Annual Report 2024

We are still waiting for the Aura venture funds to report, but I am guessing their values will be unchanged. So, now we can compute reasonably accurate annual accounts. All $ signs in this report indicate Australian Dollars. I'll do a separate report on individual investments. I do a report breaking down spending after the end of the financial year. I'll probably do another report on our SMSF performance then.

Overview 

Investment returns were positive and net worth again increased. We did a lot better than in 2023. This was a direct result of my dis-satisfaction with the 2023 result and my determination to do better. We came in way ahead of the best case net worth projection I made in the 2023 report of $6.7 million with an end of year total of $7.4 million. We took a vacation in Maroochydore, Queensland in July and in December we travelled overseas for the first time since before the pandemic to China and Thailand. I did some short business trips to Sydney during the year as well. My 60th birthday was in December and I started a transition to retirement pension in that month.

Investment Return

In Australian Dollar terms we gained 23.1% for the year while in USD terms we gained 12.1%. The big gap is because the Australian Dollar fell. The MSCI gained 18.0% and the S&P 500 25.0% in USD terms while the ASX 200 gained 13.2% in AUD terms. The HFRI hedge fund index gained 9.6% in USD terms. Our target portfolio gained 19.2% in AUD terms. The new Vanguard 60/40 AUD benchmark only returned 12.4%. So, we under-performed the US Dollar stock indices but outperformed the other benchmarks. 

This chart compares our portfolio to the benchmarks in Australian Dollar terms over the year:

 

I can be happy with this. Beating US tech stocks is hard! The following chart shows monthly returns in Australian Dollar terms:

 

This shows that our out-performance mainly came towards the end of the year. We beat the target portfolio in seven of the twelve months and the 60/40 portfolio in eight of the months.

 

Here are our annualized returns over various standard periods:

 

There is a big improvement over last year. We beat the ASX 200, HFRI, the target portfolio, and the 60/40 portfolio over the last 5 years. We also beat HFRI over the longer time horizons and are close to the target return over 10 years. But we performed much worse than the US stock indices over all time horizons and the ASX 200 and the target portfolio over the 20 year time horizon. The positive news is that our performance is better in the last 10 years than in the previous 10 years. Though not shown here, we also match the target performance over the last 15 years since the GFC. As a result, I have begun to use the returns of the target portfolio over 20 years to project our future returns. I lost big in the GFC due to using too much leverage. I now use only 10-15% leverage and much of that is our mortgage.

Here are the investment returns and contributions of each asset class in 2024 in currency neutral and unlevered terms:

 

The contributions to return from each asset class sum to the total portfolio return. The portfolio shares are at the beginning of the year. Rest of the world stocks did best, because of the performance of Defi Technologies, followed by futures, which includes bitcoin, and gold. These three also made the largest contributions to the total return. All asset classes had positive returns but real assets, private equity, and hedge funds did not perform that well despite some strong individual performers in those asset classes.

Investment Allocation

There were significant changes in asset allocation over the year:

 

Cash, futures, and rest of the world stocks increased their shares, while hedge funds, Australian small cap, US stocks, and bonds reduced their shares by quite a lot. Other asset classes changed their shares by 1% or less.

Accounts

Here are our annual accounts in Australian Dollars: 

Percentage changes are for the total numbers. There are lots of quirks in the way I compute the accounts, which have gradually evolved over time. There is an explanation at the end of this post. 

We earned $208k after tax in salary etc. Total non-investment earnings including retirement contributions were $240k, up 14% on 2022. I'm quite surprised by that increase! Part of it seems to be from timing of payments as well as larger tax refunds.

 

We gained (pre-tax including unrealized capital gains) $577k on non-retirement account investments. A chunk of the gains were due to the fall in the Australian Dollar (forex). We gained $562k on retirement accounts with $32k in employer retirement contributions. The value of our house is estimated to have risen by $51k. As a result, investment gains totaled $1.194M and total income $1.435M.

 

Total spending (doesn't include mortgage payments, life insurance, margin interest etc.) of $169k is up 13% on last year. Again, I am surprised by the size of the increase. Our spending including mortgage interest (but not principal repayments) seems to be up by only 5%. We did reduce our mortgage interest a lot by increasing the cash in our offset account.

 

$20k of the current pre-tax investment income was tax credits – we don't actually get that money so we need to deduct it to get to the change in net worth. We saved $38k from salaries etc. before making contributions of $26k to the SMSF. I also record an $8k "inheritance", which are gifts we received, mostly on our trip to China. Current net worth increased by $577k.

Taxes on superannuation returns are just estimated because, though we know the tax paid by the SMSF, our employer superannuation funds only report after tax returns. I estimate this tax to make retirement and non-retirement investment returns comparable. The total estimated tax on superannuation was $20k. Net worth of retirement accounts increased by $600k after the transfer from current savings. With the gain in the value of our house, total net worth increased by $1.228M.

Projections

Last year my best case scenario for 2024 was for an increase in net worth of $500k to $6.7 million. We actually reached $7.4 million. For this year, my base case scenario is simply a 10% increase in net worth to $8.2 million. The bear case is for a 10% decline to $6.7 million. In 2022, our net worth only fell by 0.7%, so this is very bearish. What about the best case scenario? This is going to seem crazy but I project double the percentage increase of 2024 for a net worth of $10 million. Told you it was crazy.

Notes to the Accounts

Current account includes everything that is not related to retirement accounts and housing account income and spending. Then the other two are fairly self-explanatory. However, property taxes etc. are included in the current account. Since we notionally converted the mortgage to an investment loan, mortgage interest is counted in current investment costs. So, the only item in the housing account now is increases or decreases in the value of our house. This simplified the accounts a lot but I still keep a lot of cells in the spreadsheet that might again be used in the future.

 

Current other income is reported after tax, while investment income is reported pre-tax. Net tax on investment income then gets subtracted from current income as our annual tax refund or extra payment gets included there. Retirement investment income gets reported pre-tax too while retirement contributions are after tax. For retirement accounts, "tax credits" is the imputed tax on investment earnings which is used to compute pre-tax earnings from the actual received amounts. For non-retirement accounts, "tax credits" are actual franking credits received on Australian dividends and the tax withheld on foreign investment income. Both of these are included in the pre-tax earning but are not actually received month to month as cash.... 

 

For current accounts "core expenditure" takes out business expenses that will be refunded by our employers and some one-off expenditures. This year, I didn't bother to note these, which amounted to about $1,000. "Saving" is the difference between "other income" net of transfers to other columns and spending in that column, while "change in net worth" also includes the investment income.

Trip to Sunshine Coast

As Ramit's Conscious Spending Plan says that we aren't doing enough "guilt-free spending", I booked a trip to Queensland for when the weather will be colder here 😀. Took under 2 hours to decide on location, book an apartment, book flights, and book a car. Pretty efficient I think. Total bill for a family of four: AUD 5,350. I think those are all the additional costs compared to doing similar activities based at home on a staycation. Not sure I am "guilt-free", though! Now we could have picked cheaper options throughout. But we got an apartment on the beachfront with a sea view and a swimming pool, a car that will definitely fit our luggage and extra legroom on the flight (front row) at convenient times. We got the cheapest available price on Jetstar on the way back.

One interesting thing is that I thought about using my Qantas Frequent Flyer points, but my 160k points were only worth about AUD 1,000. Apparently, they are worth more for international flights, so I kept them for now. Will probably find I'm not allowed to use them when I next try to book an international flight.

Trading Update: Tokyo Edition

So far it looks like the "old" more systematic model won today. US stocks are down. I'm not trading as I was flying to Japan and now my phone's connectivity is dodgy and I need it as a security device. Anyway, Wednesday is US Independence Day and Tuesday is already a short trading day so, I'll wait till Thursday or when I am back in Australia next week,

My hotel is the blue tower in the background.

P.S.
The stockmarket turned and went up. So, the "new" model was vindicated in the end. Still, I don't like trading rules that don't make logical sense.

Update (from England)

It is always a slow process to get the accounts together at the end of June as it is the end of the financial year in Australia and data on tax credits etc. won't be available till mid-July. I estimate that we lost more than $A40k in net worth for the month and got -4.0% rate of return in AUD terms. The ASX 200 index was down 5.3% though. OTOH the MSCI lost 2.31% and the S&P 500 1.94%. Our estimated loss in US Dollar terms was 3.5%. So, again, we beat the Australian index but lagged the international stock market indices.

It looks like we again had high spending - $A7.6k not including large business expenses. And that doesn't include our mortgage repayments. We did buy a washing machine and dryer. That cost $A3030 in total. So the rest of our spending came to $4.6k. $943 was property tax ($313 per quarter) and body corporate fee ($630 per quarter). Health insurance is $308 (per month) etc.

I'm in England on business. Working on putting together an international consortium to bid for research funding. Round trip of 6 days away. I was in the Middle East for 2 weeks in late May early June - going to conferences and visiting family. My doctor was surprised when I said I was visiting family in the Middle East :) This second trip only came up while I was in Turkey (one of the three countries I was in). Yesterday was the hottest day of the year here in England. In London it hit almost 37C. A bit cooler where I was. Though we were meeting in a room which had air conditioning installed, the air conditioning was broken. So, it was hot work. We had lunch yesterday in the hall in this picture. Our meeting on Tuesday was in the building on the right...

Spain, Dubai, and Australia

I am now in Spain, where I arrived yesterday. I have never been here before but it feels very familiar as an amalgam of places I have been. It almost feels strange that I can't speak the language. Reading it is a lot easier of course. I know French quite well and am generally good at languages, especially reading them. Unemployment is 25% in Spain right now and supposedly it is a country in financial crisis. There are a few closed stores in town but generally you wouldn't know about the crisis. Maybe one sign was when I got on the Iberian flight at Madrid airport the plane felt very old, rundown, and cramped. Well, after flying on Emirates, the first leg of which was on an A380. My first flight on Emirates or an A380. But Madrid airport was huge and grandiose. Dubai airport at 5am is totally packed with crowds of people from all over the world buying duty free goods and scurrying around. It was a long trip around 33 hours door to door and 4 flights to the coast of the far west of Europe from inland south east Australia. Following up from a comment I just made on my last post in response to Financial Independence's comment that an income of $4,000 a month is sufficient. As, I said in Australia that is less than the average wage. A couple each earning the average wage will make $11,000 per month or $130k per year. The median price of a house in the major cities in Australia is around $500k which is about 4 times their annual income. So we are making about twice the average and looking at houses that cost 50% more than average which would be 3 times our annual income. This hopefully, gives some perspective on average numbers for Australia and our relative position. In much of the world these numbers will seem enormous, but you aren't facing Australian prices. Here in Spain, a beer from the mini-bar in the hotel room is about half the price of a beer in a typical pub or restaurant in Australia, for example.

Preliminary Monthly Report

Doing the accounts for March this morning... Looks like we hit a net worth of $A600k for the first time, partly because of the fall in the Australian Dollar to $US1.03 this month. But I'm noticing that quite a lot of our investments are hitting all time highs in terms of the profit we have made on them. These are:

CFS Developing Companies Fund
CFS Diversified Fund
PSS(AP) (Snork Maiden's superannuation fund)
Qantas
Celeste Australian Small Companies
Acadian Global Equity Long-Short
Argo Investments
CFS Geared Global Share Fund

Some others are also quite close to peak profit levels. Of course a lot of other investments are still way down from their peak profit level or are underwater... Two common themes among the winners are small cap stock funds and recent investments. Small caps have been doing very well - they usually do at the beginning of the business cycle, which is why we have invested in them quite heavily. Recent investments haven't yet had a chance to lose money :)

Our house-buying fund has reached $A82,973 from $A77,386 last month. The goal is to reach around $A100k.

Apart from computing rates of return, I use the monthly accounting to check up on whether all our retirement contributions have been properly made by our employers, whether the fees we are being charged are correct, and whether we have been paid money we are owed. I found that my superannuation provider has been charging around $A100 a month for "inbuilt benefits" since I cut my member contribution to zero in September. This makes no sense to me as there is nothing in the prospectus (PDS) about increased fees if you cut your contributions. It does say that you can't get optional life insurance etc. and in fact the fund refused me the coverage, which I tried to get. So I think they are now charging me for coverage that I don't have. I sent them an e-mail querying this...

Anyway this is how our Australian superannuation accounts are doing:



The green line is Snork Maiden's account and the blue line my current account, both of which we are contributing to. The red is my account from when I worked in Australia previously. I rolled it over into a commercial fund manager and it is invested rather riskily. Hence the big fluctuations. We have now managed to save $100k in our new super accounts.

I'm also still owed money for travel to a conference back last November, and for consulting over the last six months. In the latter case, government budget cuts and local circumstances look like I lost the gig now (right after my security clearance was finally approved at the end of February, but it would be nice to get paid for what I already did! The conference money is also owed by another university. My own employer is actually great at reimbursing money. I submitted a bill for our recent overseas trip this Tuesday and already the money was in my account on Friday!

One Million Kilometres

I'm planning a trip next month to a neighboring country and just realized I will hit 1 million kilometres of flying during my flight there. I've kept a spreadsheet of my travel from when I first moved to the US and hadn't flown much yet recording all flights I've ever been on. A professor in an environmental studies class noted he didn't have a car but had flown as far as the moon and back (I think that is what he said) and so wondered if he was hypocritical and I wondered how much I'd flown. I use a piece of software called anAtlas to compute the distances. It's a long way to go to match George Clooney's character :)



Yes, I didn't fly anywhere until I was 18 years old.

Street Scenes from the Other Side of the World

Third post in this series:

1996-2002:

2007-Present:


The most noticeable thing about these pictures I think is the sunshine :) It's not been like that much recently.

Another Continent

Street scenes from the other side of the ocean:

1990-1991:


1991-1992:


1992-1993:


1995-1996:


2002-2007:


Yes, when I was in grad school I ended up moving every year. Since then, I've been much slower to move.

Revisiting the Old Neighborhood

I was inspired by these posts to put up some pictures of places I used to live. The difference in my case is that they all look much the same as when I lived there and I'm twice the age of Ken! For three countries I've lived in I could just go to Google Earth and capture pictures. No need to actually travel :) So to kick off here is Britain below. I've tried to capture a feeling of the streets and I've just labeled them by when I lived there. It's pretty easy to guess where they are though :)

1964-1966:


1966-1983:


1989-1990:


1993-1994:


The only changes are really the models of the cars and in the 1966-1983 place the size of the plants in the gardens and the recycling bins.

Yoyo in Hollywood

Seems like it was hard to get both Yoyo and the Hollywood sign in focus.

Rome

I was just invited to come and talk in Rome. But I turned it down. I think I will have done enough traveling for the year and I don't feel particularly expert in the specifics that they are interested in. I don't see it adding a lot professionally in other ways. It's more like a training session for the participants (from developing countries) from what I can understand. It's a pity because I like Rome and I have a friend I could visit there and even in theory visit family from there. But that's a big trip and would take me away from Snork Maiden for a long time and she isn't very keen on that. So, I think I'll stay home this time. I expect only to get more such invites in the future.

High End Japanese Restaurant

When I posted a picture of Yoyo looking at Sushi I said that was a high end Japanese restaurant too. This place was on the 39th floor of a building in a Seoul satellite city with a great view. You had to take your shoes off outside the private dining room and then get up into the room. In the middle was a table over a sunken well. So you were sitting on the floor Japanese-style but actually your feet were in the well and so you were actually sitting at a table Western-style simultaneously. There were endless courses.



In the picture there is sashimi (on balls of shredded radish) on the right and sushi in the plate. The mug has hot sake with fugu fins in it. My host said that his grandfather liked to drink this. It was interesting and not bad at all. There was also beer.

Bibimbap at the National Museum

Bibimbap can be served in a sizzling bowl which you are supposed to add soup and hot sauce to complete the preparation. But, then, sometimes it isn't, like this example at the National Museum:

River of Alcohol

A bar with a river of alcohol! The traditional Korean drink makoli to be precise:




This was in the Sinchon neighborhood. You can drink as much as you like for W4,000 each (just under $4). You can also order food. The main menu was in Korean and Japanese, but there was also a Chinese menu. No English menu. Again, recommended by our Hong Kong guide. So, the dishes cover holes in the table. You lift the dish and ladle out some drink into your cups. It is about as strong as cider or a strong beer. It is the first stage in the production of rice based liquor before distillation.

Neighborhood Restaurant

We found lots of attractions and places to eat in Seoul by following a guidebook that Snork Maiden bought at Hong Kong airport. First she had to translate from Cantonese to Mandarin and then to Korean though some things were actually labelled in Korean. This was very helpful. By the end of the trip I could read all the Korean consonants. One of the places recommended was just round the corner from our hotel and we ended up eating there twice. We would never have tried some place like that without the guidebook. The basic menu consisted of 20+ dishes (and rice and soup) for W7,000 (about $6) per person. This is what it looks like (with an additional dish in the middle):



As here, you can order "additional dishes" in addition to the basics. The restaurant is in a traditional house with a tiled roof. The host brings the menu on a giant wooden spoon:



There is actually a menu in English, surprisingly enough. We actually asked for one in Chinese first. Here is a Korean pancake (W10,000):



The dish we were least enthusiastic about were these leaves (I think it is perilla):

Chun Restaurant

At this place, in the Sinchon neighborhood, the staff cook your food in a big pan built into your table. It is supposedly chicken, but was mostly cabbage. Before:



and after:

Namdaemun

Namdaemun (Nan da men in modern Mandarin Chinese - South Great Gate) is a market area in the centre of Seoul. We had lunch one day in a restaurant there after going camera shopping. This is what it looked like:



The main dishes are a spicy tofu stew and cold buckwheat noodles. After serving the noodles a woman came and cut them with a big pair of scissors. We didn't think much of the sushi. In centre from left - soup, kimchi, tofu, radish. Also in the picture rice and bean-sprouts. You always get served a bunch of small dishes for free in Korean restaurants but I found they were a bit more substantial in Korea than in other countries. Close up of the noodles:



Also typical of restaurants in Korea is that there is a lot of chopsticks and spoons on the table which you select as many as you need:

Temple Food

We went to a restaurant in the Insadong neighborhood that claimed to serve "temple food". This meant that the food was vegetarian and made of locally available ingredients and featured some things that Buddhist monks might have traditionally eaten. Lunch was a fixed menu for W22k per person (about $20) with a large number of small dishes. As my friends commented, this was pretty lavish for monks. The first set of courses looked like this:



At top left and bottom right are crunchy cracker, at top right pancake, and at bottom left tofu-like. In the middle was very salty peppercorns. The next round looked like this:



Top right is tempura vegetables (mushrooms and capsicum) and in the wicker basket mostly greens/herbs of various slightly different varieties surrounded by kimchi, tofu, and other dishes, soup etc. There was also rice (not in the picture). The dessert course featured some sweet stuff and crispy puffy things that seem to be popular in Korea:

Yoyo Tackles Korean Food

Yoyo takes on a Korean melon:

Yes, they are really small. Snork Maiden thought that the skin was edible. I wasn't so sure. Yoyo wasn't much happier with this box of sushi:

Each piece was individually wrapped in plastic. It wasn't that good. On the other hand I went to a high end Japanese restaurant. I haven't got the pictures from that yet. Yoyo looks happier with this almond liquor and salted almonds:

The liquor was really sweet. We didn't finish it.