Our mortgage balance continued to decrease very slowly, as 2/3 of our mortgage is currently on a fixed-rate, interest only contract (another 2-4 years before resetting to standard variable rate, interest only). The balance of my stock portfolio margin loans remained constant as I am paying interest only on these balances. As interest rates are continuing to rise, I took the opportunity to fix the interest rate (@8.15%) on the balance of my St George Bank Margin Loan for next financial year, although it is doubtful whether my stock portfolio will appreciate by more than 8.15% during that time. Due to the margin loan interest being deductible against my PAYG income (at a marginal tax rate of 30% or 38% depending on my other taxable income/deductible expenses) while any capital gains (held >12 months) are taxed at half my marginal tax rate, my leveraged stock portfolio only has to achieve a total return (capital gains + dividends) of around 7% for me to "break even". In theory, investing in a diversified stock portfolio should yield an average total return of 10% or more over the long term, so gearing should be a good long-term wealth building strategy. But the overall performance this century has been rather "disappointing". Having been forced to sell off some of my stock portfolio to avoid margin calls just as the GFC peaked early last year, my stock portfolio has been lagging the rebound in the overall stock market. The stock sales also left me with a mix of stocks and that I wouldn't choose if I was buying them today - overweight in banks(ANZ, NAB, WBC) and insurers (QBE), private equity (IPE), resource companies (BHP, RIO), and illiquid hedge funds (McQ Equinox, OMIP-220, OMIP-320, OMIP-SL). If there wasn't so much legislative risk associated with superannuation, negative gearing and capital gains I'd probably look at reorganising my investment strategy. But given the current degree of uncertainty about future changes, it's probably best to remain diversified between superannuation and geared real estate and stock investments.
Assets___________$ Amount______$ Diff_____% Diff
Debts____________$ Amount_____$ Diff_____% Diff
Home Mortgage(s)_$364,152_______-$403____-0.11 %
Net Worth________$895,604_____-$7,560____-0.84 %
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