Tuesday 23 October 2007

My Overall Asset Allocation Update: 22 Oct 2007

Asset allocation has changed slightly since the last update due to the transfer of our retirement funds from our employer's superannuation fund into our own SMSF. The transfer resulted in a large cash balance, which is slowly reducing as we invest the funds into the Vanguard LifeStages High-Growth Index Fund over several months using dollar cost averaging.

According to my asset allocation records my net worth is currently $1,174,609 (this figures is slightly higher than my NetWorthIQ figure as it includes a small coin collection and some bullion that isn't counted in my monthly NetWorthIQ updates). This figure derives from a total asset valuation of $2,146,371 and debts of $971,762.

The debts can be broken down into $363,000 real estate mortgages, $229,491 in a "portfolio loan" used for some stock investments and secured against my real estate equity, $268,718 in margin loans, and $89,840 in miscellaneous debts (0% CC balance transfers, hedge fund investment loan etc.)

The overall Loan to Value Ration (LVR) is 45.3% (the ratio of debts to asset valuation), and the overall gearing level is 82.7% (debt:equity ration, or debt:NW ratio). My long term target is to maintain my LVR around 50% (ie. gearing around 100%) while working. This boosts overall ROI (provided investment total return (income + capital gains) exceeds borrowing costs), but also is a useful tax management tool via negative gearing (which effectively converts income into long term capital gains, which has a lower tax rate).

Copyright Enough Wealth 2007

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