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Monday, 2 September 2013

Net Worth: August 2013

Not much change to our SMSF balance this month as the stock market (Australian and International) was fairly flat overall, despite a couple of rises and dips during the month. And there were no employer contributions deposited into our SMSF this month (due once a quarter). The net value of my stock and real estate portfolios was also fairly constant, but there was a sizeable transfer of funds out of the 'property' column and into the 'stocks' column caused by the sale of our investment property last week. The sale proceeds were used to pay off the loan secured against the investment property, and the surplus funds were used to pay down one of our home mortgage accounts (the variable rate one - the other home mortgage account is on a fixed rate for another year and a half, and the early repayment penalty would be similar to the amount of interest over the remainder of the fixed rate period!), and the remainder used to pay off some of my margin loans. Hence the decrease in the net value of my real estate investments corresponds with the 'increase' in my geared stock portfolio.

The remaining amount shown for 'properties' and 'home mortgage(s)' is my half of these figures. As usual, I don't include assets or liabilities belonging to DW, DS1 or DS2 in my net worth figures.

Assets$ Amount$ Diff% Diff
Stocks *$148,503$132,809n/a
Retirement$526,183$2,9670.57%
Properties$471,105-$393,584n/a
Debts$ Amount $ Diff% Diff
Home Mortgage(s)$102,371-$260,643n/a
Net Worth$1,043,421$2,8350.27%
* the Stocks figure is portfolio value - margin loans

Paying off the investment property mortgage has freed up about 1/4-million dollars of available credit in my 'portfolio loan' account (which is secured against our house title), so I could, in theory, deposit $250K into my leveraged equities margin loan account by drawing down on this loan account, and then purchase another half a million dollars worth of stocks (or managed funds, or index funds) on margin, at a 'modest' LVR of 50% (from the point of view of the margin lender). A bull market over the next decade could see the ASX200 double, as the world fully recovers from the GFC, which would result in a windfall gain of half a million dollars. But on the other hand, a stagnant market over the coming decade (as happened in the 70s) would see me throwing all my available cash flow away simply servicing the debt. And a decline in the stock market would erode my net worth considerably.

I suspect I have reached the limit of my personal risk-tolerance, as I will feel more comfortable using my cash flow to pay down some of my existing margin loan balances, and/or contributing additional amounts into my SMSF. While I won't get rich with that approach, there is more certainty of achieving a comfortable lifestyle for my retirement.  I already have several hundred thousand dollars of 'other peoples money' invested via my geared share portfolio, plus we have a small amount of gearing in our self-managed superannuation fund via our IQ CFD investment. Borrowing even more to invest in the stock market seems too high-risk at this of my working life, and would not leave much room for misadventure (such a ill health or losing my job). I'll leave it to DS1 and DS2 to create a 'family fortune'. ;)

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