Saturday, 2 July 2022

Net Worth: JUN 2022

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 suffered from significant US and local market declines during this past month, but as I had eliminated my geared shared investments my 'Stocks' figure was only down -$6,026 (-2.24%) with $262,781 net equity.

Our estimated house price for June (my half) was down (-$17,101) to $1,178,956 with the Northern Beaches area of Sydney finally starting to reflect the general weakness of the Sydney real estate market. Apparently units (apartments) are coming back into favour as the move towards suburban houses that was apparent during the Covid-19 epidemic and lock-downs starts to unwind. Hopefully this means that the value of my off-the-plan investment apartment will hold up reasonably well over coming years. Rents are also starting to rise, which should help offset rising mortgage interest rates (which will have a large impact on my cashflow position once the apartment construction is completed and I have to pay the balance of the purchase price using a $900K mortgage or my available home equity line of credit).

The value of my retirement savings decreased significantly during June (due to the increased local and international stock market weakness) to $1,333,899 (down -$87,994 or -6.19%). Looks like I won't be reaching the $1.7m TBC any time soon. Good thing I was already planning to keep working full-time until about 70, and then do another decade or so as a part-time financial planner.

Overall, my estimated NW decreased by roughly a year's salary to $3,112,727 over the past month - down by -$109,926 (-3.41%).

As I have completed my MFinPlan degree and my PhD enrolment application at WSU wasn't accepted (I'll try applying to some other local unis) and I don't have any clients for my part-time financial planning business yet, I have a bit of spare time these days in the evenings and on the weekend. I've joined a local gym to shed some of the excess weight I've put on while working from home, and yesterday I applied to become a 'Doordash' delivery driver (I used to do UberEats deliveries, which was quite fun, but they required a recent model car and comprehensive car insurance, whereas Doordash can be done using my 2002 S-type Jag with the basic insurance cover I have). I might do a few hours of 'Doordash' delivery driving on Friday and Saturday nights (peak period) to earn some extra $$$ to help boost my cashflow - at least until I see how the finances work out with my investment apartment next year (I'm not sure how 'negatively geared' and cashflow negative it will turn out to be). Having some extra regular income for the rest of 2022 might also help with my mortgage applications at the end of the year.

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Thursday, 16 June 2022

Bought some Platinum

I recently watched a video that pointed out that Platinum was relatively 'cheap' compared to the traditional ratio of platinum to gold spot price (I had, indeed, grown up in a period when platinum was generally as expensive as gold, or even slightly more expensive). The was some discussion regarding why the Platinum price might have dropped relative to gold (such as no longer used as much in catalytic converters, and the relative difficulty/cost of using platinum for working the harder metal for coins, jewellery etc.). But I recall similar conjecture that the price of silver would plummet with the transition from silver-based photographic use to digital photography, and the fact is that platinum was always harder to work into jewellery than the much softer gold, but that didn't affect its pricing.

So, I decided to increase my monthly 'savings plan' contributions into my Perth Mint online depository account by $100 each month, and purchase ~$100 of unallocated Platinum in addition to my existing monthly purchases of ~$100 of gold and ~$100 of silver.

Unfortunately you can only set up an automatic purchase plan for gold and silver. For platinum purchases you have to log in during trading hours and manually place an order. So although my $300 gets automatically deposited around the 15th of each month, and the gold and silver purchases are processed automatically at the close of business on the first business day each month, I'll have to remember to log in around the 16th of each month (as soon as I get confirmation that the $300 has been deposited) and place a manual order.

Aside from inconvenience of having to manually place the platinum order each month, the manual order also charges the standard 1% transaction fee, whereas the automatic purchase plan transactions are charged a reduced 0.5% fee.

Theoretically adding a third 'precious metal' to my bullion investment *should* provide some diversification benefit i.e. reduced volatility in the value of my bullion investment while retaining the overall performance of 'bullion' as an asset class. Whether adding some platinum to my gold and silver holdings affects the performance of my 'bullion' investment positively or negatively in practice will of course depend on the relative performance of the three metals. I think that there is a least a chance that the relative value of platinum to gold will see 'reversion to the mean' in the long term (but that could either mean the platinum price increases, OR that the gold price falls).

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Tuesday, 14 June 2022

Markets crash and burn

While I still have a large exposure to Australian and global stock markets via my SMSF investment, it doesn't have any gearing and is invested for the 'long term' so I can be fairly sanguine regarding market gyrations. But I am glad that I decided to sell off most of my stock market based investments (to free up cash in preparation for 'settlement' on my investment apartment towards the end of this year)  at the end of April and  eliminated my margin loans.

I probably won't have any free cashflow for the next few years (my apartment will probably be 'negatively geared' for quite a while, especially if mortgage interest rates rise significantly), but there may be a good opportunity to start investing back into the stock market once the current cycle 'bottoms out'.

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Thursday, 2 June 2022

Net Worth: MAY 2022

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

Stocks and managed fund investments suffered from modest US and local market declines during this past month, and I had liquidated most of my directly held share and managed fund investments, so my 'Stocks' figure was down -$17,323 (-6.05%) to have $286,130 net equity. The markets rose somewhat during the latter half of the month, so I probably performed worse than the market during May. I expect I will have some realizd capital gains this FY, which will result in a tax liability.

In reality only about $58K remains invested stock and managed fund investments outside of my superannuation, but the reported 'stocks' figure in NetWorthShare includes the net cash position plus the equity in my 'off-the-plan' unit (via deposit and prepayment of stamp duty). It ended up sitting in my 'stocks' category due to having paid for the deposit and stamp duty using my 'portfolio loan' which was normally used to fund share investment purchases (or capital into my margin loan accounts), so after paying off most of that debt the net balance is left sitting in my 'stocks' category. I should probably split this between the 'cash' and 'other real estate' categories, but it has no impact on my overall NW calculation, so I can't be bothered making the reporting adjustment.

Our estimated house price for May (my half) was unchanged at $1,196,057 as there was no update to the data available for our suburb this month. There is still a mild decline in Sydney real estate underway, but our suburb's reported data had been bucking the trend in recent months, so no net change is probably a reasonable estimate for this month. I won't be surprised if there is a 10%-15% decline in estimated value over the next 1-2 years, but it is hard to 'predict' (guess) such future price movements.

The value of my retirement savings decreased during May (due to the local and international stock market weakness) to $1,421,893 (down -$25,763 or -1.78%). Overall, my estimated NW decreased slightly to $3,222,653 by the end of May - down by -$44,312 (-1.36%).

As I have paid off my margin loans and portfolio loans I won't be funding interest payments each month, so I should have some surplus cashflow and slowly build up my cash reserves during the remainder of 2022. At the end of this year I will need to get a mortgage to fund the balance of my 'off-the-plan' investment unit purchase, so the more cash and less debt I am holding when I apply the better. If I can't get a mortgage I would have to fund the transaction using my 'portfolio loan' which has an interest rate about 3% higher than a standard mortgage, so I'd obviously prefer to get approved for a property mortgage!

Any lift in interest rates to fight inflation will obviously also be painful, but one positive of inflation is that it should, eventually, push up building costs (which eventually drives higher prices for existing property also) so the value of real estate *should* keep pace (roughly) with inflation, whereas the mortgage debt will be unchanged, falling in 'real terms' (or relative to the value of the property, to look at it another way).

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