Wednesday 29 December 2021

New Year resolutions for 2022

I must admit I don't really make 'resolutions' (as in I'm definitely going to keep them), but instead I tend to make 'to do' lists of things I would like to achieve (and that are theoretically achievable, even if some of them are challenging). I don't beat myself up (too much) if I don't achieve all of them, but then again I'm not the sort of person who feels any great sense of achievement/joy even if I do 'tick off' everything on my list. So my annual new year's resolutions are simply my 'high level' to do list. Hopefully I can tick most of these off at the end of 2022.

For 2022 my 'resolutions' are:

1. Keep working in my full-time job (i.e. hope that I don't get retrenched). If I keep working full-time for the next seven or so years I should have hit the transfer balance cap in superannuation, plus have some additional super left sitting in 'accumulation phase'. This should be enough to provide more than 100% replacement of my current 'take home' pay on an indefinite basis.

2. Complete my margin lending and SMSF specialist courses from Kaplan I recently enrolled in (I had previously enrolled in similar course (now no longer available) from IIT, but never got around to completing them - which was really annoying as I had done all the assignments and just had to prep and record a final 'role play' video to finish them off).

3. Work on my PhD research/training (if I'm accepted and can enrol at the start of 2022).

4. Complete the courses required for CFP and CFA certifications (I will get 'credit' for most of the required courses from completing the Master of Financial Planning degree, so should only have to do one course for each of these certifications, plus revise and do the requisite examinations). This is sort of a stretch goal, as I may do one or both of these in 2023 if I'm too busy with the PhD.

5. Get some paying clients for my financial planning business. I have one 'warm' prospect that I'll need to follow up in the new year, but aside from that I'll need to do some 'cold calling' of phone numbers in local suburbs to try and line up a few free introductory meetings with prospects each week. Paid adverts, letter box drops, and my business website have resulted in only a couple of prospects getting in touch over the past two years, so I need to be a lot more proactive about marketing. If I end up with a handful of clients by the end of 2022 I'll be happy.

6. Continue with my regular savings plans into various investments (an investment bond, gold and silver 'depository' account, and superannuation salary sacrifice). I'll probably stop making regular payments into online savings accounts, as it makes no sense to add to low interest savings accounts when I am drawing down on my portfolio loan each month to fund my fixed business expenses. Closing some small savings accounts will also simplify my monthly NW calculation and annual tax  return calculations.

7. Lose excess weight and do more exercise. Yes, this is the same 'resolution' I have made each year for the past couple of decades. Doesn't hurt to keep trying. I know what to do (and not do), I just actually have to stick with 'the plan' each day.

8. Waste less time on computer games and  TV/streaming. Mostly this is just procrastinating when I don't feel like doing items 1-8 above ;)

There are a few other things I'd like to accomplish in 2022 (some hobby and household projects that have been on my 'to do' list for a long time, getting my lean six sigma 'black belt' certification done at work, finishing some landscaping tasks at the lake house and arranging for an extension to be built there once my parents have moved there), but I have no idea which (if any) of them might come to fruition in the next twelve months.

I don't have any specific financial goals for 2022 though, as my budget is pretty fixed and regular savings occur automatically (If I eliminate some of the monthly automatic transfers into online savings accounts I'll simply switch those transfers to my business account and reduce the monthly draw-down on my home equity loan by the same amount). Most of my investments are in index funds, so where I end up in twelve months financially depends mostly on how the markets perform.

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So, how did I go with the 'resolutions' I had recorded for 2021?: I actually made a post about this last year, so I can check off how things turned out:

1. Lose weight and get fit (exercise and weight training): nope, didn't happen. If anything I've put on a bit of weight and am less fit than I was a year ago (and a year older!).

2. Continue with my savings and investment plans: Tick. I hadn't set specific targets, but had hoped that real estate might 'rise slightly' during 2021, and my super balance end up by 5-10%. So far real estate (our house valuation) has increased by 33.4% and my superannuation balance increased by 17.9% over the past year. Last time things looked this good was back in 2007, and we all know how 2008 turned out...

3. Financial Planning qualifications and study. 50:50 - I finished my masters and got the overall GPA I wanted, but didn't do any of the IIT courses I was enrolled in (ADFP, or the ML or SMSF specialist short courses). Overall I completed the important goal and let the secondary goals slide, which is better than the alternative. I probably could have completed the ADFP and ML and SMSF courses as well, but I was quite busy at work and didn't feel like doing more than my masters courses in the evenings and weekends (instead I binge watched five seasons of The Expanse, Andromeda and watched a whole lot of movies I can't even remember....)

4. Financial Planning business. Big Fat Zero. Zilch. Nada clients. I do have one warm prospect that *might* decide to get an SOA done when she 'downsizes' from her current home into an apartment, but I need to work on having a 'pipeline' of prospects in 2022. I like to think this was at least partially due to Covid-19 lockdowns etc. But I didn't make a single 'cold call' in 2021 even when lock-downs weren't in place.

5. Full-time job, Tick. Still have the same job. Was very busy (lots of unpaid 'overtime' working from home in the evenings and weekends) but that is better than things being 'quiet' and worrying about being laid off in the short term. Working from home was quite enjoyable (saved about three hours each day not having to commute), but it looks like we'll be back in the office for 2 or 3 days each week by the end of Q1 2022.

Overall my financial and educational goals for 2021 were met, but my personal and business goals weren't. Hopefully I can do better in 2022.

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Thursday 23 December 2021

Decided to close my IG trading account

I haven't needed to do any trades on my '12% solution' portfolio for the past few months, which saved on trading costs. However, I got an email reminded from IG that there is a quarterly 'fee' charged on accounts that have any open positions (ie not just holding a cash balance) but haven't done at least three trades in the quarter. I thought the fee was $25 per quarter, but the latest email stated the fee is $50 per quarter (it might have increased recently?), so just have the portfolio sitting there will cost me around $200 pa. AS the portfolio is only worth about $15K, this equates to a holding cost of around 1.3% pa. I also funded the portfolio using my St George home equity loan, which charges around 4.98% interest. So the overall cost is around 6.3%. Theoretically it is still profitable (but risky) to maintain this position, as the '12% solution' portfolio is expected to produce returns of around 12% pa, but in absolute terms the annual pre-tax profit after interest and account keeping costs will only be around $900 pa, or around $600 ($10 per week) after tax. I decided to close out my positions today/tonight and when the funds clear next week (T+3) I pay off part of my St George loan and close my IG account. If nothing else it will simplify my monthly NW and annual tax return calculations slightly.

I'll probably also close a couple of online savings accounts as it doesn't make much sense to have money sitting in savings accounts earning less than the cost of my portfolio loan. I'd also like to shut down my peer-to-peer lending account with Pleni, but I have some 5-year term investments that don't mature for another 3-4 years, and  there would be a 'break cost' to try to liquidate these immediately.

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Friday 10 December 2021

Finished my Masters and applied for PhD candidature

The result for my final subject in the Master of Financial Planning degree came out this morning. I managed to get a Distinction (with a mark of 81/100) in the 'Contemporary Issues in Taxation' subject, so my overall GPA for the degree ended up being 6.0 (out of 7) and the grade average 'Distinction' (with an average mark overall for all subjects of 79/100). So I should graduate 'cum laude' (with distinction) on my testamur. There was a bit of weirdness with the online results posting, as it is showing 12 completed subjects, but was showing only 11/12 as the total completed subjects. I've raised a ticket with the IT department to look into this as the uni no longer requires/allows you to apply to graduate, but instead is supposed to automatically process graduation once you have completed the required courses. If 'the system' is incorrectly stuck at 11/12 completed I'd never graduate ;)

I'm theoretically 'in the running' for an academic medal, having met the minimum required GPA. But to actually get a medal I'd also have to be in the top 2% of the relevant 'cohort' (apparently that would be all post-grad business school students finishing this year). I've not idea what 'percentile' my overall results will put me in. I doubt it is the top 2%. I did get an academic medal for the Master of Astronomy degree I did a few years ago, but I got a GPA of 6.5/7 for that, so I haven't done quite as well in this Financial Planning degree (law subjects aren't anything as hard as astrophysics, but god they are boring, so putting in the hours to get an HD is like an extended visit to the dentist).

I finalized my application to enrol as a PhD student next year - I initially just uploaded photos of my uni degrees and result transcripts, but was told that I had to get 'certified copies' made, and then upload photos of those certified copies. Why a photo of the original isn't as good as a photo of a certified copy of the original makes no sense to me (and I'm a JP!), but 'rules are rules'. I don't know if I'll be accepted. If I am it should be a lot easier to complete a PhD in Financial Planning part-time than it was when I tried doing a PhD part-time in astrophysics a few years ago. We'll see how things pan out. I turn 60 next week, so I wouldn't complete my PhD until 'retirement age', so it is really just a vanity project/hobby.

I have to start doing some cold calling to try and set up some introductory meetings with prospective clients each month, as I *really* need to start getting some paying clients for my financial planning 'business' to at least cover the ongoing fixed running/licencing costs next year. It would also be nice to put my financial planning knowledge/skills to use helping other people ;)

While I'm waiting to find out if I'll be starting on a PhD next year I've enrolled in a couple of 'specialist' short courses with Kaplan learning - one on 'margin lending' and the other on 'self-managed superannuation funds'. Once those courses are completed I should be able to get them added to my FAR record and the 'advisor profile' and would be able to provide advice on margin lending and SMSFs where relevant.

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Tuesday 7 December 2021

Inheritance reduces inequality

According to a new report on inheritance in Australia released by the Productivity Commission, contrary to popular perception, the transfer of wealth via inheritance actually helps reduce inequality. This is because despite the absolute amount of inheritances and gifts being higher for the wealthy, the impact of receiving an inheritance is much greater for less wealthy recipients. Measured as a percentage of the wealth already owned, the poorest 20% of recipients of gifts and inheritances got a wealth boost about 50 times larger than the impact of gifts and inheritances on the wealthiest 20%.

Of course this effect is limited to those families wealthy enough for a bequest to exist in the first place - the poorest cohort of society are unlikely to receive any inheritance as their parents are likely to die without any significant estate to pass on.

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Sunday 5 December 2021

Bought some GEAR shares

I was doing some reading for a Margin Lending 'course' from Kaplan learning (to possibly add margin lending to the list of things I'm approved to give personal financial advice on as a registered financial planner) a couple of days ago, and there was mention of 'internally geared' investments (managed funds). These funds borrow to invest more than the unit holders funds, which should provide larger gains during positive market performance periods and larger losses during negative market performance periods. One advantage of this type of gearing is that you (the unit holder) won't ever get a 'margin call' if the value of the assets decreases (the fund may go out of business and the unit value drop to $0, but you won't lose more than your initial investment). I had a quick look around at what geared investment funds (ETFs) were available, and the GEAR ETF run by betashares looked interesting, as it invests in basically the ASX200 companies. Despite the fund 'fact sheet' stating that the fund invests in the top 200 ASX shares according to market capitalization (which would be a plain vanilla ASX200 index fund) it is actually an actively managed fund, with a quite hefty management fee of 0.8% of the total fund (ie. including the borrowed funds). You also aren't told what the fund's borrowing costs are. Looking at the fund unit price compared to the ASX200 index for the past 5 years it looks like the fund pretty much tracks the index during periods of average market performance, outperforms a bit when the market is doing well, and underperforms when the market performance is below trend. So, whether or not the fund outperforms the ASX200 index over the next decade or two will apparently depend on whether there is a 'bull market' or a 'bear market' overall (i.e. the index performs above or below trend).

I decided to use the available credit in my Commsec margin loan account to purchase ~$20,000 worth of GEAR. As this is 100% borrowed funds, whether or not this turns out to help or hinder my NW over the next decade or two will depend on whether the fund total return (distributions + capital gains) exceeds the interest charged on the $20,000 loan. It won't have a material impact on my NW either way, so it was pretty much a 'spur of the moment' decision to make the investment. It will add a tiny bit more work to doing my annual tax return calculations, and eventually there will be some CGT calculations and payment required when I eventually sell the investment.

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Net Worth: NOV 2021

My monthly NW estimate has been updated in NetWorthShare for the end of November. Chart is in the side-bar.

Stocks and managed fund investments increased slightly this month, up $2,907 (0.95%) to have $308,424 net equity in my geared share portfolios. This figure includes the outstanding balance of my 'portfolio loan' (home equity loan) that was used to fund some of my share portfolio purchases, but is also used to cover the $1,150 monthly 'overhead' of my financial planning business and was also used to pay the uni fees for my master of financial planning enrolment. Now that I have completed the last subject for the masters degree, there will be less 'drag' on the porformance of my geared share portfolio valuation next year (If I get accepted into as a PhD student there won't be any fees to pay, as there is RTS (research training scheme) funding available to cover the basic uni fees.

Our estimated house price for November (my half) increased by $75,142 (7.21%) to $1,116,769.

Real estate prices, including home units/apartments in the suburb where I purchased a one-bedroom apartment 'off the plan', continue to rise (there was a bit of a slump in apartment prices in Sydney last year due to Covid), so hopefully I won't have any trouble getting a mortgage for 'settlement' when the construction of the apartment block (88 by JQZ) is completed in Q2 2023. There seems to be a slight slow down in the current 'boom' in residential real estate in Sydney, with some pundits predicting slower rate of gain in the first half of 2022 and then a slight pull-back in prices in the second half of 2022. It's all guesswork of course, and a lot may depend on how the new Omicron variant of Covid-19 plays out - if international travel doesn't resume fully in 2022 then there will be less rebound in migration than expected.

The value of my retirement savings increased during November to $1,513,495 (up $10,297 or 0.69%).

Overall, my estimated NW increased to $3,272,071 by the end of November - up by $90,057 (2.83%). I am still recording the valuation of the lake house I 'inherited' (was gifted) by my parents at 'cost' (the value when I paid the stamp duty on title transfer) and the value of my 'off-the-plan' apartment at the purchase price plus stamp duty. That forms the 'other real estate' figure ($1,377,952) and the deposit+stamp duty+outstanding balance due at settlement (in Q2 2023) is the 'other mortgages' figure (-$1,040,452). I do track a rought estimate of the valuation of the lake house/hobby farm property and the likely value of the investment apartment, and using the current estimated valuations would increase my NW by around $553,976). I might start 'officially' tracking these valuation estimates (and including them in my NW calculation) once the off-the-plan apartment construction is completed and I get an official valuation done when I get the mortgage needed for settlement. That will give me a better idea of how my unit value compares to the median home unit prices for that suburb (at the moment it is a bit of a rough guess based purely on how much I paid compared to the median unit pricing for the suburb at the time I paid the deposit).

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Saturday 4 December 2021

End of NOV 2021 "12% solution" portfolio changes

For the end of November the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$14,801.69. In addition to the "12% solution" holdings I have A$488.00 invested in the ASIA (Betashares Asia Technology Tigers) ETF which results in my IG account not tracking perfectly the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +22.3% (in USD terms). My YTD performance is now 34.3% (in AUD terms). The outperformance is mostly due to favourable exchange rate movement (the investment is in USD so the drop in AUD vs the USD has boosted the value of my portfolio in AUD terms).

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Tuesday 2 November 2021

Net Worth: OCT 2021

My monthly NW estimate has been updated in NetWorthShare for the end of October. Chart is in the side-bar.

Stocks and managed fund investments decreased this month, down -$9,618 (-3.05%) to have $315,135 net equity in my geared share portfolios. Part of this is due to using my portfolio loan to make a contribution into our SMSF to cover a quarterly provisional tax payment that was due. In future I will just sell off some of the SMSF investment in the Vanguard High Growth Index Fund to cover any cash flow requirements for tax or DW's pension payments.

Our estimated house price for September (my half) increased by $41,976 (4.20%) to $1,041,627.

Real estate prices, including home units/apartments in the suburb where I purchased a one-bedroom apartment 'off the plan', continue to rise (there was a bit of a slump in apartment prices in Sydney last year due to Covid), so hopefully I won't have any trouble getting a mortgage for 'settlement' when the construction of the apartment block (88 by JQZ) is completed in Q2 2023.

The value of my retirement savings increased during October to $1,503,198 (up $12,874 or 0.86%).

Overall, my estimated NW increased slightly to $3,182,014 by the end of October - up by $44,971 (1.43%).

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Sunday 31 October 2021

End of OCT 2021 "12% solution" portfolio changes

For the end of October the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$13,980.83. In addition to the "12% solution" holdings I have A$492.50 invested in the ASIA (Betashares Asia Technology Tigers) ETF which results in my IG account not tracking perfectly the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +21.7% (in USD terms). My YTD performance is 27.9% (in AUD terms).

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Monday 18 October 2021

Is China developing 'space-based' nuclear weapons?

Apparently China recently tested (with reasonable success, aside from a lack of pin-point accuracy) a new hypersonic glide weapon that can carry a nuclear warhead. Russia apparently already has a working hypersonic (mach-9, or -20 if you believe a comment by Putin) that is ground launched and reaches a maximum altitude around 200,000 ft (I think that was the figure).

What is different about this new Chinese test is that it was launched into LEO (ie. space) before being sent gliding around the globe to its target.

Aside from being effectively unstoppable (unlike ICBMs hypersonic gliders can change direction during flight, so can't be targeted by current anti-ICBM defensive systems). Coupled with the recent massive increase in the number of Chinese ICBM silos, it seems very unlikely that the US would take direct military action against Chinese forces if there is an invasion of Taiwan. Would the US really risk sinking Chinese naval vessels and a potential escalation to nuclear conflict? After the US response (lack thereof) to the Russian annexation of Crimea, I doubt much would actually happen if/when China invades Taiwan.

Which then would allow the PLAN to access the Pacific more easily (from bases in Taiwan) and would make most of SE Asia 'toe to line' to whatever China wanted.

One question that springs to mind is whether a hypersonic glider launched into LEO is in violation of the 1967 Outer Space Treaty (that China signed) which bans 'weapons of mass destruction' from space. Probably China will claim that the hypersonic weapon is not in breach of the treaty as long as it only carries a conventional warhead. A bit of a problem if a small nuclear warhead could be substituted at short notice...

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Tuesday 5 October 2021

Not being allowed to claim a deduction for my business losses in FY 2019 or 2020

I finally was notified of the ATOs decision regarding my application (made at the start of July) for 'discretion' to claim the losses made by my financial planning business in my tax returns for 2020 and 2021. I had hoped that due to Covid-19 'lock-downs' and the general economic conditions I might be allowed to claim deductions for my business expenses in those financial years even though I haven't managed to get any paying clients as yet. Unfortunately the ATO has advised that the ruling would be 'unfavourable'. The person who phoned to let me know the outcome suggested that I might withdraw my application rather than get the official 'unfavourable' response from the ATO. She wouldn't explain exactly why I might want to do that, although she mentioned something about 'not challenging the law' (IMHO applying for the commissioner's discretion is a perfectly normal administrative process, as there is obviously the possibility of discretion being applied within the law, otherwise the ATO would not have a form to apply for a ruling on this matter). It doesn't matter financially to me whether I 'withdraw' my application or get the official 'unfavourable' (ie declined) outcome in writing, so I agreed to just withdraw my application.

Upon reflection I suspect the ATO staffer preferred me withdrawing the application, as this probably means this application doesn't get reported in their KPIs regarding 'resolution time for applications' (taking from 3 July to 5 October is probably a LOT longer than these things are supposed to take - from memory the website said a decision would only take 3-4 weeks...)

This means that I can't claim a deduction for the annual fees paid to my AFSL ($13,800 pa), the membership fees for the FPA and AFA (around $1,000 pa in total), my marketing/advertising costs (around $1,000 pa), or my self-education costs (the master of Financial Planning cost around $14,000 pa) as the degree is a requirement for my financial planning business, but not for my normal full-time 'day job'. All these expenses (around $30,000 pa) will instead 'carry forward' and can only be claimed against any future net income from my financial planning business.

Hopefully with lock-downs in Sydney ending soon I can start making some 'cold calls' in my neighbourhood and possibly arrange free lunchtime seminars for workers in local business, which are common ways for financial planners to find prospective clients. I'd like to 'break even' on my business this financial year (I'll only be paying $7,000 in uni fees this FY as I will have completed the masters degree this semester), but I might not have enough clients to cover the basic expenses until next FY.

By that time I'll have accumulated a large amount of losses 'carried forward' so it may be quite a while before I have to pay any tax on revenue generated by my financial planning business. It would have been nicer to be able to claim the deductions 'up front' against my other salary income, as then I could have the funds invested and earning some income, rather than effectively being an interest-free loan to the taxman.

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Sunday 3 October 2021

Net Worth: SEP 2021

My monthly NW estimate has been updated in NetWorthShare for the end of September. Chart is in the side-bar.

Stocks and managed fund investments decreased this month, down -$12,244 (-3.74%) to have $315,135 net equity in my geared share portfolios.

Our estimated house price for September (my half) increased by $12,790 (1.30%) to $999,651. The realestate.com.au pages where I normally get the average sales price data for our suburb was last updated with the price data for 31 August, so the estimate might be one month behind what my NW calculations normally use. As the Sydney property market is still trending upwards, this might underestimate out house value and my overall NW slightly.

The value of my retirement savings decreased during September due to stock market weakness here and in the US, to $1,490,324 (down -$32,846 or -2.16%). I am hoping to reach (or exceed) the 'transfer balance cap' (currently $1.7m, but likely to rise to $1.8m) by the time I hit 65 years of age and can transfer the TBC amount from my accumulation SMSF account (where the tax rate is 15% on earnings and 10% on realised capital gains) to a Simple Account Based Pension (SABP) where the tax rate will be 0% on both earnings and realised capital gains. Although I plan to still be working past age 65 (either in my current full-time employment, and/or self-employed part-time as a registered Financial Adviser) and will therefore have a normal taxable income stream, I will then also have a tax-free self-funded pension income from my SMSF SABP (there are minimum withdrawal/pension rates applicable to SABP accounts.

A Simple Account Based Pension (SABP) is an income stream that you receive from your SMSF when you reach age 65 or alternatively when you are aged between preservation age and 64 and "Retired".

Age-based minimum pension payments (as a percentage of the SABP balance) apply:

Age <65    4.0%
65 - 74    5.0%
75 - 79    6.0%
80 - 84    7.0%
85 - 89    9.0%
90 - 94   11.0%
95+       14.0%

The idea behind this is that superannuation is concessionally taxed in order to provide a self-funded retirement income stream (and hence reduce demand for the Age Pension) and is not intended as a tax minimisation scheme for accumulating wealth to pass on as part of one's estate.

There were variations to these minimum rates (to 50% or 75% of the normal rates) during times of market volatility due to the GFC, pandemic etc. in FY 2008-09, 2010-11, 2011-12, 2012-13, 2019-20, and 2021-22. The idea being that reduced withdrawal rates would allow self-funded pensioners to preserve some of the SABP during a market down-turn when they may be earning other income from employment.

The value of my precious metals (gold and silver proof coin collection) decreased slightly during September, to $24,151 (down -$336 or -1.37%). My unallocated precious metal holdings with the Perth Mint online depository are included in the geared share portfolio net value.

Overall, my estimated NW decreased slightly to $3,137,043 by the end of September - down by -$32,363 (-1.02%).

Although I'm not currently tracking any change in valuation of my 'lake house' or the off-the-plan apartment that is currently being constructed, the strong real estate market in Sydney and NSW should have boosted the value of these properties above their 'cost base' (so the $1,377,952 value listed under 'Other Real Estate' is probably a considerable understatement). Once the investment apartment construction is complete in early 2023 (and I have mortgage payments, expenses and rental income impacting my cash flow) I will start tracking changes in the estimated value of the apartment compared to the initial valuation I will get when applying for the mortgage (hopefully the mooted changes to lending ratios don't prevent me from getting the required mortgage for settlement of the property). I won't track changes in the valuation of the 'lake house' as I intend to hold onto this indefinitely and leave it to my sons as part of my estate.

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Friday 1 October 2021

End of SEP 2021 "12% solution" portfolio changes

For the end of September the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$12,613.65. In addition to the "12% solution" holdings I have A$489.00 invested in the ASIA (Betashares Asia Technology Tigers) ETF which results in my IG account not tracking perfectly the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +15.1%. My YTD performance is 14.48%.

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Tuesday 28 September 2021

Australia getting back to 'Covid normal'

After keeping close to 'zero Covid' for the first half of 2021, and therefore not worrying too much about the slow rollout of Covid vaccines compared to some other parts of the developed world (eg. UK, Europe, USA and Canada), the two most populous states (NSW and VIC) suffered a rapid spike in Covid-19 cases in the past couple of months due to the more contagious 'delta' variant getting loose in the general population.

Fortunately relatively strict 'lock-down' provisions have managed to keep the daily infection numbers (and hence the rate of hospitalisations and deaths) reasonably low while the vaccination roll-out ramped up with a new sense of urgency (and some extra supplies of Pfizer vaccine for the younger cohorts where side-effects from AZ vaccine were more likely to outweigh the benefit of vaccination - at least until the chance of catching Covid increased dramatically).

At the start of the latest outbreak there was a media outcry regarding the slow pace of vaccination in Australia compared to European countries and US states. For example on 'Planet America' a few weeks ago they were comparing Australian vaccination rates to those in the US, and our most vaccinated states (NSW, VIC  and ACT) would have been close to the very bottom of the ranking of US states.

But there has been a remarkable decrease in 'vaccine hesitancy' in NSW and VIC (and the ACT) as the delta variant saw daily cases climb into the hundreds (in NSW and VIC) and a daily death toll which included some younger age groups.

We have now reached the stage that NSW and VIC have a greater percentage of their adult population having had their first vaccination that any of the US states (85.7% 'first dose' in NSW, 77.9% 'first dose' in Victoria, compared with 77.5% having at least one dose in the most vaccinated US state, Vermont), and even in terms of being fully vaccinated NSW is already on par with the 12th most fully vaccinated US States (60.45% in NSW, 60.40% in Washington State). and Victoria is on par with the 40th most fully vaccinated US State (47.72% in Victoria, 47.60% in Missouri).

Within a couple of weeks both NSW and Victoria will have a greater percentage of their adult population fully vaccinated than any state in the US, and current 'lock-down' restrictions will be eased substantially by mid-October, and back to 'Covid normal' by mid-November.

Based on current rates of vaccination, both Sydney and Melbourne (and Canberra) could see 90%+ of the adult population fully vaccinated by Christmas. It seems unlikely that any state in the US will end up with much more than 80% fully vaccinated - probably due to a combination of cost (vaccination is completely free in Australia) and the natural 'vaccination hesitancy' rates being amplified by politically inspired 'anti-vaxxer' movements being more prevalent in the US than in Australia.

While there have been a few snafus in Australia's handling of the pandemic (such as the early outbreaks in aged care facilities and cruise ships, and the latter delta variant outbreaks that managed to spread from quarantined international travelers into the general population), and some false economy regarding initial vaccine order quantities (in hind-sight, ordering enough of every prospective vaccine for the entire Australian population and then donating the surplus as foreign aid would have been a lot more cost effective than ordering smaller quantities of several vaccine offerings spread over a longer time frame, given the huge economic cost of protracted 'lock-downs') our handling of the pandemic overall seems to have been reasonably effective (probably made a lot easier being an island continent). The ultimate final per capita death toll from Covid-19 in Australia will probably end up being one of the lowest in any of the OECD countries.

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Sunday 19 September 2021

Diet week 5

My macronutrient daily averages for week 5 were:

fibre            15.6 g
fat              18.9 %
protein          85.8 g
sodium         2630.1 mg
energy         1978.9 kcals
carbohydrates    63.2 %

My average weight for week 5 was 107.6 kg, a slight increase of 0.3 kg. In theory I was consuming less than my basal metabolic requirement, so I should have lost a small amount of weight rather than putting weight on, but I had started a bit of body weight exercise and slightly more walking, so perhaps I lost fat and replaced it with lean mass instead. According to my bathroom scales my body fat % hasn't decreased, but I know from previously tracking data that the body fat % reading isn't very reliable or consistent. I do need to cut out having the occasional 'dessert' snack after dinner, as that should ensure I actually lose weight rather than just 'flat line'.

My average daily step count last week increased slightly (2,251 steps/day), as I went for a lunchtime walk four times last week. Need to add an evening walk to my routine as well. I also need to do 5BX every evening, rather than just doing a bit of resistance training whenever I 'feel like it'.

I also need to arrange for our pool pump to be fixed next week, so I can get the pool ready for 'swimming season' to commence.

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Thursday 16 September 2021

Australia finally plans for an effective sub fleet

In a shock outbreak of intelligent decision making, the Australia government today announced that they would scrap the trouble-plagued deal to build a fleet of vastly expensive, and probably ineffective, conventional submarines in Adelaide, and instead shift to building much more capable nuclear-powered subs in conjunction with the US and UK.

While this always seemed the obvious best solution for replacing our trouble-plagued fleet of Collins class conventional subs, I was shocked that such a rational decision has actually been made. Usually anything with the word 'nuclear' in it gets blocked in Australia (they even renamed Nuclear Magnetic Resonance imaging (NMR) as Magnetic Resonance Imaging (MRI) to cater to radiation-phobes). Hopefully costs don't blow out too much by trying to build as much as possible in Adelaide (this usually turns out to  be a very expensive way to buy local jobs), but at least the end result should be an effective submarine fleet at a reasonable life-cycle cost per unit, compared to the conventional French-designed sub that had seen costs blow out from the initial estimates.

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Sunday 12 September 2021

Diet week 4

My macronutrient averages for week 4 were:

fibre            12.7 g
fat              17.5 %
protein          61.7 g
sodium         2360.9 mg
energy         1745.1 kcals
carbohydrates    68.0 %

My average weight for week 4 was 107.3 kg, a decrease of -0.7 kg, which was close to what I expect at my current BMI when I stick to my diet plan of around 1,800 kcals/day. I could do with a bit more fiber and protein in my diet though - probably more vegetables and fruits would be good.

My average daily step count last week was still a lot less than I should be doing (averaging just 933 steps/day), and I didn't really have any excuses last week, just lacking self-motivation. I just need to make sure I go for a brisk walk every day and get back into the habit. It was a lot easier when I was going to the office, as I walked quite a bit just going to work by bus and train, plus I would go for a walk during 'lunch hour' most days. Working from home I can go for a walk at any time, which means that I tend to keep putting it off and never get around to it.

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Tuesday 7 September 2021

Diet week 3

My macronutrient averages for week 3 were:

fibre            16.1 g
carbohydrates    65.1 %
fat              18.1 %
protein          85.2 g
sodium         3480.7 mg
energy         2118.1 kcals

My average weight for week 3 was 108.0 kg, an increase of 0.2 kg. I had expected my rate of weight loss to slow as my metabolism adjusted to the reduced caloric intake, but due to consuming slightly more calories than planned, my average weight for week 3 was actually slightly higher than in week 2. Fortunately my weight started to decrease again by the end of week 3.

My average daily step count last week was also less than I had intended (averaging just 850 steps/day), probably due to the rainy weather. I'll have to make sure I do more regular walks from now on.

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Thursday 2 September 2021

Net Worth: AUG 2021

My monthly NW estimate has been updated in NetWorthShare for the end of August. Chart is in the side-bar.

Stocks and managed fund investments increased this month, up $7,499 (2.33%) to have $327,379 net equity in my geared share portfolios. But this figure includes using $9,500 from my home equity 'portfolio' loan that I used to purchase the 2002 S-type Jaguar. I have included the purchase price (8,000) as an asset under 'cars' so it doesn't affect my overall net worth.

Our estimated house price for August (my half) increased by $18,822 (1.94%) to $986,861. For some reason the realestate.com.au pages where I normally get the average sales price data for our suburb has stopped displaying any data, so I used the more general corelogic house price index for the whole of Sydney and used the change since last month in that index to adjust our estimated house price.

The value of my retirement savings rose during August, to $1,523,170 (up $38,338 or 2.58%).

The value of my precious metals (gold and silver proof coin collection) decreased slightly during August, to $24,487 (down -$24 or -0.10%). My unallocated precious metal holdings with the Perth Mint online depository are included in the geared share portfolio net value.

Overall, my estimated NW reached $3,169,406 by the end of August - up by $72,857 (2.35%).

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Wednesday 1 September 2021

End of AUG 2021 "12% solution" portfolio changes

For the end of August the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$14,054.53. In addition to the "12% solution" holdings I have A$519.00 invested in the ASIA (Betashares Asia Technology Tigers) ETF which results in my IG account not tracking perfectly the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +20.7%. My YTD performance is 27.56%. The performance difference is a result of trade timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betashares Asia Technology Tigers ETF). There is also an impact from AUD/USD currency movements some months, as my portfolio result is reported in AUD terms, whereas the '12% solution" model portfolio reports returns in USD terms.

So far the "12% solution" trading signals seem to result in market timing that might actually add to long term performance (compared to a simple buy-and-hold with annual rebalancing strategy). For anyone that wanted to invest a significant portion of their financial investments to this strategy I'd suggest tweaking the 60:40 "risk-on":"hedge" ratio to match your personal risk tolerance (eg. a more risk averse investor might want to adjust it to 50:50, while a more risk tolerant investor may move to  70:30 allocation). One concern is that this is a US-centric model portfolio, so it may underperform in periods when US equities underperform non-US global stock market returns.

Personally I only have 0.42% of my NW invested in my IG trading account used to follow this strategy, so it's performance won't have a material impact on my overall wealth.

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Tuesday 31 August 2021

Diet week 2

My macronutrient averages for week 2 were:

fibre            16.1 g
carbohydrates    67.7 %
fat              14.7 %
protein          57.7 g
sodium         2170.5 mg
energy         1318.8 kcals

My average weight for week 2 was 107.8 kg, a decrease of 2.1 kg from the week before. I expect my rate of weight loss will now decrease to about 1.25-1.5 kg/wk due to caloric deficit. The first few weeks of a diet always have a bit of extra weight loss due to the decrease in total food volume being ingested (and hence fluid retention in the digestive system).

I did a little bit more walking last week, (averaging 1,653 steps/day) but still not nearly as active as I should be. I'll try to do at least 5,000 steps most days this week and some 5BX exercise each evening. I doesn't look like the Sydney lock-down will end soon, so I probably won't be able to go back to Kendo training until November or December. Haven't started doing any weight training at home yet, so that is still on my 'to do' list.

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Covid-19 has increased retirement age

An article in today's SMH summarized a report by KPMG which found that during 2020-21 the average expected retirement age for males in Sydney rose by six months (to 65.3) compared to the previous year (the expected retirement age for women remained unchanged). That appears to be partly due to restrictions on migration and associated tightening of the labor market (contrary to initial expectations at the start of the pandemic), coupled with a reduction in the attraction of retirement (what's the point when you can't travel overseas, interstate, or even outside of greater Sydney at the moment?)

Personally I hadn't intended to 'retire' from my full-time employment for another ten years or so (and to then continue working part-time as a financial advisor), but the pandemic (and associated work-from-home and occasional "lock downs") has meant that I haven't bothered to take much annual leave since the start of 2020 (fortunately in Australia unused annual and long service leave accumulates - although your employer can require that you take some). There's no much point taking a day (or week) off work if you end up just sitting at home anyhow.

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Thursday 26 August 2021

Back into 'diet' mode

My weight had crept back up over the past 18 months of 'work from home' (and 'ad libitum' eating), so on Sunday 15th I decided to go back on a 'diet' - basically just cutting out all the junk food (lollies and chocolate) that I shouldn't be eating anyhow, and not having any 'dessert' after dinner or snacks during the day (and recording what I eat). I haven't started doing any intermittent fasting (yet), but I decided to delay having breakfast as soon as I get up in the morning, and instead have it as 'brunch' around 11am. I then have my dinner early (for me) before 7pm so there is a 16+ hour period of not eating and my morning. Having a 'mini fast' each day is supposed to be good for your health, although it isn't long enough to result in ketosis or autophagy. I find that I don't get hungry before bed after having an early dinner (even though I usually don't go to bed until 2-3am) and I don't even feel particularly hungry in the morning (although I am looking forward to 'breakfast' by 11am). I didn't find intermittent fasting particularly difficult last time I was trying to lose weight, so I might start having a weekly fasting day once the weather warms up (having no/few calories on cold winter days is just plain miserable).

So far my diet has been going 'according to plan' with my weight dropping from 110.8 kg to 109.2 over the first week. My macronutrient averages for the first week were:

fibre            17.2 g
carbohydrates    64.7 %
fat              19.7 %
protein          66.8 g
sodium         2435.8 mg
energy         1759.6 kcals

This pretty close to my target daily dietary averages, which are 5-15% calories from fat, 60-120 g protein, 900-2,300 mg sodium, and 1,800-2,400 kcals/day (preferably towards the bottom of that range).

At my starting weight (111 kg) my basal metabolic calorie requirement was 2,068 kcals/day, and while sedentary my required daily maintenance calories (for no weight gain or loss) was around 2,813 kcals/day. If I start doing a bit of daily activity such as brisk walking and 5BX and some pushups in the evenings (which would put me in the 'low active' region), my daily calorie requirement would be around 3,112 kcals/day. So sticking to an average of 1,800 kcals/day I should lose around 1.3 kg per week (1.0 kg per week even if I remained sedentary).

As my weight drops my caloric requirement will also decrease, so at my target weight (around 75 kg) my calorie requirement at a 'light active' level of activity would decrease to only 2,487 kcals/day, which would mean my rate of weight loss would slow to around 0.7 kg/week (even if my body metabolism doesn't adapt and slow in response to the caloric restriction over time).

Once I get to my 'ideal' weight I'll either increase my caloric intake slightly (to around 2,100 kcals/day) which would provide about 15% caloric restriction (which theoretically might be good for longevity), or if I've increased my activity level to 'active' (by doing regular kendo training and going to the gym for weight training three times a week) it would boost my maintenance caloric requirement to 2,788 kcals/day. In which case I'd eat a bit more protein to have around 2,370 kcals/day (still around 15% CRON) and focus on lowering my body fat while retaining/increasing muscle mass.

This is basically the same plan I had in the middle of 2019, when I was able to reduce my weight from 11.8 kg to 84.2 kg by March 2020 (when I stopped going to the office, or the gym, due to Covid). Hopefully if I can get back into my diet and exercise routine while in 'lock down' I won't have any reason/excuse for 'falling off the wagon' this time around.

I'll try to remember to post my weekly diet and exercise summary each week - hopefully that will help me to stick to my plans (public embarrassment can be a great motivator).

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Sunday 15 August 2021

Another D'Oh! moment

I've been parking my 'new' (second-hand 2002 model) S-type Jaguar under our carport since I took delivery of it last week, as our lock-up garage was full of things being 'stored' in our garage (for example a kayak and a wind-surfer I'd bought years ago and hardly ever used, that are supposed to be shipped up to the lake house 'sometime' - definitely not yet as we're currently in lock-down). I didn't want to leave the 'new' car permanently parked under the car port awning as the rear end wasn't under cover and gets pretty hot during the day (even though we are currently in Australia winter), which won't do the leather upholstery any good. So I spent some hours last weekend and this weekend throwing out some of the junk stored in the garage and tidying the rest so it is all neatly stacked away on the side shelving.

I finally got everything tidied up in the garage this evening and got DW to watch as I drove the S-type into the garage to make sure I had enough clearance on the sides. I had checked the garage should be wide enough for the car, but I had to keep fairly close to one side in order to have enough clearance to open the driver's side door. Unfortunately when DW indicated I had driven as far into the garage as possible (there is an old wood workbench fixed to to the end wall of the garage) the rear of the Jag wasn't far enough in to allow the roller door to be closed! I should have also checked the length of the car! D'Oh!

Oh well, the Jag will have to remain parked outside under the car port awning until I can take the kayak and some other things up to the lake house, and then I'll probably demolish and remove the work bench (I'll first check that the car will sit into the garage once the bench is removed!). Hopefully I'll be able to park the car in the garage by Christmas.

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Trying to stick to a healthier diet (again)

Prior to the pandemic and work-from-home (WFH) regime that commenced in March 2020, I had been quite successful in losing a lot of my excess weight, and had been going regularly to the gym (conveniently located on the way home via train and bus). But since WFH commenced I had not been walking as much (about 1/3 of my daily 10,000 step target had been achieved simply walking to the bus stop from home and then from the train station to my office, and vice versa). Also, although I saved time not having to commute to work every day, the economic uncertainty of the pandemic, combined with an increase in the volume of work tasks needing to be completed on schedule meant that I didn't even spend time going for an evening walk or during lunch time. Overall, I became extremely sedentary for the past 18 months, and I also stopped sticking to my 'diet plan' and didn't bother tracking my daily calories or macro-nutrients.

The result was a slow but steady weight gain, to the extent that I'm back to the most overweight I've ever been (currently just over 110kg). So, today I stuck to my planned diet (no snacks or junk food) and also skipped lunch. From now on I'll try to have breakfast a bit later (around 11am) and then only have dinner (around 7pm) and avoid any after-dinner dessert or late night snacks, so I get a decent 16 'fast' period between dinner and 'break fast'. I might also try to do intermittent fasting by not having any meals on Sundays.

We currently have a 'lockdown' in Sydney due to the delta variant outbreak, and are limited to exercising within 5km of our homes, so I won't be going back to the gym any time soon. However, we do have some dumbell and barbell weights, so I'll try to do a bit of 'pumping iron' every lunchtime (at least three times a week) and also get back into the routine of doing regular walks.

If and when I get back down to my 'ideal weight' (around 75 kg) and body fat level (12% or less), I my continue a mild form of caloric restriction with optimal nutrition (CRON) diet plan, as caloric restriction is known to improve longevity in mice and other short-lived small animals, and recent evidence (such as reported recently in Nature) in closer human-analogues such as small lemurs supports the conjecture that it may also extend healthy lifespan in humans.

First step is to get down to a healthy BMI and exercise more. Then I'll worry about tweaking my ongoing diet regime to extend lifespan. For the past 18 months my diet has been reducing my lifespan!

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Thursday 12 August 2021

Australians household wealth reaches all-time high

Despite the economic impacts of the pandemic in the 2020 - a "short sharp recession", on dip in house prices, and the share market bear market during the first half of the year, the growth in household wealth has actually boomed during past past decade. This has been largely due to a booming housing market and strong share market growth, as wage growth as been negligible.

Australian net household wealth (dwelling and financial assets minus liabilities) has increased from around 550% of annual household disposable income, to now be 825% of annual household disposable income. This increased level of household wealth should result in strong economic growth in coming years due to the psychological 'wealth effect' (people are more willing to spend a greater portion of their disposable income as their perceived wealth increases). This may also be boosted by a real increase in wages in Australia, due to the impact of the pandemic on our usual level of immigration flowing on to produce some labour shortages and hence competition for staff.

Of course this rise in wealth has not been uniform across all socio-economic segments - those who rent do benefit from rising house prices, and the bottom quartile of the population (with negative or low net worth) do not benefit from the rise in value of financial assets. Some of the increased household wealth nationwide will be redistributed via the progressive income tax scale (incomes over $180,000 have a marginal income tax rate of 47% plus 2% medicare levy, while low incomes (below$23,227) effectively have no income tax liability due to the LITO and LMITO tax offsets) but growth in average household incomes generally results in some increase wealth inequality. On the other hand, everyone benefits from stronger economic growth, as it reduces unemployment and supports real increases in minimum wage and provides governments with the budget capability to provide real increases in welfare support.

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Tuesday 10 August 2021

Delta variant of Covid-19 running rampant in parts of Sydney

After getting through 2021 relatively unscathed (compared to the US, Europe and many other countries) in terms of infections and deaths, most people had expected 2022 would continue to see Australia maintain close to zero community transmission while the two available vaccines (AZ and Pfizer) were slowly rolled out by the end of 2022. The spread of the delta variant in Sydney (starting from a single community case of an unvaccinated driver coming into contact with an infected international aircrew he was talking to hotel quarantine) has shown that our existing 'gold standard' lock-downs, contract tracing etc. isn't capable of getting the delta variant under control (especially when some people were breaching the public health orders - for example going to regional areas of NSW, or attending parties in nearby cities).

What is more worrying (to me) is that the daily case numbers are continuing to climb despite already 1/3 of all Australians (>40% of 'eligible' Australians i.e. adults) having had one dose of vaccine, and over 20% already being 'fully vaccinated'. I would have expected the lockdowns coupled with a sizeable fraction of the population being fully vaccinated would have seen lower rates of spread by this stage. Hopefully things do improve in September (when we should be getting close to 50% of all eligible adults fully vaccinated), but I'll be extra cautious until I get my first dose of Pfizer in late September...

So far Australia still has less than 1,000 deaths from Covid-19 in total, so I suppose we are still the 'lucky country' in terms of how Covid-19 has impacted us.

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Extra car expenses (of course)

The S-type Jag was delivered yesterday, and it looks very stylish and is in pretty good condition. A little bit of wear and slight cracking in the driver's seat, but that is to be expected for leather seats that are almost 20 years old (especially in Australia). Some scuffing on the door handles, but no scratches or dings in the body paintwork, and as far as I can tell everything seems to be working OK. I drove DW to her part-time job at lunchtime and the car is great fun to drive. Upon delivery I was told that the $500 12-month 'extended warranty' I had purchased only covers the engine block, drive train and gearbox, and I could have purchased a 'comprehensive' extended warranty for $870 that also covers the electrical system, computers, brakes, aircon, cylinder heard etc. It was also cheaper (per year) to take out 3-year or 5-year warranty. In the end I opted for the $1,290 3-year comprehensive extended warranty, so if anything goes wrong (like the computer system that broke in the last S-type I bought three years ago) it *might* be covered by the warranty. Each item covered only provides $350 per claim, so if something expensive goes wrong it could still get expensive to repair. I decided to pay the $790 extra to get three years of 'comprehensive' warranty cover. I'll also have to pay $240 stamp duty when I go to the local car registry office (within 14 days) to record the transfer of ownership.

I got an online quote to get comprehensive car insurance from Budget Direct. With limited km cover (5,000 km pa), no drivers under 50, $750 excess (except for windscreen excess of $40), and private/business usage, the insurance quote was about $455 pa, which seems quite reasonable.

I checked through the vehicle's service log book and it really has only had one prior owner, who had done the proper annual services with an approved Jaguar service center for the first 6 years, and then done bi-annual services using a local mechanic in years 8 and 10. The car had only done about 10,000 km pa for the first 12 years (2002-2014) and the the driver (a country town solicitor) had retired in 2013 and had only driven a few thousand km over the next six years (and had spent some money getting a new battery and the electronic throttle replaced in 2014).  After a few more years he had then obviously decided he didn't need the Jag any longer and traded it in to the dealer I bought it from. Overall the car seems quite a good buy for about $8,000 (it cost around $120,000 when new). Hopefully this car will last me for the next ten years while I am still working full-time and running my financial planning business on the side.

As this car will be used for my home-based financial planning business as a sole trader I should be able to claim back the GST on the purchase price and also claim a per km amount for business use (or a percentage of actual expenses).

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Friday 6 August 2021

Bought another S-type Jaguar

Having recently given away my Ford Escape to DS1 as his 21st birthday present, I decided to have another go at buying an S-type Jaguar as my 'new' (used) car. Last time I tried this was back in August 2018, and on that occasion I ended up buying a lemon from a private selling (hence no warranty) that had an electrical problem which ended up making the car a total write-off only a few months after I bought it.

This time I've bought a 2002 Jaguar S-type SE from a local used car dealer. Being in lock-down in Sydney I didn't go to inspect the vehicle in person, relying on the car dealers photos (the body work, paint and interior all appear to be in good condition) and I paid an extra $590 for a 12-month warranty. The car cost $8,000 and I was told that it had only one previous owner and it has reasonably low mileage (123,000 km) for its age. We'll see how reliable the car turns out to be in reality. The car dealer has a mixed bag of very good and very poor reviews regarding the quality of their used cars and after-sales service, so I suspect if the car is OK everything will be fine, but if it has any major issues I may have trouble getting the dealer to rectify it under warranty. Fingers crossed that this turns out to be a reliable vehicle, but I won't be surprised if it turns out to be another expensive mistake.

I've arranged for it to be delivered early next week, so this weekend I'll spend a few hours rearranging the boxes and junk stored in my garage so I can park the Jag inside rather than under the carport. The current  registration lasts until next February - if it is still driving well by the time I have to get it inspected to renew the registration, I'll think about getting a personalized licence plate with a nice rego number and in a colour to match the vehicle (which will cost about $125 pa). I'll probably continue to work from home several days a week even once the pandemic ends, and I normally take public transport to the office, so I will probably only use this car a few times a week, and for occasional visits to any of my financial planning clients/prospects that want a 'house call', as well as the occasional longer drive up to the lake house during school holidays.

The total purchase cost (including 12-mo warranty, delivery charge, and a $100 'admin fee') was $8,709. And annual registration and CTP insurance will cost about $1,000. Being a 3.0L V6 engine it isn't very fuel efficient, allegedly needing 10.8 - 12.5 L per 100 km, and emitting around 314g CO2 per km. The 70L fuel tank will cost around $100 to fill at current fuel prices, and should provide a range of about 560 km. The running costs will largely depend on how much basic log book servicing costs, and if it develops any expensive faults.

I already have a 1960 Mk2 Jaguar that my parents gave me for my 18th birthday, but that car is stored up at my parent's farm and hardly ever gets used these days (I used it for daily commutes to university and then to my work back in the 1980s, but we did a respray and interior restoration and haven't used it much in the past twenty years). The styling of the S-type is based on the classic Mk1 and Mk2 models.

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Tuesday 3 August 2021

DS1 seems to be on the path to financial success

DS1 finished his computer science degree (with Distinction) last year, and ended up with two good job offers, eventually taking a position at a local IT 'unicorn' company. He's recently passed his 6-month 'probation' period, and is working from home several days a week normally, or full-time WFH during 'lockdowns', so his income stream seems quite secure at the moment. Given his starting salary was similar to my current salary (!) plus he gets some stock options (which will probably be quite valuable when they 'vest' and if/when the company gets listed) and still lives at home rent free, he is able to save a large chunk of his income. His NW is already around $180K, which is pretty impressive for a 21 year old (it is partly due to the modest share portfolio and superannuation investments I made on his behalf during childhood).

He has a small amount of HELP debt (around $30K of accumulated university fees) which will slowly be repaid via an annual compulsory repayment. Repayments are required when your taxable income exceeds the threshold (currently $47,014), and the repayment rate depends on taxable income (for DS1 it will be around 7.5%). So, effectively DS1 will be paying off his $30K StudyAssist debt at the rate of around $7,500 pa for the next 4 years or so.

In the meantime he is saving as much as possible for a deposit on an investment property, which he'll probably purchase sometime this year (if he has enough deposit saved up and the current 'lockdown' ends). His living expenses are quite low, as he doesn't pay rent, makes use of the household groceries (although his does some of his own grocery shopping if he wants anything in particular), and I gave him my old car for his 21st birthday a few months ago (although it is still registered in my name and I have full insurance cover for when I want to 'borrow' his car). I'll probably buy myself a second hand S-type Jaguar soon, just so I don't have to 'borrow' DS1's car too much.

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Monday 2 August 2021

Net Worth: JUL 2021

My monthly NW estimate has been updated in NetWorthShare for the end of July. Chart is in the side-bar.

Stocks and managed fund investments decreased slightly this month, down -$32,464 (-9.21%) to have $319,930 net equity in my geared share portfolios. But this figure includes a withdrawal of $30K from my home equity 'portfolio' loan that I used to make an non-concessional (un-deducted or 'after tax') contribution of $30K into my SMSF (we needed some extra money in the SMSF cash account to fund DW's annual pension withdrawal of $25K and the annual tax assessment liability for FY 2020, and I chose to make a NCC rather than sell off some of the Vanguard High Growth investment held by our SMSF).

Our estimated house price for July (my half) increased by $18,137 (1.91%) to $968,039. The Sydney housing market (especially houses) continues to trend up, although the rate of increase has somewhat slowed, and will probably reduce further with the whole of Sydney currently being in 'lock down' to fight an outbreak of the Delta strain of Covid-19.

The value of my retirement savings rose during July, to $1,484,832 (up $30,345 or 2.09%). But as stated above, most of this increase is due to the $30K non-concessional contribution.

The value of my precious metals increased slightly during July, to $24,511 (up $1,054 or +4.49%).

Overall, my estimated NW reached $3,096,549 by the end of July - up by a relatively modest $17,346 (0.56%).

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Saturday 31 July 2021

End of JUL 2021 "12% solution" portfolio changes

For the end of July the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is the same allocation as last month, I don't need to do any trades this month, which will help reduce trading costs.

My current IG trading account balance is A$13,022.59. In addition to the "12% solution" holdings I have A$507.50 invested in the ASIA (Betashares Asia Technology Tigers) ETF. The ASIA ETF has been in a downtrend since Feb, which has resulted in my IG account underperforming relative to the "12% solution" benchmark.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +17.8%. My YTD performance is 18.19%. The performance difference is a result of trade timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betashares Asia Technology Tigers ETF). There may also be some AUD/USD currency movements affecting my result (reported in AUD terms) compared to the USD returns reported for the '12% solution" model portfolio each month.

So far the "12% solution" trading signals seem to result in market timing that might actually add to long term performance (compared to a simple buy-and-hold with annual rebalancing strategy). For anyone that wanted to invest a significant portion of their financial investments to this strategy I'd suggest tweaking the 60:40 "risk-on":"hedge" ratio to match your personal risk tolerance (eg. a more risk averse investor might want to adjust it to 50:50, while a more risk tolerant investor may move to  70:30 allocation). Once concern is that this is a US-centric model portfolio, so it may underperform in periods when US equities underperform non-US global stock market returns.

Personally I only have 0.42% of my NW invested in my IG trading account used to follow this strategy, so it's performance won't have a material impact on my overall wealth.

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Monday 26 July 2021

Perth Mint Online will be offline next weekend

My monthly automatic transfer of funds into my PMO cash account was processed on the 15th, and my savings plan standing order to buy gold and silver at the start of each month would normally be filled at close of business on the first business day of the month (2nd August for the coming transaction). If there is an outage (unscheduled or for planner maintenance) the T&Cs state that "Any order/orders will be filled by us at the first available opportunity and you accept full responsibility for any losses or damage".

There is a scheduled maintenance to The Perth Mint Depository Online (DOL) platform and Perth Mint websites that will run from 5.00pm AWST (GMT+8) Friday 30 July until 8am Monday 2 August 2021. So my automatic investment *should* happen as normal on Monday afternoon. I'm not too fussed if the transaction does get delayed, as the price could move either up or down, so on average any delay in processing my regular bullion purchases should not make any significant difference.

They'll probably be some conspiracy theorists that decide this is all part of some grand plot to limit sales of physical bullion and/or cover up a shortage of physical metal and/or manipulate the price. ;)

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Thursday 15 July 2021

Checking on adviser commissions I have paid

As a consumer I was only vaguely aware of the extent of the 'commissions' being paid to 'advisers' by financial products I had invested in. I knew they existed, and because I bothered to read the 'fine print' of product PDSs, I also knew that the commission was paid to 'your financial adviser' (if you had one), but that if you didn't have an adviser (for example, if you applied directly to the product manufacturer) they didn't rebate the commissions, but simply kept the extra profit margin.

Eventually, back in 2013, I found out about a new 'commission rebate service' that would at least rebate to me 50% of the trailing/on-going commissions that product providers normally paid to financial advisers (or kept for themselves if there was no adviser 'attached' to an account). Getting half of the fees rebated was better than nothing! A few years later the rebate service introduced a flat $75 'account admin fee', which reduced the rebate to a bit less than half, but it was still good to get a large chunk of the 'trailing commissions' on my financial investment products and insurance policies rebated. Over the years the commissions that were built into the financial products (margin loans, managed funds and personal insurance products) were:

Year       commissions       admin fee      rebated*
2013       $1,197.66           $      0.00      $   598.33
2014       $   937.76           $      0.00      $   468.88
2015       $1,027.10           $      0.00      $   513.55
2016       $1,226.25           $    75.00      $   575.63
2017       $1,223.25           $    75.00      $   574.13
2018       $1,428.08           $    75.00      $   676.54
2019       $1,530.21           $    75.00      $   727.61
2020       $1,605.17           $    75.00      $   765.09
2021       $   309.11           $    75.00      $   117.06

* addendum - in the original version of this post I had accidentally put $596.33 as the amount rebated every year, rather than the actually figures.

Over nine years I had paid $10,484.59 in commissions, and had been rebated $5,106.82. Other product customers that had applied directly (without an adviser) or who had an adviser that didn't rebate part of the commissions, would have been $5,106.82 worse off!

But even after going through the process of finding and arranging for the commission rebate 'adviser', I still paid $5,467.77 for the following "services" (as listed in the annual Fee Disclosure Statements):

1. Getting a portion of commissions received by xxxxxx as your Broker for the products
2. Member account maintenance as requested and required.

At least I was getting something in exchange for the trailing commissions being charged - a lot of consumers had 'advisers' receiving trailing commissions that they had never even met (I remember my father, an airline pilot, complained once that there was an 'adviser' in Tasmania listed on his insurance policies, and he'd never had any communication at all with that 'adviser'), or who provided no ongoing service.

Prior to the Royal Commission revealing the extent to which Australian customers had been paying 'fees for no service' the existing regulations (requiring an annual Fee Disclosure Statement) were supposed to protect consumers by making them aware of the fees and commissions being paid. Except that, as in my case, if you had bought a product direct from the manufacturer you still paid the fees and commissions. And most advisers didn't rebate much (if any) the commissions paid to them.

Last year one of the reforms introduced due to the findings of the Royal Commission was that trailing commissions were banned for financial products, with the exception of life products (personal insurance policies). That is why the total commissions for 2021 dropped to only $309.11.

I have received correspondence for the non-life product companies stating that commissions had been turned off, and that the 'cost saving' would be passed on to me (the consumer) via lower costs (eg. lower margin interest rates, lower managed fund management fees etc.). Whether or not the benefit of eliminating commissions has been fully passed on to consumers is hard to know (I'd guess not, but I can't be bothered trying to work out how much has actually been passed on to me out of last year's reduction in commissions).

As I got registered as a financial planner (adviser) in late 2018 I could have filled in some forms to 'change adviser' to myself. I probably should have done so, as I would have received 80% of the commissions (my AFLS/broker group retains 20% of any fees and commissions I receive as their Authorised Representative). However, the amount after tax wasn't huge, and I would have probably needed to worry about providing myself with an annual 'Fee Disclosure Statement' (:

Now, that I'm (hopefully) about to get my first few paying clients as a financial adviser (and will need to process annual Fee Disclosure Statements etc), I may as well send in a 'change of adviser' form for my life insurance (Income Protection) policy, so that I will get 80% of the annual $310 trailing commission, rather than just 50%.

ps. Advisers (and insurance brokers) used to get 80% of the first year insurance premium, and then a 20% trailing commission. This was slowly reduced to 70%/20% in 2019, and 60%/20% from 2020 onwards. This lower commission regime for life products is one of the reasons (the others are the FASEA exam, the increased educational and CPD requirements and increased administrative burden of regulatory requirements) that many financial advisers/insurance brokers are leaving the 'industry'. There is also 10% GST added to all fees and commissions, and some 'clawback' provisions around the first year premium commission (if the policy is cancelled or cover amount reduced in the first few years).

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Wednesday 7 July 2021

The difficulties with getting concessional superannuation contributions exactly 'right'

I've tried to contribute the maximum amount allowed as a concessionally taxed contribution in my superannuation each year. For the last few years that was $25,000 pa, but this FY it has been increased by 10% in line with CPI increases since the decision to regularly index was legislated.

As I had setup a 'salary sacrifice' arrangement to make additional employer contributions in exchange for a reduction in take-home pay, I didn't bother changing this when they introduced tax deductibility of contributions for employees. I had expected to wind up pretty close to the $25,000 'cap' for last FY, as I was expecting a small pay rise in Feb when my employer does their annual salary reviews (it turned out that this year was 0% increase), and aside from the normal SGL contributions my employer also makes some 'additional voluntary' contributions to reimburse part of the superannuation fund admin fees, and to pay for the standard amount of life, TPD and IP insurance offered as part of our superannuation plan (this is this reason why I currently have employer contributions going into the company's super scheme, while most of my super is sitting in our SMSF - the extra cost of having two super funds is more than offset by the benefit of the 'free' insurance cover).

Since the FY has ended I was able to log in to the superannuation fund online platform and check all the contributions made during the FY. All the expected contributions add up to a few hundred dollars over the $25,000 cap, which is fine as I would only have to pay extra tax equivalent to the difference between the concessional 15% tax charged on concessional contributions and my marginal tax rate. The excess is then reclassified as being a non-concessional contribution, but as I make hardly any non-concessional contributions I am well below the $100,000 annual limit for non-concessional super contributions.

However, for some weird reason one month my employer had paid three lots of the normal bi-monthly SGL contribution, which made my excess CC another $500 or so higher. What is worse is that they had a late monthly payment arrive in the super fund accounts in early July 2020 in addition to the normal contribution towards the end of July, and then this June the monthly payment was deposited exactly on 30 June. This meant that last FY I received 13 'monthly' SGL and salary sacrifice contributions, which added another couple of thousand dollars worth of 'excess concessional contributions'. This will mean I'll probably have to pay an extra $500 or so tax. But since they appear to have made an extra bi-monthly deposit I'm not too upset (although I suspect this 'extra' payment has something to do with the how they calculate the bi-monthly payments, and not really anything 'extra'). They also have already been contributing 10% SGL since 2018 instead of the required 9.5% (which only increased to 10% from 1 July). I just wish the 'monthly' contributions were deposited on a more regular schedule so it was possible to make a more accurate calculation of how much the annual concessional contributions total will be before the end of the FY has passed and it is too late to make any adjustments.

I'm actually an employee-appointed representative on the company superannuation committee, so I had mentioned the difficulty in working out how much 'spare' CC cap was left at the end of the FY (so one could make a 'top up' contribution and claim a tax deduction for it, to exactly meet the cap amount. The super fund rep told me to check the online transactions in late June to work out what the total contributions were -- but since the final contribution was only credited at close of business on 30 June that would have been too late to make any voluntary contribution anyhow!

I'm going to leave my current salary sacrifice arrangement in place for this FY - due to the increase in the CC cap I should have plenty of 'cap space' left next June (especially as they won't be able to squeeze in a 13th monthly contribution now that they are completely up to date), and I should be able to calculate the 'cap space' in the last week of June and work out how much I can deposit as a voluntary tax deductible super contribution to just hit the CC cap.

Aside from the concessional contributions I might also make a $100,000 non-concessional contribution into my Qsuper account, as I want roughly that amount (or more) in the QSuper account so I transfer it into their lifetime annuity product when I retire. Once my total super balance (TSB) exceeds the $1.7m TSB cap I won't be able to make any further non-concessional contributions into super (except if I make a 'downsize contribution' of up to $300K if/when we sell our home). Fortunately you can still make concessional contributions (SGL and salary sacrifice) after you reach the TBC.

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Saturday 3 July 2021

Applying for the Tax Commissioner's Discretion

Normally you can't claim a loss (tax deduction) for a business that is only a hobby or lifestyle choice. Even if it has business-like characteristics, if it is unlikely to ever make a profit AND doesn't have a significant commercial purpose you can't offset the loss against your other income. In that situation you can only defer the loss until you make a profit from the business (at which time the carried forward losses can be offset against the profits to reduce the tax liability).

If you're a sole trader or an individual partner in a partnership, and you meet at least ONE of the non-commercial losses requirements ( the four 'standard tests'), you can offset your business losses against other assessable income (such as salary or investment income) in the same income year.

The non-commercial business loss requirements if you have income under $250,000 are:

1. your assessable business income is at least $20,000 in the income year, OR

2. your business has produced a profit in three out of the past five years (including the current year), OR

3. your business uses, or has an interest in, real property worth at least $500,000, and that property is used on a continuing basis in a business activity (this excludes your private residence and adjacent land), OR

4. your business uses certain other assets (excluding motor vehicles) worth at least $100,000 on a continuing basis.

Since my financial planning business hasn't generated any income yet, has not yet broken even or made a profit, and is run from a home-office, it doesn't pass any of the four 'standard tests' yet. So normally I would simply have to carry forward the losses until eventually the business makes more than $20,000 income. My original business plan had projected getting my first client in year 1 (2018/19), and then have enough clients during FY 2019/20 to 'break even'. Due to Covid-19 and repeated lockdowns I have yet to sign up my first paying client. Business costs have included paying $1,150 each month as an Authorised Representative of my dealer broker (and remain registered as a financial adviser), paying annual membership fee to the Financial Planning Association, paying university fees for the Master of Financial Planning degree I'm undertaking to meet the new FASEA educational requirements, and paying small amounts for marketing (my business website, and a couple of magazine ads). Overall, the annual business expenses were approximately:

2018-19: $25,095

2019-20: $29,271

2020-21: $25,637

and projected expenses for the current FY:

2021-22: $22,245 (slightly lower as I finish my uni degree this year, but will upgrade from student to full membership of the Association of Financial Advisers). At this stage I'm expecting to sign up my first paying clients during 2021-22, although the amount of income will depend on the number and nature of the clients.

I'm a bit behind in lodging my annual tax returns, so it would be nice to claim a deduction for these expenses, but I normally wouldn't be able to claim a deduction as I haven't meet any one of the four 'standard tests'.

However, if you are a sole trader and have income under $250,000 you can apply for the tax "commissioner's discretion" to allow the losses from the business activity to be offset against your other income. There are only two reasons for obtaining the discretion:

1. the business activity has commenced and has a standard lead-time before it can pass one of the four standard tests or produce a taxable profit. But this normally only applies where an inherent characteristic of the business prevents making a profit - for example the time taken after planting a new vineyard due to the nature of grape growing. It does NOT include situations starting out small or building up a client base. So no chance of my business qualifying on this basis.

2. special circumstances such as drought, flood, bushfire or other circumstance outside your control that have prevented the activity from passing one of the four tests. This is where I *might* be able to get the commissioner's discretion, due to the impact of Covid-19 preventing me from producing a tax profit as yet.

So, I've applied for the tax commissioner's discretion regarding non-commercial business losses for 2018-19, 2019-20, 2020-21, and 2021-22. We'll see what he/she decides.

I also have to lodge a backlog of annual BAS (business activity statements), which should at least provide a refund of GST paid on inputs (the fees paid to my dealer broker, ads etc.) as I have had no business outputs (SOAs) subject to GST.

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Thursday 1 July 2021

Net Worth: JUN 2021

My monthly NW estimate has been updated in NetWorthShare for the end of June. Chart is in the side-bar.

Stocks and managed fund investments increased this month, up $10,941 (+3.20%) to have  $352,394 net equity in my geared share portfolios. This is similar to what is was back in 2007 before the GFC, but I have much lower gearing nowadays.

Our estimated house price for May (my half) increased by $24,875 (2.69%) to $949,902. This increase seems to confirm that last month's sudden jump was actually indicative of the strong property market in Sydney, rather than being an aberration.

The value of my retirement savings rose during June, to $1,454,487 (up $36,609 or 2.58%). I'm on track to reach the 'transfer balance cap' (maximum amount that can be moved from 'accumulation' to 'retirement' phase) before I hit 65 (when I'll be able to make the transfer without retiring). The TBC is currently $1.7m (increased in line with CPI on 1 July).

The value of my precious metals declined slightly during June, to $23,457 (down $920 or -3.77%).

Overall, my estimated NW reached $3,079,203 by the end of June - up by a healthy $71,776 (2.39%).

I continue to include the value of the 'other real restate' at cost in my NW calculation, but the lake house is likely to have increased from $337,000 to around $676,725 since I 'bought' it from my parents, and the value of the off-the-plan unit is likely to have increased from the purchase cost of $1m + $40,452 stamp duty, to $1,160,695 - but I'll wait until I get an official valuation done when the unit construction is completed in 2023 before I start tracking changes in the unit's value as part of my NW estimate.

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End of JUN 2021 "12% solution" portfolio changes

For the end of June the emailed trading signal is to invest 60% in QQQ and 40% in TLT. As this is a change in allocation from last month, it requires selling off both SPY and JNK and buying 60% QQQ and 40% TLT. When the market is open (Thursday night my time) my monthly trades will therefore be:

SELL SPY : SPDR S&P 500 Index Fund 

SELL JNK : SPDR Barclays High_yield Corporate Bond Fund

BUY QQQ : Powershares Nasdaq-100 Index Fund

BUY TLT : iShares 20+ Year Long-Term Treasury Bond Fund

My current account balance is A$12,164.40 and aside from the "12% solution" holdings I still have A$581.50 of the ASIA ETF, so the actual investment amounts for this month will be around A$6950 (60%) QQQ and A$4600 (40%) TLT, but the exact amount trading will be rounded down to the nearest whole number quantity of the ETFs.

According to the monthly newsletter, the 2020 performance for this model was +40.6% and for 2021 YTD performance is now +13.7%. My YTD performance is only 10.43% due to a combination of timing differences, buy/sell spread, trading costs, not having an exact 60:40 asset allocation (due to rounding down to the nearest tradeable quantity) and the fact the my '12% solution' portfolio is on my IG trading account which also includes some ASIA (Betashares Asia Technology Tigers ETF).

I didn't get around to closing out my positions and shutting down the IG account before the end of June (Australian FY end), so I'll probably keep doing these monthly trades for another 12 months and see how things go. It's really not cost effective to do the required monthly trades with such a small portfolio using the IG trading platform. To do this properly would require either a larger financial committment (say a portfolio amount of $100,000+) or else find a trading platform that has suitable ETFs available to trade and $0 trade fees and no account keeping fee. Doing monthly trades also means any capital gains will be taxed at my marginal tax rate (you only get the 50% CGT discount for assets held for more than 12 months), so this would probably also be something better done inside an SMSF where the tax rate applied to short term capital gains is the same as long term capital gains, as is only 10%.

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