Asset Allocation: Jan 2008

My Total Assets at the start of 2008 were worth approximately $2,065,876 with debts (margin loans and mortgages) of $932,963, giving a net worth of approximately $1,132,913. The overall level of gearing is a reasonable 45.2%, or a debt:equity ratio of 82.4%.

Overall asset allocation was;

Cash 2.4%
Australian Stocks 40.1%
International Stocks 10.2%
Hedge Funds 5.0%
Property 42.3%

The allocation to property has decreased from around 50% a few years ago, as we haven't bought more property, my savings have been directed into other asset classes, and the Australian stock market had performed strongly over the past four years while the property market was subdued.

I would like to accumulate about 10% of my assets in bond index funds as this asset class is almost non-existent in my portfolio, but it just doesn't seem to make sense for me to invest in bonds in my geared investment accounts where the margin loan interest rate is likely to average more than the bond yield. It would seem more sensible to pay off the margin loans than invest in bonds, but I'm happy with my overall levels of gearing (around 50% in my non-retirement investments), so I'm stuck with investing in equities and hedge funds via my geared investment accounts.

I haven't included relatively small investments I have in agribusiness funds, coins and bullion. I also haven't allowed for any tax liability, mostly because current tax laws will make income and realised capital gains in my retirement account tax free during the pension phase, and if I liquidate my non-retirement holdings during my retirement years my marginal tax rate will be fairly low, and long term capital gains are only taxed at half the marginal tax rate. I also haven't even considered any possible inheritances I may receive during my retirement years.

Copyright Enough Wealth 2007