Tuesday 31 July 2007

SmartPortfolio Review

Smart Portfolio is a FREE online portfolio management site.

Joining process: Easy

Just Click on the SignUp button to register - select a username and password. You need to supply a name, email address and postcode, but obviously the privacy conscious could enter the usual (eg. Donald Duck, duck1234@yahoo.com, 2000). I normally am happy to enter basic details for a free online service, but the lack of an obvious link to a privacy policy made me a little bit worried about spam, so I entered one of my 'junk' email addresses.

Once you have created an account you can enter information about your existing portfolio - this is a bit of a chore if you have a long established portfolio, with many dividends and DRP transactions to enter. There is no import feature, so this will mean duplicated work if you already track your portfolio transactions using Quicken or MSMoney. However, if you have a relatively simple portfolio and don't want to pay for Quicken or MSMoney this product is very attractive.

One bug I noticed when I first logged in and went to the Portfolio page to enter my portfolio transactions is that initially the Portfolio Value had an amount of $1,000.00 even though there was nothing yet in the portfolio! Entering a few sample transactions I found that the transactions listed correctly, but the overall portfolio summary was still incorrect. I couldn't work out how the portfolio value figure is calculated, and the profit% appears to be a simple total % gain, not an annualised return.

When you have your portfolio transactions up to date you can then run reports on Portfolio Analysis (trading summary), Asset Allocation (by stock or sector), Performance Chart and Tax Summary.

The overall layout is very nice and clean, and features such as the Asset Allocation and Performance Chart are very nice. If the bugs in some of the calculations are fixed (or at least some links to help screens explaining how the figures are calculated) then this site will be really useful for someone starting out with a portfolio. Until a transaction import feature is added (the is an export to excel feature) users with an existing portfolio and many historic trades to enter would be less enticed to start using this site.

Sample of data entered for this review and some of the results displayed:

Transactions entered:
Date Code Name Volume Price Commission Value
20/02/2005 CDF Commonwealth Divers. 1000 0.950 $29.95 $979.95 Edit Delete
13/06/2004 CDF Commonwealth Divers. 1000 0.870 $29.95 $899.95 Edit Delete

Portfolio Summary Displayed:
Value Change $ Change % Total profit $ Total profit %
Shares $3,700.00 $260.00 7.56 % $1,820.10 96.82 %
Portfolio value $2,820.10 $260.00 10.16 % $1,820.10 182.01 %

Portfolio Analysis:
Positions - winners / losers
Positions: 1 Open: 1 Closed: 0 Transactions: 2
Number Total Average $ Average %
Winners 1 $1,820 $1,820 96.81 %
Losers 0 $0 $0 0.00 %
Summary $1,820 $1,820 96.81 %
Ratio winners / losers 0.00 0.00 0.00 0.00

Copyright Enough Wealth 2007

Sunday 29 July 2007

DFS(FP) Update 3

I finished off the last of the 20 assessment activities for the DFS1 course at work during lunchtime of Friday and mailed them off for marking. This first module "Financial Advice" is mostly about the regulatory requirements and contains a whole lot of templates for the Fact Finder used to get relevant information about clients who want personal financial advice, a Risk Analyse to give a rough gauge of ow risk tolerant a client is, and sample Statement of Advice and a letter acknowledging the client has received all the relevant information, notifications and warnings. It very briefly mentions aspects of financial planning that should be considered when developing a financial plan for a client, but doesn't go into much detail about the various strategies and how to select the most appropriate one. Someone who passes this course will know what they are supposed to be doing, and how to dot all the i's and cross all the t's when providing advice, but whether or not they know HOW to do it well will depend on natural ability, background, and knowledge of the various strategies that can be employed for clients in different circumstances.

I'll start working on the next module DFS2 "Insurance" next week - it's likely to be the most boring and the one I know least about. The final two modules "Superannuation" and "Investment" are likely to be mainly revision and shouldn't take very long to complete.

I want to get all the DFS(FP assessment items finished as soon as possible as my GradDip Education course starts again next week and I'll need to start working on the assignments for that by the end of next month.

Copyright Enough Wealth 2007

Saturday 28 July 2007

Dividend Income

I usually get a large dividend payment from my CDF holdings at this time of year, and use it to repay the margin loan interest pre-payment that I've made in late June. Most years I initially pay the interest using my Citibank Redicredit Line-of-credit account and then pay off the citibank debt using my CDF dividend, but this year I chose to capitalise the margin loand interest payment. This means that the $8,416.63 dividend that was paid into my Credit Union account yesterday can be used to make other investments.

Copyright Enough Wealth 2007

News Flash: The Stock Market can be Risky!

Yes, I know that's not news to anyone. So, why all the kerfuffle about a drop of a couple of percent? The Australian stock market even managed to out-drop the US market - falling 174 pts (2.8%). On paper this knocked $15,000.00 or so off my net worth in one day, but I'm a long-term investor with an "aggressive" risk tolerance, so I should expect this to happen once or twice every few years. If it keeps going down another 10% we might even have a genuine "correction".

I can't decide which headlines are more amusing - the ones that say that this is a market "bloodbath" and the start of a bear market, or those that think a 2% decline is a "correction" and a buying opportunity...

Copyright Enough Wealth 2007

Thursday 26 July 2007

HyperGearing Case Study

Most of us would have a mix of asset in our investment portfolio - ranging from the low-risk, low-return government guaranteed bank account, through stock and real estate investments, and up, up and away into the stratosphere of geared, high-risk, high-return investments. Rather than invest in just one asset class of investment product that matches my risk-tolerance and desired return I have a mix of different investments, accumulated over time via deliberate diversification strategies and a large dose of "it seemed like a good idea at the time" strategy. In this post I'll look at what is probably my highest-risk investment, track how it's performed so far, and establish a baseline for keeping an eye on it's long-term performance over the coming years.

Investment: Hedge Fund (Macquarie Equinox Select Opportunities Fund), 100% geared using funding from a Macquarie Structured Products Investment Loan and annual interest payments capitalised using a line-of-credit loan against my property portfolio equity.

Principal Loan: $50,000 borrowed for the initial investment @7.75%pa fixed, paid annually in advance each June ($3,875 pa interest)

Interest Capitalisation Loan: The $3,875 pa interest payment on the principal loan amount is borrowed each June using my home equity line of credit, @ current variable home loan interest rate -0.7% "professional package" discount +0.1% "portfolio loan" premium. Currently the interest rate is 7.33% pa. This interest is paid monthly from my credit union savings account. (I could have also capitalised this interest on interest, but I couldn't be bothered as the amount each month is quite small, and I'd be pushing my luck regarding the tax-deductibility of such interest payments).

Investment Performance:
14.46% in the first year

Tax Considerations:
In order to ensure that the interest on any loan used to purchase the investment is tax deductible, the Macquarie Equinox fund is designed to pay a small "dividend" each year - estimated in the PDS to be around 1% pa. The dividend for the year ended 30 June 2007 will be declared by the end of August. For the evaluation of the tax effects of this investment I've assumed a 1% dividend is declared.

Taxable income from investment: 1% x $50,000 = $500

Deduction for interest paid on investment loan:
7.75% x $50,000 = $3,875

Deduction for interest paid on capitalised interest:
7.33% x $3,875 = $284

Net effect on taxable income:
$500 - $3,875 - $284 = $3,659 reduction

Marginal income tax rate = 30%
Reduction in income tax payable for 2006/7 FY: 30% x $3,659 = $1,097.70

Unrealised Capital Gains for 2006/7: 14.46% x $50,000 = $7,230
Capital Gains tax rate = 50% x marginal income tax rate = 15%
Unrealised CGT due when investment is liquidated: 15% x $7,230 = $1,084.50
Net Unrealised Capital Gain: $7,230 - $1,084.50 = $6,145.50

Net after-tax profit calculation:
= Investment Value - Loan balance - interest paid + tax refunds - CG tax due
= $57,230 - $53,875 - $284 + $1,097.70 - $1,084.50
= $3,084.20

It's a bit hard to work out a ROI as I used OPM to fund this investment, but as a ball-park figure I assume that I "used" $3,875 of home equity that could have otherwise been invested elsewhere, plus I paid out $284 in interest on this home equity loan. So, ROI becomes $3,084.20/($3,875+$284) = 74.16%

On the face of it this looks like a great little money-maker, BUT the potential riskis huge. Worst-case the investment could become worthless, leaving me with a $53,875 in debt to repay. So, as nice as a 74.16% pa return is, I'll restrict my total investment in this high-risk asset class to the current $50,000 - which is around 4.3% of my net worth. This limits the potential maximum loss to around $88,750 after ten years, vs. a "likely" net profit of around $90,980 after ten years (assuming interest rates stay the same, tax rates stay the same, and the investment return averages 14.5% pa).

Break even requires an averaged investment return of 5.98% pa (It's less than the cost of borrowing to invest due to the tax effectiveness of the investment).

Best-case scenario would be a net profit of $191,674 if the investment return averaged 20% (a figure quoted in the PDS as a "projection" based on historical returns for the underlying investments used to value to investment). This best-case scenario is highly unlikely, with the "historic" return data for many of the underlying investments being only a couple of years!

Doing a back-of-the-envelop estimate of "probable" outcome, I get the following:

Outcome Probability Scenario
-$88,750 10% Stay invested for 10 years, then investment goes bust
-$ 6,930 20% Stay invested for 10 years, investment return avg 5%
$16,264 25% Stay invested for 10 years, investment return avg 8%
$90,980 25% Stay invested for 10 years, investment return avg 14.5%
$131,567 19% Stay invested for 10 years, investment return avg 17%
$191,674 1% Stay invested for 10 years, investment return avg 20%

The Weighted average outcome is a profit of $43,464. (As a reality check this equates to an average return of 10.77%, which seems realistic)

Overall, I estimate that the likelihood of losing my entire 4.3% of net worth that I've put into this high-risk is only around 10%, and that there's a reasonable chance that this investment could increase my net worth by an extra $100K to $200K in ten years time.

This is a good illustration of how slack my investment due-diligence and risk analysis really is. Checking through the PDS again I found that:
a) The 10-year historic return of the underlying investments is actually around 15%, not 20%
b) This investment is supposedly "capital guaranteed" - so worst-case I *should* get back the initial $50,000 at the maturity date
c) There is a "rising guarantee" that "locks in" a part of the increased fund value each year (if any) - this may mean that by the end of August the rising guarantee has increased to maybe $53,000 - which would then become my "worst-case" scenario
d) The investment matures after 8 years, not 10. But at that time the fund "rolls over" into an investment in the top-10 ASX listed stocks, so it won't trigger a CGT event at that time. I may need to refinance to $50,000 loan at that time though.
e) I really don't understand exactly what mix of underlying investments the fund performance is linked to and I don't know what fees are being siphoned off - probably a lot, as exotic investments tend to have high management fees, and capital protected products tend to be loaded up with hidden costs.

So I've violated the cardinal rule to "only invest in things you understand". Then again, although $50,000 is a sizeable investment in one product, it's only 4.3% of my total net worth, and an even smaller % of my total investment portfolio. And some of the benefits (income tax deductions, investment asset diversification into non-correlated asset classes) are pretty certain.

If I was a more risk-averse investor I'd not invest in this product in the first place - instead I'd make a "risk free" 7.33% after-tax ROI by not drawing down my home equity loan to pay the interest on this investment.

On the other hand, a more risk-seeking investor might add $50K or $100K of such an investment to their portfolio each year, using every bit of available equity to fund the investment borrowings. If things worked out, after ten years you could have made an extra $1m or so and be able to retire, or possibly write a book and teach seminars on how to make a fortune through speculative investing ;)

Copyright Enough Wealth 2007

Retirement Funding

We're still waiting for our employer contributions to start appearing in the bank account of our Self-Managed Superannuation Fund. Apart from the intial $200 deposit I made last June nothing has appeared in the account yet. We notified our employer to direct our 9% compulsory employer contribution plus our "salary sacrifice" amounts into the SMSF from 1 July, and the payroll department has apparently made the change. The employer contributions still go initially to the company's superannuation administrator, who is then supposed to redirect it into the SMSF bank account within a couple of days. As no funds had appeared in the account yet I asked payroll in what timeframe I should expect the money to appear in our SMSF account. It turns out that although the superannuation contribution amount is printed on each fortnightly payroll slip the contributions are only sent in at the end of each month. So I should see the July contributions hit the SMSF bank account by the middle of August. As soon as I know that no additional contributions are going into the old fund we can send in the paperwork to close DWs account and "rollover" the entire balance into our SMSF. I'll also send in the request to rollover the bulk of my account balance into our SMSF, just leaving enough in the old fund to cover my insurance premiums. It's cheaper to get death & TPD cover through our company superannuation scheme as we get group rates and the premium is paid out of pre-tax dollars. Outside of superannuation life insurance premiums are generally higher, and aren't tax deductible. In contrast, income protection insurance is tax deductible, so it's generally better to obtain it outside of superannuation.

Copyright Enough Wealth 2007

Tuesday 24 July 2007

Good News Day

Mum is OK - she had a tetanus shot and a diptheria booster for the wound on her hand, and is on antibiotics, but she was lucky and didn't break anything or get a concussion when she passed out and fell head-first into the bedroom wall. She was even feeling well enough to have us over for dinner this afternoon.

Meanwhile, my AUD/USD forex trading has been doing well - going long the AUD in the recent strong uptrend has made back some of my previous trading losses. I put a total of A$4,000 into my forex trading account and was down to A$1200 at one stage. My balance is now back up to A$2240 with the AUD at US$0.8847. If the Aussie dollar reaches 90c US I'll be close to break-even on my trading account. I've still managed to lose a bit of money every time I try to "day trade" the short term ups and downs, but the general uptrend has continued as I expected. If I'd just started out my forex trading with a smaller positions and thus allowed a larger margin buffer (so I didn't get liquidated on short-term dips in the AUD) I would have made a profit from the overall trend. Then again, any gains I make from my forex trading are really just hedging the currency losses on my US stock portfolio.

Today the Australian stock market was back up 40 points, more than making up yesterday's drop to close at a record high. So my stock investments and superannuation account balance are looking good.

Copyright Enough Wealth 2007

Mini Medical Mayhem

Today was a day for medical mini-crises. First, DS2 was awake all night with a nagging cough, and by 5am we weren't sure if he was suffering from asthma of just badly conjested lungs. We've all had the same lingering chest cold for more than a month, but DS2 is only 10 months olds so it's more of a concern. He already had one course of anti-biotics several weeks ago, which got him over the worst of it, but the slight "rattle" and cough never went entirely away. Then last week he developed another runny nose, and his cough got worse over the weekend. So at 6 am we were debating whether to take him to the hospital emergency department, or just to our local GP. As the wait in the ER would probably be at least 2-3 hours we decided to go to the GP first. We managed to see the doctor at 9am despite not having an appointment, and it seems that DS2 probably doesn't have asthma, just a bad chest infection - maybe a spot of pneumonia. We then dropped DS2 off at my parents place for baby-sitting along with the first dose of new course of anti-biotic, and managed to get to work only a couple of hours late.

When we collected DS2 this afternoon he was looking well and had been resting comfortably all day and not causing Grandma too much trouble. So all seemed OK for DS2 to stay with Grandma tomorrow as usual (DW is working 2 days a week now). Then, at 9pm my Dad phoned to say than Mum had hurt her hand and then fainted while walking to the bedroom to lie down for a rest... Unfortunately she apparently hit her head when she passed out, and hurt her nose and some teeth. Last I heard Dad was going to take Mum to the ER for treatment and will phone with a progress report in the morning...

So I'll be taking a day off work tomorrow to look after DS2 (and check up on Mum's condition). I may need to take Mondays and Tuesdays off work for a couple of weeks if Mum isn't up to baby-sitting for a while.

Copyright Enough Wealth 2007

Sunday 22 July 2007

Why I Don't Worry about Rebalancing my Asset Allocation

In an ideal world my investment asset allocation would be done in the following manner:
1. Determine what initial amount to invest and ongoing savings plan
2. Determine my risk tolerance and any constraints regarding what investment types I choose to invest in (eg. ethical funds, hedge funds etc)
3. Decide my timeframe and investment targets (eg. final amount for retirement, target ROI or whatever)
4. Select an appropriate asset allocation to meet my investment return target with minimal risk (ie. aim for the efficient frontier)
5. Select individual investments to meet my overall asset allocation with consideration of fees, diversification.
6. Rebalance the investments periodically (eg. every year) or when the actual asset allocation differs too much from the target allocation - either by selling investments and reinvesting, or by adjusting what assets new savings are directed into. Bearing in mind transaction costs and capital gains tax effects.

In reality I have a ROI target of 5%-15% for my total networth, excluding annual savings of around $30K. Assuming a CPI of 2%-3% this would mean a real return of around 2% - 12%. But I don't have an overall asset allocation target as I have a large chunk of my net worth tied up in real estate via our home and our rental property, despite preferring to be largely invested in Australian and international shares. The rental property investment was mainly chosen because DW wanted to invest in the property market, and the house - well we both prefer to own our own home rather than rent. I therefore tend to only manage asset allocations within our superannuation account and by having the remainder of my investible assets in stock investments plus some alternative investments (hedge funds, agricultural investments, coins, bullion etc). Given that I have a much larger proportion of my assets in real estate than I would prefer, you'd expect that any additional investments would have been directed towards additional stock purchases, or perhaps some alternative investments. In reality although my personal savings have been directed towards direct stock investments or into my superannuation fund, until recently we had actually been increasing the proportion of our networth tied up in real estate due to our home loan payments reducing the property loan principal over time. We've now got both our home loan and rental property loan setup as "interest only", mainly because DW can't afford her half of the normal P+I loan payments while working part-time, so this will shift our asset allocation
more towards stocks over time.

As you can see, my overall asset allocation is therefore a pretty hit-and-miss affair. So for that reason worrying about fine-tuning asset allocation by rebalancing is a moot point.

Copyright Enough Wealth 2007

Saturday 21 July 2007

Frugal Living: Children's Books

DS1 is an avid reader - so much so that it would be uneconomical to buy him novels to read. I have bought some encyclopaedia's, dictionaries and reference books, but for novels we tend to just borrow books from the local library. He has enjoyed the Enid Blyton series "Secret Seven" and "Famous Five", even though they are very old fashioned. I remember reading a "Tom Swift" novel when I was around his age (7), so I did a search on the Gutenberg.org site to see if these books were now out of copyright. Sure enough, you can download the series for free. One thing I did notice was that the language in some of the Tom Swift stories seems very *ist by modern standards, so you might want to either edit the text or use the books as a starting point for discussing how racial and cultural stereotypes are inaccuate and offensive...

Copyright Enough Wealth 2007

When a Credit Card can be a Good Thing

Many PF blogs are concerned with paying off debt, including credit card debt. This is a valid approach to increasing your wealth if you are starting out from a position of indebtedness, but can become counterproductive once you've cleared the decks of you debt and are accumulating a positive net worth. While you always have to remain on guard against using credit cards to buy "things" that you don't really need (especially if you also can't really afford them), credit cards can be a useful tool in your financial kit if used carefully. There are several ways in which a CC can be a useful tool:

* I have one credit card which I use for all my day-to-day expenses (grocery shopping, petrol, paying utilites etc). It has a low annual fee and a free rewards program (cash back credit cards) that earns me enough points to redeem for a couple of hundred dollars paid off my credit card each year. As long as I always pay off the balance each month I'm actually making money by using a CC instead of cash to pay my bills. The trick is to only buy the things you'd be paying for anyhow, otherwise you can easily build up a CC balance which you can't afford to pay off in full each month. I've also got an Amex card which I use overseas for paying hotel bills, meals and so on. I may cancel this card one day as it has an annual fee of around $100 a year (being a "gold card"), and my everyday credit card is now a VISA card which can be used overseas - when I first got my Amex card more than twenty years ago my day-to-day CC was a "Bankcard" which was only able to be used within Australia and New Zealand (and not all merchants accepted it in NZ either!). Bankcard was shut down and was replaced by a VISA card last year, so there's no longer any need for my Amex card - aside from nostalgia and some warped sense of "value" provided by a "gold" card. These days a "gold card" isn't even a status symbol - for that you'd need a platinum, black, or gold-pressed latinum card for some vast annual fee! It's important to compare credit cards to determine which one offers the best features for the lowest cost.

* Another benefit I've gotten from credit cards in recent years has been making money off 0% balance transfers deposited into online savings accounts earning 5% or 6% interest on OPM. In Australia there's no such thing as a "credit score", so getting and using these cards has no impact on the interest rate you pay on other borrowings, and little effect on how much you can borrow for a home or investment loan. If you do make use of CC arbitrage to earn some extra income on the side, it's important to avoid cards that have an annual fee or where a fee is charged for the balance transfer. You also have to ensure that the minimum amount due is paid each month during the 0% period, and that you pay off the remaining balance before the 0% offer period ends.

* Using a credit card to pay everyday expenses can make it easy to track expenses for budgeting. Rather than having to use a notebook you just check through you monthly CC statements.

* Instead of an emergency fund. Once you have a positive net worth you probably have enough money invested to get you through an emergency. The problem will be that some investments may be hard to liquidate in a hurry. However, from my point of view it makes more sense to just use my CC for an emergency expense rather than keep cash in an at call account. Even though you can get an online savings account that pays a good interest rate these days, it is still less than you'd hope to make from investing in other assets such as stocks, real estate etc. In any event, once an emergency expense has been charged to my CC I have time before the monthly bill is due, so I can carefully consider which investment to liquidate to cover the expense.

Even if you've had problems handling credit cards responsibly in the past, I think many people would be better off learning to use a CC the "correct" way once they've paid off all their consumer debt, rather than avoiding CCs completely for the rest of their life.

Copyright Enough Wealth 2007

Frugal Living: Harry Potter

I admit to being a big kid when it comes to taste in entertainment* - I enjoy TV shows like Dr Who, Hyperdrive, Torchwood, Lost, Stargate, Star Wars... in fact anything with little green men and some flashing blinking lights (which reminds me of Flying High 2). I also enjoy reading SF and fantasy novels, so I've enjoyed reading the Harry Potter series so far, but I'm too stingy to pay for a hardcover copy when they are first released. The latest book in the HP series went on sale this morning, so I did my usual trick of standing around the book section of the local department store and read the first 88 pages of Deathly Hallows while DW took DS1 to the clothing section to buy him some school socks. I'll probably take about a week to get through the whole book, reading it for half an hour in various book shops and department stores during lunch hour and on the weekend. I don't feel too guilty about not buying the books - I have bought the DVDs of the movies as they have gone ex-rental, as the whole family enjoys watching them several times. I'll probably buy a boxed set of the entire series in paperback in a couple of years - by which time DS1 will be old enough to enjoy reading them.

The different approaches to selling the Potter book taken by various booksellers is quite interesting too. The Dymocks book store always takes pre-orders, sells the new release at full RRP (around A$44) and ran out of stock by lunchtime (there's a note in the window saying that more stock will arrive next week). I'm amazed that anyone buys the book from them - the Big W department store has lots of copies in stock, as does the Myer department store, and both are selling the same book for under $30. I'm also amazed that Dymocks ran out of stock this morning - the same thing happened when the sixth HP novel was released. I can only imagine that head office controls how many copies they can get hold of.

* I also like medieval wind ensembles and illuminated manuscripts, so I can pretend to have posh tastes if needs be.

Copyright Enough Wealth 2007

Friday 20 July 2007

Interest Income FY2006/7

I took a day of annual leave today - in theory to have some quiet time while DS1 was at school to sort out my paperwork for my tax return. I didn't get as much done as I'd hoped - I had to call ps146 in the morning to do a "role play" assignment via telephone as part of the DFS(FP) course I'm doing, so I didn't get started on sorting and filing until after lunch. And then DW had to go to the school early in mid-afternoon to collect DS1 as he had a bit of a chest cold which had triggered an asthma attack. He had a mild temperature (~1 deg) when he got home, but he seems OK this evening. He's still a bit wheezy and having puffs of Ventolin every few hours, but hopefully going to bed early and a good night's sleep will seem him better by morning.

Anyhow, I did manage to add up all the interest payments I'd received last year. Aside from a couple of joint accounts (where I have to include half the interest on my tax return, but the accounts are actually used exclusively by DW these days) I had a total of nine interest bearing accounts in use last year. A couple of them are linked to my margin lending accounts, and some were online accounts used to earn interest on my 0% CC balance transfer arbitrage activities. All together I earned a total of $1,783.98 in interest last financial year. I'll probably end up paying 30% income tax on that interest. Although I had various tax deductions (superannuation salary sacrifice, margin loan and rental property interest) to reduce my taxable income, I also received some unplanned capital gains during the year due to takeover activity affecting my stock portfolio. I still estimate that my total taxable income will end up within the 30% tax rate band.

Copyright Enough Wealth 2007

Thursday 19 July 2007

Some Things Never Change

It seems a bit odd doing a book review about a book written in 1898, but "Everybody's Guide to Money Matters: with a description of the various investments chiefly dealt in on the stock exchange, and the mode of dealing therein" is actually a fun read. It's amazing how much things have stayed the same, such as cheque writing procedures, and yet the anachronistic references tickle my fancy. For example, the reference to reducing the government debt accumulated during the last great war seems familiar - until you realise that it's the Battle of Waterloo being referred to! I can recommend having a read through this book for fun. And, being a free ebook from the gutenberg project, the price is right ;)

Copyright Enough Wealth 2007

EnoughWealth Turns One! 37,524th "Visitor" recorded

Well, the first anniversary of EnoughWealth has arrived. I enjoy blogging about
personal finance, and enough people read this blog to make it seem a worthwhile
hobby, so the stats are largely irrelevant. Then again, I like to see readership
trending upwards, and it's interesting to see which posts are most popular and
which attract the most comments. I've combined the stats for the two sites that
post my blog - they are mirrors of each other but seem to draw from different
readership pools. The logs show very little referral from one site to the other,
so the amount of double counting in the stats is negligible.
# Posts: 474
# Visitors: 37,524
# Hits (Page views): 97,267
nb. This data doesn't include July and August 2006, and only partial data for
September 2006 as I didn't install sitemeter until late September 2006.

Copyright Enough Wealth 2007

How Much Does Insurance Cost?

The answer of course is personal, as it depends on what type and how much cover you decide you need. For interest I added up my main insurance costs to see how much I'm paying:

Cover $ Policy Type Premium /mo
$400,000 Death or TPD $89.84
$62,340 pa Loss of Income' $59.81''
Private Hospital $151.45'''
Car CTP $27.58
$340,000 House & Contents $82.93
TOTAL COST /month $411.61

' 2 year waiting period applies, paid until age 65
'' Premium is tax deductible
''' After government premium discount has been applied

The recent tree fall that could easily have destroyed our rental property shows the value of insurance, but I wish it was possible to buy insurance "direct" from the insurer and get the commisions rebated - most insurance policy premiums pay a large chunk of the first years premium and a considerable trailing commision to the insurance broker who "sold" you the policy.

Copyright Enough Wealth 2007

Wednesday 18 July 2007

AU Shares - portfolio update: 17 July 2007

Just in case anyone is interested in what stocks are in my Australian Share Portfolios, here's the latest update. Don't take this as any sort of stock recommendation though - a lot of these stocks have been sitting in my portfolio for over a decade, and I'm just too lazy to go through the entire portfolio and try to work out which stocks are worth keeping and which should be ditched. Aside from laziness there are a few other reasons not to tidy up my portfolio:
* Selling stocks would realise capital gains, which would not only reduce the amount of capital invested, but would reduce the amount of family allowance DW gets this year by boosting our combined taxable income.
* The number of stocks in my portfolio means that I'm pretty much diversified out individual stock risk and am left with market risk. These days I tend to think that stock selection is too hard (even most professional fund managers don't beat the index most years) and when I want to add to my portfolio I just buy some more CDF shares (a low-cost index ETF). I do occasionally get bored and buy a particular stock, such as my recent dabble in IPE options, but the amount is trivial and is more to alleviate boredom that to try to boost my portfolio performance.

Current holdings:

Leveraged Equities Account (loan balance $158,711.04, value $314,560.04)
stock qty price mkt value margin
AAN 295 $15.17 $4,475.15 70%
AEO 1,405 $1.95 $2,739.75 65%
AGK 510 $16.00 $8,160.00 70%
AMP 735 $10.41 $7,651.35 75%
ANN 480 $12.48 $5,990.40 70%
ANZ 1,107 $29.47 $32,623.29 75%
BHP 748 $38.17 $28,551.16 75%
BSL 781 $11.55 $9,020.55 70%
CDF 6,943 $1.83 $12,705.69 70%
CHB 118 $51.08 $6,027.44 70%
DJS 2,000 $5.52 $11,040.00 70%
FGL 3,751 $6.31 $23,668.81 80%
LLC 481 $18.58 $8,936.98 75%
NAB 323 $40.08 $12,945.84 75%
QBE 983 $30.70 $30,178.10 75%
SGM 830 $28.57 $23,713.10 70%
SUN 963 $20.52 $19,760.76 75%
SYB 2,880 $4.12 $11,865.60 70%
TLS 5,000 $4.67 $23,350.00 80%
TLSCA 3,000 $3.19 $9,570.00 80%
VRL 1,500 $3.24 $4,860.00 60%
WDC 783 $19.69 $15,417.27 80%
WDCNB 68 $19.10 $1,298.80 80%

Comsec Account (loan balance $109,743.99, value $232,038.86)
stock qty price mkt value margin
AGK 240 $16.00 $3,840.00 70%
AAN 139 $15.20 $2,112.80 70%
APA 4,644 $4.28 $19,876.32 70%
ASX 200 $51.20 $10,240.00 70%
CBA 130 $55.95 $7,273.50 75%
CDF 43,997 $1.89 $83,154.33 70%
IPEO 59,000 $0.06 $3,540.00 0%
IPE 8,000 $1.06 $8,480.00 60%
IFL 1,300 $10.70 $13,910.00 60%
LDW 1,350 $8.30 $11,205.00 0%
NCM 300 $24.35 $7,305.00 60%
OST 2,000 $6.99 $13,980.00 70%
QBE 607 $30.73 $18,653.11 75%
RIO 60 $97.50 $5,850.00 75%
THG 4,000 $1.115 $4,460.00 50%
WBC 300 $26.40 $7,920.00 75%
WPL 220 $46.54 $10,238.80 75%

Copyright Enough Wealth 2007

Monday 16 July 2007

Junior Judo

DS1 has been enjoying going to Judo training on Monday nights for the past three weeks, so tonight we formally signed him up. Membership of the State Judo association cost $60pa, his Judo-gi (uniform) cost $65 and the club fee for training is $45 per month. I think the class is quite good value for money. There are usually only three kids in the Junior class (a bigger class runs on Wednesday night at the Olympic Centre, but it's too far to travel unless DS1 gets very serious about his training) so he gets lots of attention from the instructor. He's the smallest in the class, but he's very enthusiastic and isn't put off by his larger training partners. Aside from being great exercise, Judo training is good for learning discipline and focus, and can provide some self-defence benefits (as long as you don't kid yourself that it's much use against an armed threat!). One advantage of this sport for DS1 is that competition is based on weight grades, so he can aspire to do well if he trains hard and has ability, even though he's quite small for his age.

Copyright Enough Wealth 2007

Blog Performance and Monetization Update: July 2007

Readership continued to increase during June, managing to surpass the May totals even without the one-date spike that occurred in May. I did make some comments on the dilbert blog, which prompted a few of the dibert fans to check out EnoughWealth.

My Technorati rating has increased from 30 last month to hit 63. My Alexa rank managed to get below 900,000 a couple of times, but is generally stuck just above that level.

In terms of income generation, PayPerPost has generated the only significant amounts of revenue, paying out US$297.25 so far. Blogsvertise, SponsoredPosts, and ReviewMe provide similar revenue opportunities but with much less frequency. The best thing about these are that payments are made into my PayPal account, rather than having to accumulate a large enough credit to justify the costs of banking a USD cheque in Australia.

Google AdSense revenue is tiny, so I've set up a 'wrapper' of code from AdBrite which displays AdBrite ads unless they can't beat the CPM rate I've estimated would be achieved by displaying the AdSense ads. So far I've accumulated a credit for US$26.72, but I've set the threshold to be paid via Cheque to US$100, otherwise the cost of banking a USD cheque into my Australian bank account would take too large a chunk out of the revenue.

I've yet to achieve any credit from displaying the Newsroom content, and my Amazon affiliate earnings haven't increased since a few books were purchased by a blog visitor last year.

Copyright Enough Wealth 2007

Friday 13 July 2007

Fun with Forex

I stopped my posts about day trading Forex as I'd given up in disgust after losing $3,000 fairly rapidly. The last trade was especially annoying as I'd gone long the AUD at around 83.15c US and had been liquidated when the AUD dropped to below 82.70c on a sharp dip. It only traded a few points below the liquidation price before bouncing back up to above 83c, and since then has trended strongly upward to over 86c.

Since my original plan had been to buy the AUD vs USD when it was around 82c, but had lost my capital trying to day trade short runs up and down, it was disappointing to end up sitting on the sidelines with less than $250 in my trading account and not having enough margin to benefit from the strength of the AUD.

I finally decided to transfer another (final) $1000 into my trading account and take a small ($25,000) long position on the AUD. I figured that since I have around US$75,000 of stock in my "little book that beats the market" portfolio that is unhedged, I can't really loose by doing this. If the AUD does continue to rise against the USD the gains from my Forex trading will offset the currency losses from my US stock portfolio and vice versa. Although the effective interest rate on keeping a position open is around 7%pa the current run up in the AUD is so strong that the interest cost is negligible.

BTW - with the AUD around US$0.868 my net worth is breaking through one million in USD. ;)

Copyright Enough Wealth 2007

Close But No Cigar

My theory about the IPE options was correct, the IPE share price went up another 3c to $1.08, so the IPEO price also went up around 3c. However my order for 70,000 IPEO at 2.7c was only partially filled (only 5,000 shares) and I doubt that the remainder of the order for 65,000 additional options will get filled at that price. By the close the highest bid was at 3c with the lowest sell bid at 7c. The last sale was at 6c, so I would have done really well if my order had been filled at the market open.

It was only after the market had opened up around 1% this morning that I realised I should have made the IPEO order 'at market' rather than 'at limit', but for such volatile penny stocks it's usually a bit too risky to place 'at market' orders.

Anyhow, since I already had 54,000 IPEO stock options with todays small addition I now have 59,000. Todays price rise gave me a quick $590 profit on just this small stock holding. The last NTA reported for the IPE shares was $1.23 after tax as at 13 July, so the stock price could easily continue upward now that some positive sentiment seems to have developed.

Copyright Enough Wealth 2007

Thursday 12 July 2007

A Pity the Stock Market isn't always Logical

Last year I bought some shares in a private equity company (IPE) because it was trading at a discount to it's float price of $1.00 when it was largely sitting on cash in the bank plus some general stock market investments. Since the general market had gone up since it's IPO it had a book value above $1.00, so it seemed like a sure thing. So far, so good, and I've made a bit of money with the stock now trading at around $1.05.

The odd thing is that I also bought some options on this stock, which entitle purchase of the stock at $1.00. The options expire in October, so they should still have some time value, and with the stock now trending up they should be worth at least the stock price - $1.00. However, IPEO is still trading well below the price I would expect, at around 2.5c/3.0c. I already have 54,000 of these options, but I think I'll buy another parcel, just in case the underlying stock keeps going up towards $1.10 or above, which should push to options to around 10c.

We'll see how it turns out.

Copyright Enough Wealth 2007

Wednesday 11 July 2007

US Stock Trade and Portfolio Update - July 2007

This month I selected Aspreva Pharmaceuticals (ASPV) from the current MagicFormula listing to add to my "Little Book That Beats The Market" Portfolio of US Shares (100% geared). I placed an order to buy 200 ASPV @ market (around $18.70). My US Stock Portfolio current situation is listed in the sidebar. I won't have to transfer any funds into my account to settle this month's stock purchase as one of my previous stock picks was taken over, so I have over $5,000 USD cash sitting in my account at the moment.

My portfolio has been hovering around an annualised ROI (XIRR) of 20% in recent months, although my current net gain is only 8.35% as I'm still slowly building up my portfolio (towards a total of 18 stocks accumulated at the rate of one new stock purchase each month). My success criteria is to achieve a return greater than the cost of funds invested (borrowed as part of a "Portfolio loan" from St George bank, so the interest rate is the standard variable home loan rate, around 7.25%), and my long-term target is to achieve a ROI of 10-20% pa.

After I'm fully invested with a portfolio of 18 stocks this December (approx. US$90K) I'll start to sell off the oldest holding each month and replace it with a new pick from the current MagicFormula list. Rather than rolling over the exact amount realised from each sale into a new stock, I'll invest 1/18th of the current portfolio value, adding in some extra cash when needed. That way I'll be investing roughly equal dollar amounts each month.

Copyright Enough Wealth 2007

Net Worth - PF Bloggers Progress for June

Here's the latest round-up on how the various PF (Personal Finance) bloggers who post their Net Worth each month are progressing.

Monthly Net Worth of PF Bloggers for JUNE 2007:

Blogger Age Net Worth $ Change % Change
An English Major's Money 23 $17,234.00 $1,189.00 N/A
Blogging Away Debt 2x -$33,693.00 $701.00 N/A
Blunt Money 2x $227,234.83 $544.76 0.2%
Consumerism Commentary 30 $104,903.00 $6,678.80 6.8%
Crazy Money 27 $277,230.00 $7,720.00 2.9%
Enough Wealth 45 $1,149,990.00 -$12,554.00 -1.1%
Financial ladder xx $159,859.85 $3,070.19 2.0%
Finance Journey 25 $167,587.00 $1,212.00 0.7%
It's Just Money 32 N/A N/A N/A
Lazy Man and Money 2x $192,905.00 $8,811.00 4.8%
Make love, not debt 2x N/A N/A N/A
Mapgirl 3x $46,366.00 $1,361.00 N/A
Moomin Valley 4x $448,904.00 $3,777.00 0.9%
My Money Blog 28 $149,676.00 -$1,882.00 -1.2%
My Open Wallet 37 $349,426.00 $5,325.00 1.6%
Savvy Saver 27 $207,458.00 $5,809.00 2.9%
Tired But Happy 30 $179,248.00 $757.00 0.4%

nb. Some ages have been adjusted as follows:
exact age provided = listed as given
"20's" = listed as 2x
"early 20's" = listed as 22
"mid-late 20's" = listed as 27
and so on.

If you have any corrections, let me know asap after the post and I'll edit immediately. If it's more than a few days after the post, email me and I'll make the change the following month.

Note: Most of these figures are in USD, but some are not (eg. mine are in AUD). Also, some bloggers post combined net worth of a couple, others are single, or, like me, only post their personal net worth.

The N/A figures are either a lack of monthly data, or where I've not included % change data because the net worth is less than +/- $100K.

Copyright Enough Wealth 2007

Tuesday 10 July 2007

DFS(FP) Update 2

I'm quite enjoying the Diploma of Financial Services (Financial Planning) coursework from ps146.com. There are 80 assessment questions to complete within 4 months, so far I've done the first three. The subject matter in the first course is quite general, but serves to fill in any gaps in your knowledge, especially the finicky details like exactly what is the difference between general and personal advice, and how that translates into what obligations are restrictions apply.

The folder of course notes for the third subject (Superannuation) only arrived today - apparently the delay was due to updating the material to include the "Simpler Super" rule changes that came into effect on 1 July. It looks as if that is the most detailed of the subjects, as there are a lot of specific conditions that impact on how superannuation is taxed and when contributions and withdrawals are allowed. Since DW and I are trustees for our own SMSF this will be a useful subject.

Copyright Enough Wealth 2007

Wage Rise

I got my annual salary review letter yesterday and it turned out I got a 3% increase. Nothing spectacular, but it's slightly more than the past 12 months inflation rate so I can't complain. DW returned to work from maternity leave a couple of weeks ago - just in time to also get the annual rise of 3%. She had originally planned to return to work at the end of July but her boss advised her to return to work a few weeks earlier so that she'd not miss out on the annual rise. As a one-off rise it's not that substantial, but it will boost all future year's pay by 3%.

Copyright Enough Wealth 2007

Monday 9 July 2007

Net Worth Update June 2007

My net worth as at 30 June dropped by $12,554 during the month to $1,149,990 (AUD), largely due to 12 months prepayment of $13,425 interest on one of my margin loan accounts. My leveraged stock portfolios decreased by a net -2.80% last month due to the overall weakness in the stock market. Whilst the estimated valuations for my share of our home and investment property increased slightly I decided to retain the previous month's valuation as I have indicative figures for the next month showing that this was just a temporary blip in average sale price for our suburb, and prices will have reverted to the previous level by next month. The overall property equity decreased slightly due to our mortgage loan balances increasing fractionally (by 0.03%) due to our monthly redraw of $2,000. The valuation of my retirement account also decreased slightly during June (-0.24%) as it is largely invested in domestic and international stock funds.

Copyright Enough Wealth 2007

Sunday 8 July 2007

Poll Result: What average annual return do you expect from stocks in the next ten years?

No real surprises here, the opinion of the readers of this blog appear to be in line with historical returns of the stock market over ten year periods. If anything, the responses show a slightly more optimistic view of likely returns over the next ten years than professional pundits consider likely.

Copyright Enough Wealth 2007


Next Wednsday will be my first fortnightly pay of the new financial year, so I expect the annual salary letter was distributed at my workplace last week while I was on leave. So, tomorrow I should find out what sort of pay increase I've received. The recent national minimum wage case awarded a 1.7% rise and the average weekly wage was risen by around 3.5% in the past 12 months. Since I haven't had a change in job description in the past year I expect a rise of between 2.5% and 5%. Since even a 5% rise in salary would only have the same impact on my financial position as an extra 0.35% return on my investment portfolio, the impact of my wage rise will be more emotional than fiscal. If I get a minimal rise of 2.5% or less I'll probably feel a bit unappreciated, especially since I only got the standard across the board rise of around 3% last year. A larger rise would make me feel appreciated at work. That's one of the challenges faced by employers - any large wage rise has only a transient impact on employee morale and motivation, but has an ongoing impact on the cost of the payroll and the company's bottom line.

Copyright Enough Wealth 2007

Account Keeping Software

My subscription version of Quicken 2006 Personal Plus expires in a couple of days. I'd got it free with a copy of Money magazine last year but never really used it much. I used to enter all my financial transactions into Quicken back in the mid 90s, but I no longer had to time to enter everything regularly once I got married. I want to start recording my transactions in detail again, especially my stock transactions, so I'll need some software, but I'm not sure if I'll pay for the 2007 version of Quicken Personal Plus or try something else. I had a look at expensr.com but it doesn't seem to cater for stock transactions (at least not in the detail I'm used to with Quicken). I ordered the 90-day free trial CD of Quicken 2007 Personal Plus, so I'll try it out and see if it's worth buying or not.

Copyright Enough Wealth 2007

Saturday 7 July 2007

Would you Lend Me This Much Money?

Probably not, but the financial institutions would. Aside from the amounts I owe on our property mortgages and stock portfolio margin loans, I have the following unused credit limits available:

Credit Cards
#1 $9,250 @ 18.99%
#2 $23,000 @ 17.49%
#3 $8,000 @ 14.74%
#4 $45,000 @ 11.99%
#5 $17,000 @ 13.74%
#6 $27,000 @ 12.99%
#7 $20,000 @ 15.95%

Mortgage redraw available
$50,800 @ 7.37%

Portfolio Loan (like a HELOC)
$138,000 @ 7.47%

Stock Portfolio Margin Loan available cash amounts
#1 $85,985 @ 9.15%
#2 $34,859 @ 8.90%
#3 $60,170 @ 8.85%

Overall approved credit available:
$519,064 @ 9.97% average interest rate

It's interesting to see how much the standard rates on my various credit cards vary. Of course most of these cards aren't in use - they were only used for 0% balance transfer arbitrage and have no outstanding balance. The one CC I use for all day-to-day bill payments and shopping usually has a monthly balance of around $2,000-$3,000 which is paid off in full each month.

The margin loans limits are also just for making a cash withdrawal (ie. 0% margin value), if they were used to purchase stocks the available funds would be 2-3x the listed amounts.

I only use credit to purchase investments, and nothing too speculative, but it's easy to see how someone could get into a LOT of trouble if they were to suddenly make use of the credit that is on offer to make "lifestyle" purchases... Of course the lenders aren't too worried since most of this lending would be secured against real estate or company stock, with the maximum possible LVR getting to around 75%-80% if I maxed out my credit.

Copyright Enough Wealth 2007

Friday 6 July 2007

Tax Reduction - Part 6

Medical expenses can consume a large chunk of ones cashflow, and also have tax implications. Firstly, medical insurance. In Australia there is universal public health coverage. A 1.5% medicare levy is charged based on your taxable income (there are some exemptions and reductions for special cases such as low income households) which contributes towards the cost of public health in Australia. There is also a medicare levy surcharge (MLS) of an additional 1% of taxable income is charged when your income is above the threshold and you don't have private hospital insurance. The threshold for an single taxpayer is $50,000 and varies for different family types. For example, DW and I have 2 children, so our MLS threshold is $101,500. In previous years when DW and I were both working fulltime we would have had to pay the surcharge if we didn't have private hospital insurance. So the monthly insurance premium of $144.20 was good value as it was close to what the surcharge would have cost anyhow. This year our combined taxable income will be a lot less (around $60,000) as DW is working part-time and also salary sacrificing around half of her wage into superannuation, and I am salary sacrificing around half of my wage as well. As the monthly insurance premium has increased to $151.45 we could save $1,817.40 by cancelling out insurance. We'd have to take up coverage again when DW resumes fulltime work. However, I don't think I'll cancel the insurance as it is very useful if you ever need "elective" surgery (otherwise you'll be on the public hospital waiting list, which can be very long).

The second tax aspect of medical expenses is the Net medical expenses tax offset. Net medical expenses are the medical expenses you have paid less any refunds you got, or could get, from Medicare or a private health fund. You can claim a tax offset of 20% – 20 cents in the dollar – of your net medical expenses over $1,500. There is no upper limit on the amount you can claim. For example, our total medical expenses on GP visits, specialist consultations and tests, pharmaceuticals, dental work and optical costs was $7,191 in the past 12 months. Our total refunds from medicare and our private hospital cover was $1,340 for this period, leaving us "out of pocket" to the tune of $5,851. This means I can claim a tax rebate of 20%x($5,851-$1,500) = $870.20, which is better than nothing. So it's important to keep all receipts for pharmacy, dental and optical expenses as medicare only has a record of the expenses that you claimed a refund for (mainly GP and specialist doctor and hospital costs).

Although it would be interesting to know the ratio of our health expenses to the benefit we've received from medicare and our private hospital insurance, it's not easy to calculate. For one thing the medicate levy only pays for part of the governments expenditure on public health. A larger amount comes out of consolidated revenue. Also, aside from the obvious medicare refunds that you have to apply for, there is an inbuilt subsidy for medicines via the PBS (Pharmaceutical Benefits Scheme) which isn't printed on pharmacy receipts.

Copyright Enough Wealth 2007

Thursday 5 July 2007

Lots of Activity but not much Progress

I lodged our claim with the insurance company last night regarding the tree damage to our rental property. The CSR told me to call the Sydney office this morning to confirm that the assessor would inspect the damage today. When I called they had the claim recorded, but advised that a builder would be sent to inspect and quote first, and that it wouldn't happen today. The tennants have been good sports about the whole thing so far, but are complaining that it's a bit cold with a hole in the loungeroom roof just covered with a plastic sheet. If it takes too long to get the roof fixed (or we get heavy rain before the repairs are done) I suspect the tennants may just give notice and move elsewhere.

At 8am the repair man from the water company phoned to ask if I knew where the water meter was located. I had to admit that I had no idea - I knew where the tap was to turn off the main water supply, but hadn't noticed the meter (it's usually next to the control valve). The tennants later said that the broken water pipe (ripped up when the tree was uprooted) had been repaired by an emergency crew the night before, so I'm not sure why the water company was looking for the meter the next morning - perhaps to check how much water had been lost while the pipe was broken?

During the day we went into town to convert our home loan from principal and interest (P+I) to interest only for the next ten years. DW will be working part-time until DS2 starts school, so we need to reduce the home loan payments in the meantime. We also spent a hour and a half (!) at the family assistance office filling in paperwork to apply for family tax benefit payments. Hopefully we'll get a letter in a couple of week confirming the payment amount, but it's just as likely that we need to spend more time during business hours providing some extra paperwork that they forgot to request this time around.

Copyright Enough Wealth 2007

Wednesday 4 July 2007


I was enjoying a nice relaxing afternnon at home when the phone rang. The nextdoor neighbour of our rental property asked "Do you know that there's a big tree fallen on top of your house?" [our rental property]. It was news to me. So, we all jumped into the car and drove over to our property to inspect the damage. The tree was bigger than the house and had just missed landing on the house and flattening it completely. As it is, few large branches have gone through the roof, and the lounge room was full of debris.

Luckily the tennants weren't home at the time - they usually park their car where the trunk of the tree landed. As no-one was home at the time I'm a little disappointed that the tree didn't drop two metres further to the left, in which case it would have entirely demolished the house. The house is insured for aroung $385,000, which would have gone a long way towards building a nice, new house on the block. As it is, I guess that the house is probably repairable, so we'll just get the inconvenience of getting repairs done and end up with the same 50-year old house as before.

Apparently the tree fell over in a strong wind gust around 2pm this afternoon. All the heavy rain in the past month has made the ground very wet and spongy, so any strong winds are likely to make lots of tree uproot. When we got to the property at 4:30pm and saw the damage I called the local State Emergency Service (SES). The SES volunteers arrived within 15 minutes and will clear off the branches embedded in the roof and cover the gaping holes with a tarpaulin (to keep out any rain).

When we got back home at 5:30pm I called our insurance company to lodge a claim. The assessor should inspect the property tomorrow and let us know if the tenant can stay there while repairs are made, or has to move out, and the extent of the damage. Our insurance also covers loss of rent, but I've no idea what happens if the tennat decides to just give four weeks notice and move our (their 6 month lease expired last month).

I'm also not sure if the insurance will cover the cost of getting the main body of the tree removed, or just the actual house repairs. Best case we'll be out of pocket for the $100 excess. Worst case we'll also have to pay for getting the tree removed, landscaping the damaged rockery, lose some rent while the property is getting repaired, etc. etc. That's why, since no-one was home at the time, I'd have preferred the tree to land square on the house and demolish it completely.

Copyright Enough Wealth 2007

Tuesday 3 July 2007

Alexa Ranking

My Alexa ranking is hovering between 800,000 and 900,000. Although there's probably some bias in the stats due to higher uptake of the Alexa Toolbar in some countries compared to others, it's still interesting to see that this site has more users from the US and Canada than Australia, and that as many users come from Coatia, Sweden and Vietnam as come from Australia! Anyhow, if you use IE for you browsing, and wish to download the Alexa toolbar, the link above will provide it. The main benefits of using the Alexa toolbar are:

* real-time information about the sites you visit.
* helps identify phisher and scammer sites
* Alexa's Related Links helps find related information

Copyright Enough Wealth 2007

A Nice Opportunity for Beginning Investors

It's a pity that I already have several online savings accounts and mututal fund investments, because the new offering from rabobank looks very attractive. They offer an online savings account with no fees or minimum balance with an interest rate of 6.6%, and from this account you can invest in wholesale mutual funds for a low entry fee of only 0.75% (compared with up to 5% entry for retail funds going direct or via a planner, or 0% for a retail fund investment via a discount broker). They are offering 0% entry fee, but only until the end of July. But the 0.75% fee is still good value as it gives access to wholesale funds (which usually charge lower management fees than their retail fund equivalents) with a minimum investment of only $250.

I'd try out this account and fund investment option if I didn't already have more accounts than I know what to do with. They do offer the account for use with a DIY Superannuation account (SMSF), but I'll have to check carefully how their costs and range of available funds compares with accessing mutual fund investments via e*Trade (I already have an e*Trade account setup for use with our SMSF). One benefit of making out SMSF mutual fund investments via e*Trade is that eSuperFund (which administers our SMSF) has access to transaction data from our e*Trade account. If we invested for our SMSF via Raboplus we'd have to send copies of all the relevant financial info to eSuperFund each year.

I was also thinking about opening a Raboplus account for DS1 and/or DS2, but unfortunately you can't open a raboplus account if you're under 12, so the kids will have to make do with their St George bank accounts and Commonwealth Bank 'dollarmite' savings accounts. It's funny how some banks and Superannuation funds have no problem with opening accounts for a minor (with an adult having authority to operate the account), while others either don't handle accounts for minors at all, or insist on the account being opened in the name of the adult trustee(s).

Copyright Enough Wealth 2007

Financial Projection - Property

Sydney prices for established homes in the more desireable suburbs have tended to increase by around 6% in the long term. After the boom in prices between 1998-2003 we've now had several years of flat prices. According to Australian Property Monitors there will be a 5% increase in property prices in the next 12 months. This agrees with the recent increases observed in average home sales prices in the two suburbs where we have our home and rental property. There have also been reports that the boom in Western Australian house prices over the past three years (driven by the commondity/mining boom) has come to an end, so I expect house prices in WA and NT to be flat or decrease in the next 12 months and house prices in Sydney to increase by more than 5% - perhaps as much as 10%. This will be good news for my net worth as DW and I have equal shares in around $1.4m of real estate with about $0.7m of mortgage debt. With a mix of variable and fixed rate loans, our overall mortgage interest rate is currently around 7.25%, so an increase in house prices of 10% would boost our home equity by 12.75%.

Copyright Enough Wealth 2007

Monday 2 July 2007

DFS(FP) Update 1

Three out of the four modules for the Diploma of Financial Services (Financial Planning) arrived by Australia Post parcel delivery today, which is pretty good service considering I only enrolled in the course online on Thursday. The modules look fairly interesting, and the assessment items seem fairly straight-forward. In the first few assessment items you only have to read through the material provided and regurgitate the material in your own words. You have to pass all the assessment items with a mark of "100%" (ie. get the answer correct), but if you stuff up the answer you get sent back some "feedback" on where you went wrong and can resubmit.

The one missing module is the one on Superannuation. I'm not sure if this parcel was just delayed and will arrive by post tomorrow, or if ps146.com is in the midst of revising the course due to the changes to superannuation regulations that apply from 1 July. I don't think that they revise and update the material too often, some of the "background reading" material is at least 18 months out of date. It can't be too long before it arrives as you are only allowed four months from date of enrollment to submit all the assessment items (although you can get a couple of months extension for an extra $150 fee).

Copyright Enough Wealth 2007

Sunday 1 July 2007

Poll: What Return do you expect from the Stock Market?

What average annual return do you expect from stocks in the next ten years?
Less than 1% pa
1% - 5% pa
6% - 10% pa
11% - 15% pa
16% - 20% pa
Over 21% pa
Free polls from Pollhost.com

Enter your answer to view the poll results...

Copyright Enough Wealth 2007

Tax Reduction - Part 5

In past years I've made investments into agricultural schemes. Aside from the 100% tax deducibility of the inital investment, ongoing annual management fees, land rent and insurance premiums are tax deductible each year. Eventually I'll hopefully get a reasonable return on these investments in timber (hardwood for wood chips and teak for sawn logs) and sandlewood (for incense). Although this sort of investment provides income tax deferral rather than 'converting' income into capital gains, it is still worthwhile as you get to benefit from the returns generated from the investment of the deferred tax amounts, plus tax cuts in recent years have meant that my marginal tax rates will be lowered when the investments produce income than would have been the case in the years when the initial investments were made. In addition I'll be able to use this income to help cover living costs in future years, so I'll be able to salary sacrifice more of my salary into retirement savings than would otherwise have been the case.

Copyright Enough Wealth 2007