Rolling Fund.