Education Bonds

I just discovered an investment structure I had never heard of: Education Bonds. These are an Australian investment structure that is similar to investment bonds but with some twists. We have an investment bond in Little My's name at Generation Life. We used it to invest the money he inherited from my mother. 

First, I will describe an investment bond again. It is an investment that pays tax in the fund nominally at 30%. If you hold it for 10 years and then withdraw the money you don't pay any additional tax. If you withdraw it before 10 years you owe tax on the earnings at your regular tax rates but get a 30% tax offset. You can reset the 10 year term by contributing a new investment of more than 125% of the previous year's investment. Why would you want to do that? If your tax rate or a child who you made the beneficiary end up having a tax rate below 30%, you'll pay less tax then if you withdraw the money.

Most of this applies to an education bond too. These are the differences:

1. You can withdraw the contributions without tax or penalty at any time. Only the earnings are locked up for 10 years.

2. You can make a claim to pay for education expenses and withdraw earnings to do so. When you do this, you get the tax paid added onto the amount you withdraw. So, there is no tax in the fund on these withdrawals. This can be done at any time, not just after 10 years.

3. The twist is that the beneficiary whose education you are paying for is liable for tax on the earnings. Children under 18 have very high penalty tax rates (one reason we used an investment bond for Little My). So, beyond the tax-free $416 per year this really wouldn't make sense. Once they turn 18, the regular adult rates apply including the tax free threshold.

4. Here is the really interesting part: You can keep any education bills incurred since you started the education bond and claim them in a later year. So, you could claim school tuition from 2026 in 2036 say!

5. If you withdraw all your contributions and then want to withdraw earnings without valid education bills, the standard investment bond rules apply.

6. The downside is you are limited to the investment options the provider has and an additional administration fee. After all, they have to deal with all these education claims... For Australian Unity this additional fee is 0.7% p.a. 

There are only a few providers and so far Australian Unity seems most attractive. Generation Life don't offer this product.

Basically, this is a way of tax-sheltering some investment income in a similar way to income splitting through a family trust. But it is much more restrictive on investments and possibly has higher fees (our SMSF pays 0.3% p.a.). You are only really going to be directly paying for higher education expenses using this.

For someone in my position, it might make sense after you have maxed out your tax free super pension and you are already above the tax-free bracket of income tax on your non-super earnings, which is true in my case. The problem is that actually trying to reclaim all the children's private school fees during the 3 or so years they are in Uni would push them into the 30% marginal tax bracket, which is probably where I will be myself. If they are working part time they might already use up the tax free allowance (currently AUD 18.2k), which would make the tax savings small. And this is assuming they go to Uni. With these considerations, the 0.7% annual fee, and limited investment options, I am undecided if this is worthwhile.

 

April 2026 Report

Markets rebounded this month, but they rebounded a lot less in Australia than in the rest of the world. This was partly because of a strong rebound in the Australian Dollar from USD 0.6880 to USD 0.7179. Gold fell a little in USD terms and quite a lot in AUD terms. Here is the performance of our benchmarks (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 10.21%

S&P 500: 10.49%

HFRI Hedge Fund Index (forecast): 2.71%

Australian Dollar Benchmarks

ASX 200: 2.19%

Target Portfolio (forecast): 1.97%

Australian 60/40 benchmark: 2.44%

In Australian Dollar terms we gained 2.88% and in US Dollar terms we gained 7.35%. So we outperformed all AUD benchmarks and HFRI but underperformed relative to the two USD stock indices. Our SMSF gained 4.62%. Unisuper gained 4.49% and PSS(AP) 2.34%. So, we outperformed one of our superannuation benchmarks.

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. Gold and Australian small cap lost money but all other asset classes gained. Futures were the best performer while hedge funds made the greatest contribution. 

Things that worked well this month:

• Nine investments gained more than AUD 10k: L1 Global Long-Short (GLS.AX, 42k), Unisuper (35k), Australian Dollar Futures (35k), Pershing Square Holdings (PSH.L, 19k), Acadian Global Long-Short (19k), PSS(AP) (15k), Pengana Private Equity (PE1.AX, 15k),  CREF Social Choice (11k), and Hearts and Minds (HM1.AX, 11k).

What really didn't work:

• Only three investments lost money with gold losing 28k.

We moved towards our target allocation. Our actual allocation currently looks like this:

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

Moominmama receives employer superannuation contributions every two weeks. We also make monthly concessional contributions to Moominmama's superannuation to reach the annual cap on contributions. There will still be capital calls from Aura Venture Fund II and III. I am receiving monthly pension payments from both Unisuper and our SMSF totalling AUD 5,150 per month. I was again less active in the market, making the following investment and trade moves this month:

• I reinvested a distribution at Masterworks and invested USD 2k in another startup at Unpopular Ventures on Angellist. We are no longer subscribing to their rolling fund but will invest a little in promising startups that they syndicate.
• I sold 1,000 shares of PMGOLD.AX (10 ounces) and then bought back in again at a lower price, but not low enough, as the price has fallen more.
• I bought another 10k shares in WAM Alternatives (WMA.AX).

Here are the income and spending accounts * for this month:

Other income includes Moominmama's salary and employer superannuation contributions and totalled AUD 4k as usual. It was a big spending month at AUD 19k due to school fees. This number does not include our mortgage payments, which are regarded here as saving and investment costs. Dissaving amounted to AUD 15k, within the 4% rule limit of AUD 23k. We gained AUD 193k investing, 2/3 of which were was in retirement accounts. They performed better both on the way down and the way up from the March correction than our non-retirement accounts and are now higher than in February. We received lots of dividends with associated franking credits this month. As a result of all this, net worth rose by AUD 162k to AUD 8.309 million. We are about AUD 100k above the beginning of the year, but this is mainly due to the increase in the value of our house.

* Results are shown separately for retirement and non-retirement accounts as well as housing, which nowadays doesn't have much activity. The grey shaded rows are additional notes. Total investment income is split into investment income before exchange rate moves and the contribution of exchange rates. Other income is non-investment income including salaries, employer superannuation contributions, and net tax returns. Investment income is shown pre-tax. Tax credits include franking credits on Australian Dividends and imputed tax on industry superannuation returns and and actual SMSF tax. These are taken away from investment income to get changes in actual net worth. Inheritances include gifts from relatives. Saving is from non-investment income, transfers, and inheritances. 

I Was Never Paid Back My Security Deposit?!

Gradually, over time I am fixing errors in my old accounts. I want to have a reasonably accurate record of investment performance and spending over time, I find solving the mysterious errors challenging, and I get to revisit different times in my life and remember what I was doing. I focus on the months with the biggest known errors. Today, it was the turn of September 2007, the month we moved to Australia. The accounts were pretty messed up. Finally, I worked out that either I was not paid back my security deposit in the US, or I received cash. I can't find any deposit in my bank accounts from the time. It was quite a crazy time, so maybe I just forgot? Intriguingly, in some handwritten accounts from then I recorded the deposit until the end of October and then just dropped it. I didn't mention it in the monthly report on this blog. I've now recorded it as an additional USD 600 of spending in September 2007.

 

The biggest remaining error in AUD terms is AUD 500 in October 2005 and in USD terms $684 in September 2020:

The error is defined as the difference between two different ways of computing the foreign currency component of the monthly change in net worth, which should be equal. This esoteric sounding error translates one to one into income or spending incorrectly recorded or transfers out of some accounts or investments not being matched by transfers into corresponding accounts. Once there were much more significant errors than these as there usually are now at the end of the month before I fix things. 
 

Masterworks Reverses Changes to Secondary Market

I recently reported that Masterworks had redesigned their secondary market. How exactly the new market would work was unclear, but you needed to make a new phone call with them before doing any trading and it seemed that they would send you opportunities to buy shares rather than their being a market with openly posted prices. Now, they have announced via email that they are reversing these changes:

"Hi everyone,

We recently announced changes to how secondary market trading works on Masterworks. We didn't get this one right, and we're sorry for the confusion. Based on your feedback, we've reversed or cancelled those planned changes and the secondary market is back to working the way it did before.

Our goal remains to make the secondary market more effective and user-friendly for all investors. We're continuing to work on improvements and will keep you updated as things develop.

In the meantime, if you'd like help navigating the trading platform, our secondary market advisory services are available to you. You can schedule a call to receive personalized guidance from our team here.

Thank you for your patience and your feedback."

I will take a look and see how things are going before deciding on whether to do some more trades. One of the paintings that I did buy last month has now had an exit above the price I paid, which provides some support for my approach to selecting secondary investments.
 

Tax Credit Update

I just updated my tax credits chart to include last year's tax returns and expected tax credits on this year's returns:

This doesn't include tax credits on our Self Managed Superannuation Fund's return. Three sorts of tax credits on both our tax returns are included. The most important are franking (or imputation) credits associated with Australian dividends. When a company pays Australian corporation tax they can pass on a credit for the tax paid to their shareholders. This credit gets added to the shareholders income but can also be subtracted from their tax due.* So, there is no double taxation of dividends in Australia. The second is tax withheld on foreign dividends, which can be claimed against Australian tax, and the third is the Early Stage Venture Capital Partnership credit. You get a tax offset equal to 10% of the amount invested in these partnerships (and the profits are tax free).

There are various reasons for the decline in franking credits since 2021/22.  One fund reorganized and now doesn't pay Australian tax (WCMQ.AX). Tribeca Global Resources (TGF.AX) paid a huge dividend in that year, and so on.

* If your franking credits exceed your tax liability the government sends you the difference! 

Performance Update

I stopped reporting these five year performance figures in my monthly reports, but I'm still tracking them, and I've added the target portfolio to the list of benchmarks.

The top panel in the table shows our portfolio performance over five years of monthly data in AUD and USD terms. Due to the fall in the AUD over this timeframe, the AUD performance is better. Also, AUD performance is far less volatile, which is part of our portfolio design.

The middle panel shows our performance relative to the five benchmarks and the bottom panel the performance of the five benchmarks. The benchmarks are the MSCI All Country Index (Gross, USD), the ASX 200 Index (including estimated franking credits), the HFRI hedge fund index (fund weighted), a monthly rebalanced portfolio of two Vanguard ETFs - VDBA and VDGR, and the Target Portfolio. Alpha and beta are estimated in regressions of our excess returns relative to either the US Fed or the RBA interest rate on the excess returns of the benchmark. The MSCI and HFRI benchmarks are in USD and the other three in AUD.

Of course the two equity indices are more volatile. The typical hedge fund is very conservative actually with very low volatility. In risk adjusted terms hedge funds return more than the other benchmarks, which is shown by the information ratio. 

We have positive alpha and lower "downside capture" relative to the three AUD benchmarks. Relative to the Target Portfolio we have a beta or almost one - meaning that a 1% increase in the excess return of the Target Portfolio is typically associated with a 0.97% increase in the excess return of our portfolio. But we also actually have a positive alpha, which shows that active management beyond tracking the target adds value. 1.5% p.a. is worth around AUD 100k per year. Actually, given the composition of the Target Portfolio, it is impossible to track it passively, as there aren't hedge fund or private equity ETFs. You need to pick specific funds. 

USVC

AngelList have announced a new mutual fund investing in venture capital called USVC. You can invest as little as USD 500. I have been thinking about investing in this via our SMSF. Previously, I wanted to invest in Unpopular Ventures on the AngelList platform using the SMSF but SuperGuardian, our administrator, said it wasn't allowed because of the partnership structure. Instead, we invested in Moominmama's name. This isn't a partnership, so it should be OK. It seems to be open to non-US investors despite the mutual fund structure. On the other hand, I feel I am too contrarian to be happy investing in all these US AI companies at this stage. At least 80% of the fund will be in US venture. That is why I like Unpopular Ventures because it is truly global. In retrospect I would have done much better with my investments if I had been less contrarian. But it is just this fundamental character trait. So, I try to work with it rather than against it. I feel uncomfortable going with the majority.

ASA Podcasts

Two of the partners of ASA who managed the Diversified Property Fund we are invested in have been on podcasts recently. Here are the links for Chris Aylward and Tim Slattery.

Closing US Bank Accounts

Keybank are increasing the security precautions on their bank accounts. You will need either a US phone number or a "passkey" to log in. Apparently, a virtual phone number won't work, it must be a real mobile phone. Up till now I had a virtual US number, used a friend's address as my mailing address, and used "secret questions" to log in. I tried to set up the passkey but it would only accept US government issued photo IDs. I don't understand why they are so US-centric. Don't they even have Canadian citizens as customers? Once upon a time this was an account at the globally focused HSBC. But mergers and acquisitions moved it to Keybank. This was my bank branch when it was temporarily owned by First Niagara:

So, I moved the money I had out of the accounts to Interactive Brokers. Now I need to get a USD account here in Australia to receive transfers from the US without getting terrible exchange rates. Moominmama has one at HSBC Australia. I might do that, but first I am investigating whether I can get a receiving account at OFX.

Update 4 April

In the end, I decided to go with HSBC Australia as it is a known quantity and setting up a business account with OFX seemed like it might be more complicated than what I need.

March 2026 Report

This was a down month across most assets as the Iran War intensified. On the final day of the month, US markets and gold rallied, causing a timing issue that makes our portfolio performance look relatively worse. Our overall portfolio did not perform as designed and fell as much or more than the markets generally. However, our superannuation accounts did perform relatively well. As a a result I am fairly relaxed as we continue to receive pensions from superannuation and dividends from non-superannuation investments as well as having large cash buffers. The Australian Dollar fell from USD 0.7116 to USD 0.6880 meaning that USD investment returns are worse than AUD investment returns. Here is the performance of our benchmarks (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): -7.13%

S&P 500: -4.98%

HFRI Hedge Fund Index (forecast): -1.68%

Australian Dollar Benchmarks

ASX 200: -6.87%

Target Portfolio (forecast): -2.58%

Australian 60/40 benchmark: -4.64%

In Australian Dollar terms we lost 6.28% and in US Dollar terms we lost 9.39%. So we narrowly beat the ASX 200 but underperformed all other benchmarks. In dollar terms it was our worst month ever. We lost AUD 448k. The previous worst month was March 2020 when we were down AUD 316k. In USD terms we were down 476k vs. 331k during the COVID crash. The USD number is larger than the AUD in both cases because the Australian Dollar fell.

On the other hand, our SMSF lost 2.94%. Unisuper lost 2.68% and PSS(AP) 3.16%. So, we outperformed one of our superannuation benchmarks.

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. All asset classes lost money. Hedge funds were the worst performer and the greatest detractor. Real assets performed least bad and detracted the least.

Things that worked well this month:

• Only six investments gained money with the Winton Global Alpha fund gaining the most at AUD 5k.

What really didn't work:

• Twelve investments lost more than AUD 10k and four lost more than AUD 50k! These were the L1 Global Long-Short Fund (GLS.AX), Tribeca Global Resources (TGF.AX), 3i (III.L), and gold.

We moved a little towards our target allocation. Our actual allocation currently looks like this:

 

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

Moominmama receives employer superannuation contributions every two weeks. We also make monthly concessional contributions to Moominmama's superannuation to reach the annual cap on contributions. There will still be capital calls from Aura Venture Fund II and III. I am receiving monthly pension payments from both Unisuper and our SMSF totalling AUD 5,150 per month. I was less active than recently in the market, making the following investment and trade moves this month:

• I transferred USD 5,000 to Masterworks to buy shares of paintings on the secondary market just before they decided to shut down that market in its current form.
• I bought 5,000 shares of each of CD3.AX and MOT.AX in our SMSF.
• I bought 5,000 shares of Cadence Opportunities (CDO.AX) and 1,000 shares of the ASX 200 ETF, IOZ.AX in Moominmama's account. 
• I bought 1,000 shares of the gold ETF, PMGOLD.AX, in my account. 

Here are the income and spending accounts * for this month:

Other income includes Moominmama's salary and employer superannuation contributions and totalled AUD 4k. Spending was down to AUD 8k, which is what I'd expect in months without school fees. This number does not include our mortgage payments, which are regarded here as saving and investment costs. Dissaving amounted to AUD 4k, well within the 4% rule limit. However, we lost AUD 438k investing. As I noted a week ago, most of this was in non-retirement accounts: -358k, with "only" AUD 80k lost in retirement accounts. As a result of all this, net worth decreased by AUD 440k to AUD 8.152 million.

* Results are shown separately for retirement and non-retirement accounts as well as housing, which nowadays doesn't have much activity. The grey shaded rows are additional notes. Total investment income is split into investment income before exchange rate moves and the contribution of exchange rates. Other income is non-investment income including salaries, employer superannuation contributions, and net tax returns. Investment income is shown pre-tax. Tax credits include franking credits on Australian Dividends and imputed tax on industry superannuation returns and and actual SMSF tax. These are taken away from investment income to get changes in actual net worth. Inheritances include gifts from relatives. Saving is from non-investment income, transfers, and inheritances. 

Intra-Month Portfolio Update

Currently our portfolio is down about 6.5% this month compared to the ASX 200 down 7.5%. The 60/40 benchmark is down 4.5% and the target portfolio only 3.1%. I am not too worried, as our SMSF is down only 2.4% and Unisuper 1.9%. These are the retirement accounts we are drawing a pension from. We have just over a year's worth of pension in cash in the SMSF and near two year's worth of spending in cash in our offset account.

The losses are concentrated in our non-retirement accounts, which are down 9.6%. Within those, gold is down sharply and the discount to NAV at several closed end funds has increased sharply, with Tribeca Global Resources (TGF.AX) "leading" the way.

Almost 40 Years of Spending

I am helping a friend make a move from New York to Texas with financial advice and a small loan. Talking about budgeting got me to go look at the longest term spending data I have electronically. This is in Pounds Sterling and I can't be bothered to convert to dollars because I would have to research exchange rates from the 1980s. It goes back to September 1988. I probably could extend it further from handwritten records. But, anyway, this is what I have readily to hand:

It's also not inflation adjusted (see below). Apart from the upward trend, it is noticeable how much more volatile the series gets recently. You can see the peak when we bought our house (stamp duty) and the trough at the start of the Pandemic. There are previous peaks usually associated with moves, like in 2007 when we moved to Australia. Currently, school fees are the most volatile element in our budget. Actually, in percent terms, spending got more volatile recently, but it's not more volatile than it was in the earlier years of the series:

So, the first version of this post used non-inflation adjusted data. I easily found almost uptodate data on the UK Retail Price Index. This is not ideal as for most of this period I was spending in Australian or US Dollars. The exchange rate and then the use of a foreign price index will distort things. But if you want to know what our spending was in today's pounds, it is correct:

 

I also added a two year moving average. Spending does rise 4 to 5-fold. This is not surprising. We now have four people rather than one. Real spending fell after rising to a new level following my first move to Australia and my last move to the US. And this is also true since we moved into our current house, despite going from two to four people during that period. Real spending has been drifting lower over the last decade. On the other hand, it continued higher after other moves.

Masterworks "Redesigns" Secondary Market

I recently invested USD 5,000 in paintings I bought at large discounts on the Masterworks secondary market. I was thinking to do more such purchases now and then and gradually build up a more diversified portfolio. I targeted offerings that had appreciated since their initial offering and so were more likely to have a near term exit, which were selling at large discounts - up to 50% of appraised value.

Bracco di Ferro by Basquiat

Masterworks was only allowing buy orders to be placed for one day at a time. I think the idea was to force buyers to buy at the offer price and so maybe push prices up. But the result was that someone casually looking at the site saw piles of sell orders and no buy orders and would conclude that this was not a good investment. 

Then today we got an email from Masterworks saying that in future sellers will need to discuss their planned sales with Masterworks and buyers will be offered curated offers. You need to sign a new agreement to participate. From my reading of the agreement, they will charge an extra 2% p.a. AUM fee for participating. I've emailed the firm for clarification on that. If so, I won't participate. I am guessing they plan to buy shares at a discount from sellers and then sell them at a marked up price to buyers.

Recently, I talked to their sales guy who offered me investments in funds. These funds consist of shares in paintings which Masterworks has received as annual management fees. They are offered at a 10% discount to appraised value. The minimum investment for one fund was USD 100k and for the other 25k. I told him I preferred to buy in the secondary market. I guess a bunch of people have told them that. Now maybe the 25k fund looks a little attractive but it also includes paintings that are trading way below their initial offering price that I think might never be exited.

P.S. 16 March 2026

I got an email back from Masterworks saying that they didn't intend to add an additional 2% fee and they will change the wording of the agreement.

February 2026 Report

The Australian Dollar rose from USD 0.6989 to USD 0.7116 meaning that USD investment returns are better than AUD investment returns. Stock markets mostly rose (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 1.31%

S&P 500: -0.76%

HFRI Hedge Fund Index: 1.92%

Australian Dollar Benchmarks

ASX 200: 4.33%

Target Portfolio: 0.16%

Australian 60/40 benchmark: 1.27%

In currency neutral terms we gained 1.31%. But in Australian Dollar terms we lost 0.33% and in US Dollar terms we gained 1.48%. So we beat the USD stock index benchmarks but underperformed the AUD benchmarks and HFRI. Hedge funds are having a good performance patch. It was the first down month for the S&P 500 since April 2025! February is a seasonally negative month for both the S&P 500 and our own portfolio.

The target portfolio has been flat for several months now as the rise in the Australian Dollar and.a fall in venture capital offset gains in other asset classes:

The SMSF underperformed, losing 1.83%. Unisuper  returned 0.92% and PSS(AP) 1.37%. 

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

The asset class returns are in currency neutral terms as the rate of return on gross assets and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. Performance was very mixed with a huge rate of return for futures. Hedge funds slightly edged futures out in terms of contribution. Gold had the worst rate of return and detracted the most.

Things that worked well this month:

• Four investments made more than AUD 10k: L1 Global Long Short (GLS.AX, 26k), Tribeca Global Resources (TGF.AX, 22k), Australian Dollar Futures (14k), Winton Global Alpha (11k). Eleven investments hit new high profit marks including GLS, TGF, and Winton. For TGF the previous peak was in 2022. Cadence Opportunities hit a new peak, with the previous peak in 2021!

What really didn't work:

• Three investments lost more than AUD 10k: Pershing Square Holdings (PSH.L, 24k), gold (15k), and Regal Investment Fund (RF1.AX, 15k). Because of timing issues, the price of the PMGOLD gold ETF fell, while the price of gold rose in US Dollar terms for the month. This wasn't because of the rise in the Australian Dollar. The USD price of gold when converted into AUD rose from AUD 7,000 to AUD 7,413! Ratherm there was a 9% fall in the USD price of gold on the last day of January. But the ASX closed before that happened.

We moved towards our target allocation. Our actual allocation currently looks like this:

 

About 68% of our portfolio is in what are often considered to be alternative assets: real estate, art, hedge funds, private equity and credit, gold, and futures. A lot of these are listed investments or investments with daily liquidity, so our portfolio is not as illiquid as you might think.

Moominmama receives employer superannuation contributions every two weeks. We also make monthly concessional contributions to Moominmama's superannuation to reach the annual cap on contributions. There will still be capital calls from Aura Venture Fund II and III. I am receiving monthly pension payments from both Unisuper and our SMSF totalling AUD 5,150 per month. I made non-concessional contributions of AUD 30k Unisuper and AUD 20k to our SMSF. I am thinking to max out the total possible contributions before I probably hit the transfer balance cap at the end of this financial year and can't make any further non-concessional contributions. There is a twist that complicates things. The transfer balance cap is expected to be raised by AUD 100k next year. I was very active in the market, making the following investment and trade moves this month:

• I bought 5k shares of Regal Partners (RPL.AX) on a dip.
• I bought 10k shares of Hearts and Minds (HM1.AX) on the same dip in the market. 
• I bought 4k shares of WAM Capital (WAM.AX) to round out our position to 110k. This was funded really from the gain in our Australian Dollar Futures. When futures rise, the cash in your account increases and vice versa...
• I bought 10k more shares of Cadence Opportunities (CDO.AX). 
• I did two profitable trades in gold and used the proceeds to buy 5k shares of Wilson Alternative Assets (WMA.AX). This should help rebalance our portfolio a little towards real assets. Then I did an unprofitable trade in gold...
• I sold 50 shares of Berkshire Hathaway (BRK/B). I'm a bit disappointed that it is below where I bought it in last year's market correction. This helped rebalance our portfolio a little away from US stocks. 
• I sold 1,000 shares of the ASX 200 ETF, IOZ.AX. This helped rebalance our portfolio towards the target portfolio and together with the BRK/B sale fund the following: 
• I bought 2000 shares of ZIM. I was planning on this being a longer term trade, but I ended up getting out after one day!
• So, instead I bought 500 additional shares of Pershing Square Holdings (PSH.L). 
• I sold more than 23k shares of Regal Investment Fund (RF1.AX). The market price was near the NAV now.
• I then bought 350k shares of the US Residential Property Fund, URF.AX. They now say that they will try to sell all property by the end of the year. This should close the gap between NAV and the market price. Risk is that the Australian Dollar rises a lot in the interim reducing NAV. This also helped rebalance the porfolio.
• I also bought just over 10k shares of the Cordish-Dixon Private Equity Fund III (CD3.AX). I liked the recent presentation on fund performance and think it is really undervalued. 
• I invested USD 3,750 in another start up with Unpopular Ventures.
• I made a new investment in 500 shares of the Alerian MLP ETF. This also helped rebalance towards real assets.

Here are the income and spending accounts * for this month:

Other income includes Moominmama's salary, a refund Moominpapa received and employer superannuation contributions. There was a larger than normal transfer into superannuation as I made the non-concessional contributions mentioned above. Spending was almost AUD 30k. This was the highest monthly spend since January 2015 when we bought our house and paid stamp duty! This was a high month due to school fees and a big "professional" expenditure by Moominpapa. As a result dissaving was AUD 23k for the month, which is just at the 4% rule limit. Because we lost AUD 24k investing, net income was AUD -18k. As a result of all this, net worth decreased by AUD 49k to AUD 8.608 million.

* Results are shown separately for retirement and non-retirement accounts as well as housing, which nowadays doesn't have much activity. The grey shaded rows are additional notes. Total investment income is split into investment income before exchange rate moves and the contribution of exchange rates. Other income is non-investment income including salaries, employer superannuation contributions, and net tax returns. Investment income is shown pre-tax. Tax credits include franking credits on Australian Dividends and imputed tax on industry superannuation returns and and actual SMSF tax. These are taken away from investment income to get changes in actual net worth. Inheritances include gifts from relatives. Saving is from non-investment income, transfers, and inheritances. 

Just Cancelled My Life and Disability Insurance

I hadn't realised I was still paying life and disability insurance premia post-retirement. I just cancelled them online, saving about AUD 700 per year. The amount you pay is fixed or rising with inflation, but the coverage that you get falls as you get older and stops entirely for disability at 70 and death at 75.

Switching to Gold in Little My's Portfolio

 

Little My (our younger child) has an investment bond managed by Generation Life. Now and then I decide to tweak the portfolio allocation. I just noticed that iShares Physical Gold is now an option. So, I am switching from Magellan Global (soon to be managed by L1 instead) to gold. Gold is in the target portfolio and my own portfolio and we already have more than 1/3 of the portfolio managed by L1. So this is the new allocation:

iShares Physical Gold: 9%

Atlas Infrastructure: 8%

L1 Long Short Fund: 35%

Generation Life Tax Effective Australian Shares: 20%

Dimensional 70/30 World Allocation: 28% 

So, in terms of asset classes:

Australian Shares: 30%

International Shares: 10% 

Hedge Funds: 35% 

Credit 8% 

Real Assets: 8%

Gold: 9%

The gold position is not quite one ounce (shown in the picture above). 

The portfolio is more aggressive than the target portfolio, which makes sense as Little My is very young.