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Monday, 1 February 2010

Net Worth Update: January 2010

After a good start, market uncertainty regarding the strength of the global economic recovery saw a significant dip in my net worth by the end of January. This month continued improvement in the Sydney property market was more than offset by losses in the stock market which affected both my leveraged stock investments and the value of our SMSF account investments - by 31 January my net worth had fallen back to $843,581 (down $20,497, or -2.37%).

My retirement account (SMSF) value dropped $13,554 (-4.08%) to $318,580, with the losses in the stock market amplified by our modest amount of gearing (8 ASX200 index CFDs, code: IQ). Our employer superannuation contributions for the December quarter employer contributions (SGL and salary sacrifice) didn't appear in our SMSF bank account before the end of the month, so the deposit will probably appear this week (our employer had to make the quarterly contributions by the 31st of January (around $6,000 is due) but their superannuation administrator always takes a few business days to transfer the funds into our SMSF bank account). Since the market has 'corrected' quite a bit in the last couple of weeks, I'll probably move $5,000 from the cash account into our Vanguard High Growth index fund investment as soon as it arrives.

The estimated valuations for my half of our real estate assets (house and investment property) were up again this month, by $12,869 (+1.55%) to $843,152. At the moment Sydney property prices appear to be rising, despite the recent interest rate hikes. Prices may stagnate or weaken during 2010 as further interest rate rises from the RBA impacts affordability, but I expect the rising inflation rate and demand from record-high rates of net immigration to Australia will boost real prices for Sydney real estate in the medium (2-7 year) term.

My stock portfolio lost a whopping $19,754 to be worth $46,386 (net equity) by 31st January (due to the high gearing levels). As the Australian economy is still growing quite nicely at the moment and unemployment is likely to peak much lower than was expected last year, I expect the ASX200 to decouple from falls in Wall Street at some time -- perhaps as soon as current worries about the Chinese economy being slowed by attempts to control inflation recede.

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