Monday 16 April 2007

Financial Miscellany

A day of financial odds and ends. The Australian stock market powered up to new all-time highs early in the morning, so I decided to purchase another 4 XJORT S&P/ASX200 20-Dec-2007 5500 PUT Options - as the market goes higher the cost of the PUT options drops, so the same options that cost $1580 each back on 9 FEB, today cost me $960 each. I now have a total of 7 PUT option contracts, which would offset around 2/3 of any losses my Australian stock portfolio would suffer if the market crashed below 5,500. Below 5500 the contracts are "in the money" and are worth $10 for each pt the index drops below 5500. Above that level the value of the contracts will diminish as the expiration date (20-Dec) approaches. But they still mirror that movements in the market, so I have some "insurance" if the market suffered a correction in the meantime. A look at the All Ords index for the past 25 years shows that we're above the long-term market trend. Although the pundits say the market isn't overpriced on current p/e rations, that could quickly change if the world economy slowed or there was some significant global crisis.

Aside from buying the PUT options I also phoned the plumber to query the $800+ bill for clearing out a blocked drain. The owner said he'd check into it and get back to me.

My mother is thinking about cashing in her retirement fund (she deposited $119,865 of the proceeds from selling an investment unit back in 2004 in order to reduce the amount of capital gains tax payable). $91,149 of the $119,865 was tax deductible, so it had 15% contribution tax ($13,672.31) applied when it was deposited into her retirement fund. The balance of the contribution ($28,716) was undeducted, so there was no contribution tax due. Unfortunately the capital gains realised on the unit sale meant that her overall adjusted taxable income (ATI) was high enough that a superannuation surcharge was also charged ($13,216.60). So the overall tax saving was not very large, but every little bit helps. Anyhow, her balance has grown to $139,078.74 - an annualised ROI of 11.86%. Her retirement fund has a pretty aggressive investment mix for someone in their 70s - mainly due to the fact that the balance of my parents assets are in cash or real estate, so this component can be overweight in stocks.

Some more dividend statements were waiting in the mail when I got home - $49.70 from Rio Tinto and $498.00 from Sims Group. Most of the dividends I receive end up going towards the interest on my stock portfolio margin loans. I only have a few DRPs in place - those where the number of shares issued gets rounded up to the next whole number of shares.

Enough Wealth

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