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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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