Local Auction Boosts Our Estimated Net Worth

I went to the auction of a townhouse within my data catchment that I use to estimate the value of our home:

 

It sold for AUD 920k with two serious bidders. When I plug the number into my model, it boosts the value of our house by around AUD 250k, which seems crazy! As more data rolls in for this year, I think the estimated price will go down.

This was a popular TV show when I was in primary school:

 

That was worth a lot more back then.😀

How Well Did Your Super Fund Do in 2025?

The Australian reports on superannuation funds' performance for calendar year 2025. Neither of our employer funds - Unisuper and PSS(AP) - made the top ten. Unisuper Balanced is in the top 10 for the last 10 years. The average return for 2025 was between 8.8% and 9.3% depending on the source. I assume this is for accumulation funds. I estimate that Unisuper made 7.8% pre-tax or around 6.8% post-tax. PSS(AP) made 10.5% or 9.2% post-tax. On the other hand, our SMSF returned -6.1% pre-tax :( This is mostly because of its outperformance in 2024 (34.0%) and cryptocurrency coming back down to Earth in 2025.

Effects of Inflation Versus Growth on Stock Returns

 

From this video. Growth is relatively low currently. This explains why the Fed is cutting rates. The most bullish region for stocks is low inflation and moderate growth. Will the fund cut too much and reignite inflation more? Hard to be that bearish here.

Investors' Returns vs. Fund Returns

Report from Morningstar on investors' returns vs. fund returns. Due to badly timed trading, investors made 1.2% less per year than the funds they invested in. My return in USD terms for the relevant period was 6.83%, which is roughly what the average investor made. My AUD return was 9.81% over the same period!

 

Hopefully, This Isn't True

What it Takes to be in the Top 1% in Australia

Interesting article in the AFR on what it takes to be in the top 1% in Australia currently by both income and wealth. You can go to the free article to see lots of charts, so I won't post them here.

To be in the top 1% by income, you need a household income of AUD 532k. The top 5% is above AUD 306k. The top 10% starts at AUD 235k. I predict that our taxable income will be AUD 263k for this tax year. So we fall within the top 10%.

The wealth data are also broken down by age group. For the 41-64 age bracket the top 1% starts at AUD 7.7 million, while the top 5% starts at AUD 3.8 million. At AUD 7.4 million we are just outside the top 1%. Our average adult age is 55. The top 1% for 65+ starts from AUD 10.9 million!

There are also breakdowns by type of asset. The top 5% by home equity for our age band starts at AUD 1.42 million. So we are well below that. The top 25% is AUD 650k and above. We are within the top 25%.

A top 1% household superannuation balance is one of more than AUD 2 million. We are definitely in the top 1% by this criterion. Moominpapa alone has almost 1.9 million and Moominmama more than 900k. The top 1% of individuals starts at 1.4 million.

Market Update

My call for a continued bull market in stocks is looking a bit crazy at this point, but note the drawdown at the beginning of 1997. Nothing goes straight up. Oscar Carboni has published his year end targets for the S&P 500. His initial target is 7,512 and the extended target, if that is exceeded, is 8320.

The Australian Reports on Superannuation Fund Performance for the 2024 Calendar Year

The Australian reports on the best performing super funds for 2024. They focus on lifecycle, balanced, and sustainable options. I am sure there is some retail super option invested in international shares that did better than these. How did we do? I compute our SMSF returns pre-tax, while super funds report post-tax results. But anyway, our SMSF gained 34.1%! Estimated pre-tax numbers for Unisuper and PSS(AP) balanced options were 14.3% and 13.4%, respectively.

Who to Follow on Crypto?

I've managed to build some confidence in investing in bitcoin and the larger crypto ecosystem by following a few key people:

Oscar Carboni: Technical analyst and futures trader. His analysis of bitcoin prompted me to first get into bitcoin.

Didi Taihuttu: Digital nomad who went all in on bitcoin after previously mining bitcoin. Very skilled at technical analysis of bitcoin.

Anthony Pompliano: Entrepreneur in crypto space. He sold his company Reflexivity Research to Defi Technologies. His analysis of DEFI.NE prompted me to invest.

Raoul Pal: Former hedge fund manager who provides macro-investing services as well as crypto commentary. He links crypto trends to broader macro and especially "liquidity".

Didi Taihuttu on Youtube

I am following this dude closely on Youtube:

IWT Conscious Spending Plan

I like to watch Ramit Sethi's podcasts where he has an in depth discussion with a couple about their finances. These sessions usually involve the "Conscious Spending Plan", which is basically a type of budget. You can get a copy of the spreadsheet here. I was curious how our numbers compared to the guests on the show and so filled in the template myself.

My main issue was deciding what income number to use. At first, I tried using our income as reported in our tax returns plus employer superannuation contributions. That includes net investment income outside of superannuation. But then it was pretty tricky working out what amounts to put in for investment flows. I switched to using just our salaries plus employer superannuation contributions and it all made much more sense. I added a childcare and education category as that is our largest expense. For the "clothes" category I used our spending on mail order and groceries is what we spend in the supermarkets category. Transportation includes all our transportation spending including petrol, car repair, buses, taxis, e-scooters etc. Saving is our employer superannuation contribution plus the concessional contributions we make for Moominmama to our SMSF. All the numbers in the following are in Australian Dollars:

What do I notice in the results? One is that we don't really do "savings" both in terms of saving towards goals and having savings. Our savings are basically money in "checking" accounts. If we need more money we take it out of an investment account or borrow money. I am thinking I probably should get the savings buffer up more in case something happens to me. Otherwise, the family will quickly have payments bouncing without someone to make sure there is always enough money to cover bills. We used to keep about 1% of net worth in our offset account.

Our total "fixed costs" are at 76%, which Ramit considers too high. On the other hand, our investment contributions are at double the recommended level and I think they are now very low.

The amount left over in the "guilt-free spending" category is only 4%, which Ramit considers to be very low. There is a lot of flexibility here in what should fall into the fixed cost and this category. Is subscribing to e-scooters, which saves me a lot of time and is fun, something I should consider a fixed cost or "guilt-free spending"? Should private school and music lessons be considered a "fixed cost"? I have included some hobby-related subscriptions in the subscription fixed cost...  But moving those would only change things by $100 a month at most.

What is in the guilt-free spending is in practice spending on eating out (mostly lunch these days) and travel - mostly the money we spent on renting a house for our vacation. The recommended 20-35% of spending is really a lot!

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 :)
  

2019-20 Australian Income and Wealth Distribution

 

I didn't notice when the Australian Bureau of Statistics released the 2019-20 data on Australian household income and wealth distribution. I previously reported on the 2015-16 and 2017-18 data.

Mean gross household income was $121k per year in 2019-20 (all $ are Australian Dollars). The median was $93k. These are not adjusted for household size. ABS provides data adjusted for household size in terms of the income a single person would need to achieve the economic well-being of the average household. To adjust these to the required income of a household with 2 adults and 2 children requires multiplying by 2.1. I seriously doubt that adding a child only increases costs by 0.3 of the first adult! 

Mean gross household income in the ACT was $150k and the median $124k.

To be in the top 10% of households requires a gross income of at least $235k. To get information on the breakdown inside the top 10% you have to use their data on the number of households within each of different bands of weekly income. 4.7% of households have an annual income above $312k and another 3% between $260k and $312k. Our gross income was $264k (taxable income), so we just fall within this group and, therefore, in the top 7.7%.

Mean household net worth was $1.04 million and the median was $579k. To be in the top 10% you needed a net worth of $2.26 million. We were at $4.44 million at the end of June 2020. To be in the top 3.9% you needed a net worth of $4 million. So I estimate we were at the edge of the top 3.3%. I guess it makes sense given my age that we higher in the wealth distribution than in the income distribution.

1.2% of households had a net worth above $7 million and 0.6% above $10 million.

There is a lot more data on breakdown of assets etc. which I might report on another time.

To be in the US top 1% by net worth required USD 11 million ($17.75 million) in the same period. A top 1% US household income is around USD 600k and above.

Sam Dogen Interview

Sam Dogen of Financial Samurai has first video interview. Finally, you can get to see him, even if you still don't know his real name 😀

New I Will Teach You to be Rich Podcast

 

 

Ramit Sethi has started a podcast titled of course: "I Will Teach You to be Rich" and subtitled: "Real money stories from behind closed doors".  It's like a couples therapy session with Ramit as counsellor. It's great, but often the numbers don't seem to add up. For example, this couple makes USD 250k between them. Let's take off 1/3 for taxes etc. They say they spend just over 10% on housing and save 20%. They have "very low expenses". The guy scrimps and saves on everything. But, apart from what I listed, they would have to have another USD 90k in expenses. That's near what our family of four spends on everything including housing and private school and daycare. So, what is really going on here? Does the woman spend a lot of that on her own outside the household budget stuff? So this doesn't sound like "very low expenses" to me.

The Best Portfolio for Australia

The portfolio charts website, I wrote about before, now lets you do analysis using Australian assets, inflation etc! It turns out that the best portfolio for Australia isn't the same as the best for the US... The following table shows the average and standard deviation of real returns, the maximum drawdown, and the safe and permanent withdrawal rates (preserves capital) for a 30 year retirement horizon:

This is based on data since 1970. Based on the permanent withdrawal rate the Ivy Portfolio developed by Meb Faber is best. The 100% Aussie stocks portfolio (TSM) has a slightly higher return, but the lowest permanent withdrawal rate. So, I think Aussie investors should start to think about portfolio design from something similar to the Ivy Portfolio. It's no surprise that I have been a fan of Meb Faber and endowment style portfolios...

Using ETFs, this portfolio recommends putting 20% into each of Australian stocks, international stocks, intermediate term bonds, commodities, and REITs.

Using the build your own portfolio tool you can see what tweaking this beginning portfolio can do. For example, replacing half the commodities allocation with gold and half the bond allocation with extra international stocks, increases the return to 6.1% and the SWR and PWR to 5.2% and 4.4% with almost no increase in drawdowns.

Going to 60% stocks divided equally between Australia and the rest of the world and 10% in each of bonds, gold, commodities, and REITs, is actually quite similar in return profile to the Ivy Portfolio. The key thing is to hedge Australian stocks with international and real assets. This latter portfolio is probably going to tbe basis of my own new target portfolio.

Capitalise

Capitalise is an automated trading platform that uses commands written in near natural English at a very high level. I heard about it when Interactive Brokers told us that we now have access to it. At the moment the service is free. You can put in commands where buy/sell levels and stops depend on functions of past prices and also various technical indicators. There is no need to learn a formal programming language like Python or understand any of the intricacies of actually executing strategies. They are based in Israel.

This would be great for me except at the moment it doesn't allow position sizing based on functions of prices. You have to give it a numerical position size. I chatted with Arica on their platform and she said that they might develop that functionality in the future. For now I can handle updating my orders each morning (Australian time) as I am only systematically trading in 3 markets (Bitcoin, palladium, and oil). Maybe they will have this functionality by the time I can't handle trading manually anymore and I won't need to learn Python etc or collaborate with someone who does know that stuff.

Distribution of Income and Wealth in Australia in 2017-18

The latest survey results have been released by ABS. To be in the top 1% in Australia you need to have a household net worth of about AUD 7.5 million (USD 5.25 million). We're in the top 4% according to the data. The mean household has a net worth of AUD 1.022 million and the median AUD 559k.

We're also in roughly the top 4% by household income if we'd earned 2018-19 income in 2017-18... Median household earns AUD 1,700 per week (AUD 88k per year) and mean 2,242 (AUD 117k). Of course, households with children average a lot more than this as the data include pensioners, students, singles etc. These data don't let you compute the income of the top 1% directly.

David Svensen Lecture at Yale

Svensen is the manager of Yale's endowment. He also gives occasional lectures at Yale.

My investment strategy is strongly influenced by endowment investors like Svensen.

Portfolio Charts

Portfolio Charts is a really interesting website where you can do simulations of safe and permanent withdrawal rates and many other things for a range of investment portfolios. These include predefined portfolios and you can also build your own portfolio using a range of ETFs. Here for example is Tony Robbins' version of Ray Dalio's All Weather portfolio:

The orange line gives the withdrawal rate which means that you wouldn't have run out of money if you retired in any year since 1970 and retired for the length of time on the x-axis. The green line is the withdrawal rate that means that you will have at least as much money as you started with in real terms. It's interesting how these go in opposite directions as the length of retirement increases. If you retired for 30 years the permanent withdrawal rate is 3.8%. This portfolio had an average real return of 5.5%. The best performing portfolio in terms of withdrawal rates is the site creator's own "Golden Butterfly" which has 40% stocks, 40% bonds, and 20% gold:

This portfolio had a real return of 6.5%.

An interesting point is that safe and permanent withdrawal rates vary a lot by country. The site allows you to choose the US, UK, Canada, and Germany as home countries. The linked article also includes Australia, but unfortunately the site itself doesn't allow you to do analysis for Australia. A big caveat is, of course, that all this depends on historical returns. If bonds, for example, don't do as well going forward as they did from 1980 till recently then, withdrawal rates are going to be lower. Choice of alternative investments is also limited to gold, a commodities ETF, and a REIT ETF.