Wednesday 28 December 2022

Bought some 'death insurance'

I don't have much 'life (and TPD) insurance' (only around $100K via my employer-sponsored superannuation fund, where my employer pays the insurance premiums - so it is 'free' cover) as our home is practically paid off and I have sufficient superannuation savings to provide for my dependents if I suddenly died. So I don't see any great need to insure against 'loss of life'.

I do have loss of income insurance - which would provide 85% of my income if I was temporarily and/or partially disabled (eg. a serious stroke, cancer or whatever). One policy is via my employer-sponsored superannuation fund and would pay out after a 6 months 'waiting period' (which my accumulated unused annual and long service leave would cover) for up to 2 years. I also have a private LOI policy that would pay out after a 2 year waiting period to age 65.

One thing I would like to insure against is longevity risk. I have sufficient superannuation that I should be able to sustainably withdraw my current after-tax income (indexed to inflation) from my superannuation without exhausting it before reaching 100 or so. But, being an atheist, I don't have any belief in an 'afterlife' (I expect it will be similarly unmemorable as my 'beforelife' was) so the closest thing I have to a comfort against the inevitability of mortality is the faint possibility that medical science *might* make some significant strides in life extension during the next three or four decades. So there is some *risk* that I might end up living past 100 (my great-Aunty lived to 105, and my paternal grandparents lived to 94, and my parents are both around 90 and reasonably healthy) -- and if there are any life extension treatments or medications available by 2060 I doubt they will be cheap or readily available.

So it is conceivable that I *might* need some extra income stream if I make it to 100 years old. Which brings us to the topic of 'death insurance' (ie. insuring against loss/deferral of death). It is actually known as a 'lifetime annuity' - which you can obtain by purchasing a policy from an insurance company. It promises to pay you a set amount for 'life' (ie. until you die).  The amount of payment received is obviously based on how much you initially pay, and the typical life expectancy for your gender and age at time of obtaining the policy. However, an 'immediate' lifetime annuity (which starts making payments immediately) provides quite a small income stream compared to the lump sum initially invested. And it is even smaller if you choose some optional features such as 1. iindexing (fully or partially) the income stream to inflation, 2. having a reversionary beneficiary (ie. if you die very young your spouse would continue to receive some income payments for the rest of their life).

A more interesting type of lifetime annuity for what I *need* is a 'deferred' lifetime annuity - where you pay the initial lump sum, but won't receive any income payments until/unless you reach a specified age (it is actually quoted for a number of years 'deferral period' from date of purchase until income payments commence). The longer the deferral period the less likely you will live long enough to receive payments (and the amount of payment can be boosted if you opt-out of having a reversionary benefit, and also no withdrawal benefit - ie. nothing at all will be paid out if you don't live for at least the deferral period. For some legal reason (in Australia - the rules seem to be different in the US, UK etc)  deferred lifetime annuities can only be purchases using superannuation money (it is treated as a private pension income stream). It seems to be only available from around age 60 (preservation age), and I'm not entirely sure if it can be purchased prior to 'retirement' or only using superannuation that is already  in 'pension phase'. Anyhow, I made the application and the rollover from my employer-sponsored superannuation fund just before my birthday (as the quote was only current until then - as the payment rates are based in life expectancy and current age, in whole years) to the insurance company providing the deferred lifetime annuity appears to have been processed, so I'm assuming that it was OK to purchase the deferred lifetime annuity using superannuation funds still in 'accumulation phase'.

The more unlikely it is that you will live long enough to receive any benefit the higher the income payments (if received) will be. I just purchased a $10,000 deferred lifetime annuity with a 40 year deferral period (so nothing will be paid out if I don't live to at least 100), that will, if I live past 100, start paying out approximately $55,000 pa (indexed to inflation) every year I live past 100. If I happened to live as long as my great-aunt the insurer would end up paying out $275,000 (in today's money) - which is a pretty good return on a $10,000 'investment'.

I do wonder what might happen if there is a medical breakthrough that extends lifespan by a decade or two -- there probably aren't currently too many lifetime annuity liabilities (compared to the number of life insurance policies) that it would be an immediate financial problem for insurance companies. But if lifespan started to climb significantly the annuity rates quoted for such deferred lifetime annuity policies might start to drop rapidly (or such insurance cover may no longer be available at all).

I'll admit the purchase of a deferred lifetime annuity with a 40 year deferral period is a significant 'long shot', but I figure that if I had simply left the $10,000 in my superannuation it would  have only provided about $400 pa of additional retirement income stream (ie about $1 per day) so I'm happy enough to fritter away the $10K on the prospect that I *might* live past 100. If I do make it to 100 it will be a nice 'birthday present', and if I don't make it to 100 I really won't care that I *wasted* $10K buying the deferred lifetime annuity ;)

Subscribe to Enough Wealth. Copyright 2006-2022

Saturday 17 December 2022

Investment unit final inspection and mortgage approval 'dramas'

DW and I had our 30 minute 'final inspection' tour of my new investment apartment today. Looks very nice and I couldn't find any defects that require fixing. In any case there will still be a 90 day period after settlement (in Jan/Feb) where any defects can be reported and must be rectified by the builder. The view from the balcony was as good as I had hoped for (although the weather wasn't great), and the finish of the apartment is excellent, so I am very happy with how the construction turned out. They even 'threw in' some extras that were not specified in the contract signed in 2019 (blinds for the bedroom and living room windows, a fitted microwave, and a nice fitted refrigerator and freezer drawer). The floor plan appears to be as per the original design, around 65 sq m (which is good as the contract allowed up to 10% variation in the final floor area). I'll be initially letting out the apartment - the rent is expected to be around $700-$750 per week. The agent said an identical apartment six floors above mine (and with a car space) recently sold for $1.5m. A car space adds about $100K to the price, and the price increases by about $10K per floor, so this would mean my apartment should be valued around $1.35m (I had guessed it would be somewhere in the $1.2-$1.3 million range). Including stamp duty and legal costs, the purchase price was about $1.05m, so I have made a 'paper profit' of about $300K (maybe).

                        A 'room with a view'

Unfortunately getting loan approval hasn't gone as smoothly as I had hoped. The rise in interest rates during the past year certainly hasn't helped with the 'serviceability' calculation. After making the required $400K reduction to our existing 'portfolio loan' line of credit, the bank lender passed on our application to a different loans officer, and they now said that further reductions in our existing credit limits (eg cancelling credit cards, reducing the existing line of credit further) would be required for the loan to be approved - but wouldn't give an exact amount to ensure approval. As I don't want to end up without financing in place for settlement in January or February, I talked them into agreeing to reinstate our previous 'line of credit' (back to the previous $850K) which means it will be sufficient to settle even if I can't secure a property mortgage loan. In the meantime I will submit a new loan application (the previous application had mysteriously disappeared off the bank's system during the past week) and hopefully will get 'provisional approval' that will be subject to reducing our overall existing credit limit by a specified amount. Depending on how much mortgage would be approved (and how much existing credit line would have to be eliminated) I might end up either funding the $800K required to 'settle' using a property mortgage (at about 5.8% pa interest rate) or else have to use the 'portfolio loan' line of credit (which is currently at 7.8% pa interest rate). I'd obviously prefer to get funding via a mortgage if possible.

In case I end up paying 7.8% interest (or more, if interest rates rise again) I have been busy cancelling some of my existing savings plans and eliminating my 'salary sacrifice' into superannuation. This should increase my 'take home pay' by enough to be able to cover the required interest only payments on the 'portfolio loan', provided I also put in a request to the ATO to vary the amount of PAYG tax withheld to reflect the anticipated net reduction in taxable income. Things will be a lot more comfortable financially if I can arrange a property mortgage to fund the purchase.

Subscribe to Enough Wealth. Copyright 2006-2022

Tuesday 6 December 2022

Inflation and interest rates snapshot

As I am about to take on a sizable mortgage, inflation and interest rates (and their future magnitude) is of considerable interest to me. After a prolonged period of very low (below the RBA's 2-3% target range) inflation, the transition to 'Covid-normal' lifestyles around the developed world led to a burst of inflation. Ongoing 'zero Covid' lock-downs in China certainly didn't help. After initially believing it was a just temporary blip (and would revert to previous low levels automatically), central banks realized that there was a risk of permanently higher inflation, with the possibility of it becoming 'entrenched' if people came to expect it would persist, and therefore demanded higher wages, which in turn leads to higher costs and prices in a 'vicious cycle'. The Russo-Ukraine war (and its impact on energy prices and fertilizer and food production) also gave a further boost to global inflation and made it more likely to persist.

So, in Australia, the RBA 'woke up' to the fact that inflation wasn't going to revert to its 2%-3% range naturally by around May this year. It then rapidly lifted rates by 0.5% increments each month for several months, and then reduced the rate of increase to a more 'normal' 0.25% increment in recent months as they wait to see when (and at what level) inflation 'peaks'.

There was a possible indication in the recent cpi figures that inflation *might* have peaked around 7% in the second half of 2022, which explains why the RBA has been content to use 0.25% increments. The RBA does not announce a rate change in January, so the next decision on rates won't be announced until Feb 2023. If the inflation rate continues to hold around 7% (or starts to moderate) there may be few (or no) more rate increases in 2023. On the plus side oil prices have been trending down since mid-year, and may drop below $70 if there is a global recession. But there have recently been some pushes for wages to rise in line with inflation, and a 7% rise in AWOTE would make it difficult for inflation to be brought rapidly back down to the 2-3% target of the RBA.

Home mortgage rates are generally 1.5-2% above the 'cash rate', so further increases in the cash rate during 2023 will flow through to higher mortgage interest rates. On the other hand, rising interest rates and falling real estate prices generally lead to a 'bust' in the building industry, which eventually leads to a tightening of housing stock and rising rents. So rents *may* rise in line with mortgage repayments to some degree. Hard to predict how things will develop during 2023 - I certainly wasn't expecting to see inflation to rise to 7% when I bought my investment apartment 'off-the-plan' back in 2019.

The RBA cash rate decisions certainly appear to be 'lagging' the movements in the inflation rate by a year or more, so I hope the RBA doesn't keep raising rates for too long and ends up throwing the Australian economy into a deep recession like in 1982 or 1991. A lot will depend on what the cpi numbers are during the next two months. Good figures would probably see the RBA 'pause' further rate hikes for a couple of months, but they are unlikely to reduce rates until they have confirmation that inflation has been brought under control. So even if inflation has peaked the RBA is unlikely to contemplate any reduction in the cash rate until at least the middle of 2023.

Subscribe to Enough Wealth. Copyright 2006-2022

Friday 2 December 2022

Applying for a mortgage 'pre-approval'

The 'off-the-plan' one-bedroom apartment I contracted to purchase back in 2019 has now completed construction. I have the 'final inspection' scheduled for 17 Dec, during which allotted 30 minute  period I'll have to go through a check-list to try to identify any 'defects' that the builder *should* rectify before settlement (which will happen sometime in January). I had intended to pay ~$200 to get an inspection done by a registered building inspector, but the company I contacted for a quote said they couldn't do it within a fixed 30 minute appointment window (they probably won't take more than 30 minutes, but probably just go from one job to the next and can't guarantee to arrive at a fixed time). Hopefully everything is working OK and the apartment floorplan ended up as advertised, and the finish it to a high standard (I would hope so, given the unit cost $1 million!).

I initially paid a $100K deposit back in 2019 (plus the $42K state 'stamp duty' tax), so I'll need $900K to pay the vendor at 'settlement'. I have about $100K in my bank account (I sold some shares earlier this year), so I need a mortgage for the remaining $800K. I could use my (and DWs) existing 'portfolio loan' line of credit (that is secured against our existing home equity), but the interest rate (7.53%) is considerably higher than I'd pay on an investment property mortgage loan (5.29%).  So I'm applying for a 30 year variable rate loan, with 'interest only' payments for the first five years. Preliminary calculations by the bank's mortgage officer indicated that we have to reduce our current 'liabilities' by around $400K to meet the bank's lending criteria. This is largely due to my having unused credit limits on several credit cards (which I don't use, but like to retain as an 'emergency fund') and a large credit limit on our portfolio loan. As we only have a small amount currently taken from on the portfolio loan.(about $80K with a credit limit of $880K), we will apply to reduce our portfolio loan credit limit by $400K so I can get the new mortgage pro-approval passed.

Based on some rough calculations, the apartment should end up costing me around $100 per week 'out of pocket' (after taking into account the tax savings due to negative gearing), which I can easily fund doing a couple of Door Dash  sessions each week. The rest of the repayments and costs during the five years of 'interest only' payments should be covered by the rental income. Hopefully rents may have risen sufficiently over the next five years so that I will be 'neutrally geared' by the time the loan reverts to 'principal and interest' payments (which will be about 20% higher than 'interest only').

If mortgage interest rates rise, I'll have to find some additional cashflow (eg. by reducing my current automated savings plans, or eliminating salary sacrifice into superannuation). Every 0.5% rise in mortgage interest rates would add another $77 per week to the required repayments.

Subscribe to Enough Wealth. Copyright 2006-2022

Net Worth: NOV 2022

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

My 'Stocks' figure was up $11,049 (4.10%) to $280,631 net equity.

The value of my 'Other Assets' category (gold and silver proof coin collection, valued at bullion value only, Perth Mint unallocated gold, silver and platinum holdings, and my small art investment via Masterworks) was up slightly during November, rising $1,070 (3.46%) to $31,993.

Our estimated house price for November (my half) fell another $18,138 (-1.64%) to  $1,088,267 with continued weakness in the Sydney real estate market due to rising interest rates. Declines are likely to continue until inflation is brought under control, the RBA ends the cycle of interest rate hikes, and home loan interest rates stop rising. I expect falls in absolute terms to continue, with the decline in real terms being worse due to inflation (currently running at 7.3% pa).

The value of my retirement savings recovered to $1,468,873 (up $85,164 or 4.64%) during November.

Overall, my estimated NW increased to $3,181,321 during the past month - up by $59,395 (1.90%), recovering most of the losses since last June, but still down by about $140,000 from the highs reached last December.

Subscribe to Enough Wealth. Copyright 2006-2022

Thursday 3 November 2022

Get $10 bonus when joining Superhero for share trading

** Sponsored Post **

Superhero is an easy to use app that I use to trade a small portfolio of US shares without having to pay commissions. I currently had the following portfolio:

CORN - Teucrium Corn Fund

WEAT - Teucrium Wheat Fund

ITA - iShares U.S. Aerospace & Defense ETF

SQQQ - ProShares UltraPro Short QQQ

Total gain since I added CORN, WEAT and SQQQ to my portfolio in July has been +USD $30.34 (+4.68%). I'm not recommending this as a portfolio - I simply thought investing in ITA was a good idea at the start of the year (due to developments in the US aerospace industry and the likely positive impact of the Ukraine war on US defense companies), and then added SQQQ as the tech bubble started to deflate, and added CORN and WEAT due to the likelihood of food commodities seeing price increases due to the impact of the Ukraine war. I only have about $500 invested in this 'portfolio' as a small speculative investment to amuse myself (I am mostly a long term investor in index funds -- which is a bit like watching grass grow).

Features of trading using  the Superhero App include:

* Earn Qantas Frequent Flyer points: Earn Qantas Points on eligible trades and transfers with Superhero. Eligibility criteria, min share trade amounts, terms and conditions, fees and charges apply.

* Trade Australian shares: $5 per trade ($0 brokerage on ETFs). $100 minimum investment.

* Trade US shares: Invest in US shares and ETFs with $0 brokerage and $10 minimum investment.

* Free to join and no monthly account fee.

To get $10 of Telsa shares for free (when you deposit $100 or more within the first 30 days) simply join using the link:

Disclaimer: If you use this link to join and qualify for the free $10 of Tesla shares, I'll also receive $10 of free Tesla shares ;)

Subscribe to Enough Wealth. Copyright 2006-2022

Wednesday 2 November 2022

Net Worth: OCT 2022

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 recovered some of the recent falls during the past month. My 'Stocks' figure was up $4,291 (1.62%) to $269,582 net equity.

The value of my 'Other Assets' category (gold and silver proof coin collection, valued at bullion value only, Perth Mint unallocated gold, silver and platinum holdings, and my small art investment via Masterworks) were mostly unchanged during October, rising only $48 (0.16%) to $30,923.

Our estimated house price for October (my half) fell another $27,595 (-2.43%) to  $1,106,405 with weakness in the Sydney real estate market due to rising interest rates. Declines are likely to continue until inflation is brought under control, the RBA ends the cycle of interest rate hikes, and home loan interest rates stop rising. I expect falls in absolute terms to continue, with the decline in real terms being worse due to inflation (currently running at 7.3% pa).

I was notified that settlement for my 'off-the-plan' investment unit will occur sometime in January, so I have a meeting to discuss a mortgage application with our current bank during November. The prices for units (apartments) in the suburb have started to decline slightly, but on the other hand rents have been rising (which will help with cashflow to fund the mortgage repayments).

The value of my retirement savings recovered to $1,403,709 (up $78,966 or 5.96%) during October, reversing the decline suffered in September.

Overall, my estimated NW increased to $3,121,926 during the past month - up by $55,962 (1.83%), recovering about half the decline in NW suffered during September.

Subscribe to Enough Wealth. Copyright 2006-2022

Saturday 15 October 2022

Unexpected 'fee for no service' refund

As a registered Financial Adviser (sans clients) I'm all too familiar with the litany of complaints the 'Royal Commission into Misconduct in the Banking, Superannuation and Financial Service Industry' uncovered several years ago here in Australia. At the time I wasn't surprised that there were some Financial Advisers who had given inappropriate advice to their clients, given that up to then there was a fairly lax requirement to become registered as a financial planner  (a short course that could be done in one week to get 'RG146' certification was all that was required) and quite a lot of 'advisers' were apparently either just product/insurance salesmen (and women) or else spruiked products based on which ones provided the highest initial and trailing commissions.

But I was rather surprised by the number of instances where advisers employed by the 'big four' banks not only pushed (recommended) products produced by the banks (or their associated companies), which was a major aspect of the profitability of 'vertical integration' (get existing banking customers to buy insurance or investment products sold by the banks themselves) but only then also provided little or no ongoing 'advice' (no matter how poor quality) to their 'clients' despite receiving ongoing trailing fees for years on end.

I had known that retail customers had a hard time avoiding paying ongoing 'trailing fees' to a financial adviser for any investment products they purchased, as I had found that nearly all investment product application forms at the time required the details of a financial adviser be filled in (who would then receive 'trailing commissions' of between 0% and 1% or more). If a retail customer didn't fill in any adviser details the relevant 'trailing fee' was simply retained by the product provider! I had managed (as a retail customer) to at least get 50% of such 'trailing fees' refunded on my investments by making use of a service by 'YourShare' who refunded 50% of such fees (you were paying 50% fees for basically just aggregating the fees and sending you a cheque each years, but at least they were doing *something* in exchange for the fees received).

I was therefore surprised to receive a letter from one of the 'big four' banks last week advising that their subsidiary financial planning company had received such trailing fees for one of my investments between August 2008 and April 2010 (probably before I signed up with YourShare) and because the didn't have records to prove I had received any relevant 'services' in exchange for the fees, the bank was refunding the $629.16 of fees paid, plus interest (at 6% pa) on that amount for the subsequent years (adding up to another $1,202.86 in interest). Quite an unexpected 'windfall' of $1,832.02.

I'll have to check up on the ATO webpage relating to 'Compensation paid from financial institutions'. I probably won't owe tax on the actual fee amounts (as such fees would have been tax deductible if I'd been aware of them, but I never claimed a deduction) but the interest component will probably be taxed as 'other income' or 'interest received'.

Subscribe to Enough Wealth. Copyright 2006-2022

Tuesday 4 October 2022

Net Worth: SEP 2022

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 fell over the past month, probably due to a combination of rising interest rates, increasing prospects of a global recession, and increasing possibility of the Russian invasion of Ukraine and annexation of 20% of the country leading to a widening of the conflict. My 'Stocks' figure was only down $2,074 (-0.78%) to $265,291 net equity. This relatively good performance is due to having eliminated gearing and liquidated most of my direct share and fund investments (outside of super) a few months ago to increase my cash holdings prior to settlement falling due for my off-the-plan investment unit purchase.

The value of my 'Other Assets' category (gold and silver proof coin collection, valued at bullion value only, Perth Mint unallocated gold, silver and platinum holdings, and my small art investment via Masterworks) did quite well during Septemeber, rising $1.507 (5.13%) to $30,875.

Our estimated house price for September (my half) fell by $32,000 (-2.74%) to  $1,134,000 due to the general weakness in the Sydney real estate market finally flowing through into sale prices in our suburb.

The value of my retirement savings dropped to $1,324,743 (down -$71,970 or -5.15%) by the end of September, due to our SMSF being practically 100% invested in the Vanguard High Growth Index Fund.

Overall, my estimated NW decreased to $3,065,964 over the past month - down by $104,287 (-3.29%). It isn't much fun watching one's net worth decrease by my annual salary during a single month. But I won't be surprised if there are worse months ahead during the remainder of the 22/23 FY.

Subscribe to Enough Wealth. Copyright 2006-2022

Saturday 10 September 2022

Door dash update

Well, I've been doing occasional Door Dash delivery 'shifts' for about 8 weeks now. I've Dashed mostly on Friday or Saturday evenings during the peak activity time (around 5:30-8:30pm), aside from a couple of occasions where I did a few hours Dashing after dropping DS2 off at a sports competition/training (and had a few hours to wait around).

I've found that Dashing in my local 'zone' is reasonably good. There are a couple of adjacent 'zones' that sometimes pay slightly more 'bonus' during their promotional periods (where you get an extra dollar or two on top of the standard delivery fee), but one of them in quite sparsely populated, so you end up doing a lot more driving to pickup and then deliver an order. Longer trips pay slightly more, but that isn't any more than you would get spending the equivalent amount of time doing shorter jobs, so the hourly rate is about the same, but the extra distance means a much higher fuel expense. The other area is more built-up, but that means you often have to park a long distance away from the pick-up location (and waste time walking from the car and back) and also often have trouble finding a parking spot close to the delivery address. So my 'home area' is pretty much a 'goldilocks zone' for getting a decent amount of work, ease of parking, and less fuel expended.

Overall, during the past 8 weeks I've done some Door Dash delivery work on 15 days. I was off sick one weekend, so I've generally be doing two nights each week. Each session has averaged 2.75 hours, during which time I've driven an average of 54 km and made 5.13 deliveries, and earned an average of $75.53 during a session. So the average hourly gross income was $27.54 per hour, or $1.54 per km travelled. I've estimated the net income (after income tax, GST, and fuel costs) is around $23.53 per hour. The effective tax is lower than my marginal tax rate due to the business use of my car making a large chunk of the car expenses (insurance, registration, servicing and depreciation) tax deductible.

I'm on track to earn around $6,000 pa (after tax and expenses) if I continue to do a couple of three hour 'shifts' each week for the rest of this FY (up to 30 Jun 2023). I don't want to do more, as that would involve working on the less profitable days, or doing some morning or lunch time 'shifts'. I also need to stay within the annual km allowance on my cheap 'limited km' car insurance policy. I quite enjoy driving around for a few hours in my Jag, so the 'work' is quite enjoyable (a LOT less stressful than my 'day job'). It will also leave me free on Mon-Thu nights after I finish my full-time work to be able to do a couple of hours of 'cold calling' prospecting for local clients for my financial planning business.

The hourly rate (in theory) for my full-time 'day job' works out to be $54.36 per hour. I say 'in theory' as although I am 'officially' expected to work 37.5 hrs/week I usually end up doing some work in the evenings and on weekends when things get hectic. So I probably average around 45-50 hrs/week. So my effective pay rate could be as little as $40.76. So Door Dashing pays about 50%-60% of what I earn in my 'day job'. If I ever get some clients for my financial planning business the basic fee will be around $1,000 for about 10 or so hours work to produce a Statement of Advice. After associated expenses of around $250 the net revenue will be around $75 per hour. However, I also have fixed costs of around $12,000 pa, which will take a large chunk out of that (especially if I don't have many clients!). I figure I'll need at least 15 or so clients each year just to cover running costs, and as a part-time financial planner I could service up to 50 clients pa. So, my maximum revenue as a part-time financial planner would be around $26,000 pa for about 10 hours/week client work. Or $26/hour (very similar to what I can earn as a Door Dash driver!). There would be a lot of unpaid hours spent prospecting /finding clients as well. Of course this is just fee revenue for providing financial plan/SoA services. If I am engaged for ongoing services I would receive a similar (or slightly lower) 'hourly rate' for ongoing services and annual review, but would also receive a fee based on 'assets under management' (AUM) of 0.25%. If the average client had $100,000 invested this would provide additional revenue of about $250 pa per client, or possibly $12,500 additional revenue, which would move the hourly rate closer to what I earn in my 'day job'.

Subscribe to Enough Wealth. Copyright 2006-2022

Friday 2 September 2022

Applied to do PhD at ACU, and enrol in courses for CFP (via FPA) and FChFP (via AFA/Kaplan) certifications

I may be crap at marketing and have no clients for my financial planning business, but I'll be damned if I don't end up as the most overqualified financial advisor in Australia! ;)

Having complete my MFinPlan coursework last year, I did a couple of 'specialist' courses via Kaplan Professional (one in Margin Lending and the other in SMSF Taxation and Regulation).

Since WSU declined my application to enrol as a PhD candidate (they wanted me to first complete a MRes degree which would take four years part-time and cost around $30K), I decided to apply to enrol as a PhD candidate at some other Australian universities. First cab off the rank was ACU (Australian Catholic University). I'm not religious and ACU isn't a "top tier" university, but ACU does have a suitable school of Business and one of their campuses is conveniently located only ten minute bus ride from the Sydney office of my full-time employer (although I've been 'working from home' for the past couple of years, and probably won't have to go into the office more than one day a month in the immediate future). The application will apparently take around 8 weeks to be assessed, so I'll find out if I get accepted towards the end of this year. If I'm not accepted I'll apply to some other Australian universities (an advantage of doing a PhD in Australia is that the university fees would be covered by a fee offset scholarship under the Australian Government's Research Training Program).

I'm not sure if/when I'll commence a part-time PhD, so in the meantime I decided to enrol in the CFP (Certified Financial Planner) program available from FPA (Financial Planning Association of Australia). Completing the MFinPlan degree means that I was given exemption/advanced standing for the CFP1-4 courses, and will only have to complete one course (CFP C) - the 'capstone project', which is basically preparing a Statement of Advice for a complex 'case study'. And then pass the four hour multiple choice certification exam (the 'pass mark' is 80% I think, and in July the overall pass rate for the CFP exam was 66% - so it is probably about as easy/difficult as the FASEA exam was). I'll probably enrol in CFP-C at the end of this year, depending on what else I am doing at the time. There is also a relevant experience requirement (2 years full-time or 4 years part-time), so I probably won't be able to get the CFP designation until after I have built up a bit of a 'client book'.

I also put in an application with Kaplan Professional to enrol in the AFA's FChFP (Fellow Chartered Financial Practitioner) certification program. Apparently there is automatic exemption/advanced standing granted for two of the four required courses if you have completed CFP1-4 already, so I'm hoping that having completed the MFinPlan degree (which gave me advanced standing for CFP1-4) I'll also get exemption from the courses AFA3 and AFA4, and only have to complete courses AFA1 (Business Strategy for Financial Advisers) and AFA2 (Client Experience Strategy). That would save me both time and money, and avoid rehashing coursework that was already covered in my MFinPlan coursework.

I was prompted to apply to enrol in the FChFP courses now, as the AFA and FPA just announced that they intend to 'merge' into a single new professional association covering financial planners in Australia (I'm currently a member of both associations). The merger seems like a good idea, as there was quite a bit of overlap in the services/goals of the two associations, and because the 'pool' of registered financial advisers in Australia has shrunk considerably over the past few years due to increased regulation and the requirements to pass the FASEA exam and meet the new educational requirements. The new association (which will be dominated by the FPA) plans to maintain the CFP certification, but will phase out the FChFP certification program (while continuing to 'recognise' the certification). So if I want to get the FChFP designation I had to start soon!

The FChFP courses aren't too expensive ($1,200 each) and the two courses I will need to do cover more practical/applied material relating to running a financial planning practice than what the CFP courses or my MFinPlan degree covered. Not sure how worthwhile the FChFP designation will be (I'm sure my clients won't know or care), but as I'm already a Fellow of the Royal Astronomical Society and a Chartered Chemist, being a Fellow Chartered Financial Practitioner seemed like cool post-nominal to add to my current list ;)

DFP BAppSc GDipAppChem GDipAppSc MAstron MFinPlan FRAS CChem JP(NSW)

That bloody PhD is proving to be elusive though !

***** update *****

Turns out that Kaplan is no longer accepting new enrolments for the FChFP courses, so I won't be doing that certification. Coincidentally I received a reminder email to renew my AFA subscription the same day I found out that the FChFP certification was no longer available - so there really isn't much point spending $500 or so to renew my AFA membership, especially as the AFA is likely to be absorbed by the FPA by the end of this year.

Subscribe to Enough Wealth. Copyright 2006-2023

Net Worth: AUG 2022

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 value was flat over the month - rising during the month but then selling off sharply during the past week due to hawkish comments by the US Fed chairman regarding inflation and interest rate rises. My 'Stocks' figure was only down $476 (-0.18%) to $267,365 net equity. This month I moved the value of my Perth Mint online depository bullion holdings from 'Stocks' into 'Other Assets' (which previously just included my gold and silver proof coin collection valued at bullion valuation), and I also added in the value of my art investment via Masterworks into the 'Other Assets' category.

Our estimated house price for August (my half) was flat at $1,166,000 due to there being no reported change in median house sales prices in our suburb.

The value of my retirement savings dropped slightly to $1,396,713 (down -$8,352 or -0.59%) by the end of August.

Overall, my estimated NW decreased slightly to $3,170,251 over the past month - down by $4,749 (-0.15%). 

'Other real estate' includes my off-the-plan investment apartment and my hobby farm at 'cost'. Other mortgages includes the amount that will be due on settlement for my off-the-plan apartment in late 2022. If I was tracking the estimated market value of my lake house/hobby farm and the likely increase in the value of my off-the-plan apartment since I paid the deposit, my NW would have improved slightly overall (by around +$4,500) during August (rural NSW property prices lag Sydney, and are still rising slightly). Any rise of drop in estimated NW of less than $10K is probably well within the 'error bars' due to the uncertainty associated with valuation of assets such as real estate, art work, coin collections etc. Including an estimated price increase for the off-the-plan investment unit and hobby farm would add around $709,851 to my posted NW figure. Including DWs assets and liabilities would add around $1,385,589 net to household NW, so if I was tracking total household NW it would currently be around A$5.266MM.

Subscribe to Enough Wealth. Copyright 2006-2022

Wednesday 31 August 2022

DS2 started his first proper job

DS2 is in Year 10 and recently picked his subjects for Year 11 (and hence what he will be studying for his HSC exams/ATAR score for uni - English (with Extension 1 and possibly Extension 2), Mathematics (with Extension 1), Software Design & Development, Economics, and Business Studies). Unlike DS1 he has cut back on a lot of his previous extracurricular activities - dropping out of piano lessons and Judo classes (he still does Kendo) and not wanting to bother doing the Duke of Edinburgh awards via school (which involves some volunteering, skills activities, and some weekend/short camping/hiking trips). He has a girlfriend and is quite keen on Volley Ball (the school junior team he is in won the zone final and will be competing in the District comp next term) and he seems to spend a lot of time chatting with friends via Discord and playing online games (how he manages to still get good grades at school is a mystery).

He has reached the age where he would like some extra 'spending money' and decided that earning $10-$20 doing a bit of busking on the weekends just wasn't adequate. Unfortunately the local newspaper has gone 100% digital, so a 'paper round' was no longer an option. He had a brief go at letterbox 'junk mail' delivery last year, but decided that spending many hours over two evenings each week collating bundles of hundreds of flyers into individual sets (OK, I actually ended up doing most of the collating!) to be delivered, and then spending 3-4 hours walking around a local suburb delivering the individual sets was too much time and effort for only earning around $50-$60. I've frequently regaled him with my tale of working on weekends at a market garden for only 60c an hour when I was in high school - but for some reason I think that gave him the impression I was an idiot, rather than the intended example regarding the value of hard work.

So he dropped the delivery job and decided to get a job at McDonalds instead (the minimum wage of around $15/hr for his age group is a lot better than the 'piece work' rate paid for letterbox delivery work). In his first attempt (last year) he got through two rounds of interviews with McDonalds, but was then never offered a position (probably due to having limited shift availability at that time, plus the reduced staffing needs during the Covid pandemic lock-downs). He recently applied again, and this time he was offered a position and did his first 'training shift' (3 hours) last Tuesday. In future his shifts will be at the local Maccas that is only a five minute walk from our house, but for this initial training session he had to attend a specific McDonalds store that is about 30 mins drive from our home. I drove him there, and since it wasn't really worth driving home again when I'd have to return to pick him up a few hours later I did a couple of hours of Door Dash delivering in that area while he was doing his 'shift'.

DS2 expects to do two or three 4-hour shifts every week, so he should earn around $180 per week for about 12 hours work. He's agreed to only spend 25% (roughly) of his wages on "everyday" spending (games, movies, whatever he fancies) and to save 50% (roughly) for longer-term goals eg. saving up for an overseas trip when he finishes his HSC exams (I bought DS1 return airfares for a trip to Europe when he finished the HSC, but he had to cover his own spending on backpacker accommodation, train fares, food etc. and will do the same for DS2 as a 'graduation present'), a new laptop computer, a second-hand car when he starts uni, etc. After a bit of "negotiating" (aka disagreement) DS2 agreed that the final 25% of his earnings should be invested, with $1,000 being contributed into super as an undeducted personal contribution (so he will receive the $500 government co-contribution). Depending on how much he actually earns, that might be around half of the agreed 25%. Once he has put aside $1,000 for his annual super contribution we'll have another chat about where he might invest that portion of his wages.

As he will also receive the mandatory 10.5% employer contributions into his superannuation account (he already has about $9,000 is his superannuation account due to 'child super' contributions I had made over the years) he will end up adding around $2,500 to his super balance each year, which is quite significant considering it will then compound for around five decades before he retires ;)

Subscribe to Enough Wealth. Copyright 2006-2022

Wednesday 24 August 2022

Bought a teeny weeny bit (0.013%) of a George Condo painting

After an initial online 'interview' back in July regarding joining with a reduced minimum investment of US$5,000 I still hadn't got around to making an initial investment, although I had been tempted by one of the paintings that was advertised via an email offer a few weeks ago.

Then a 'special offer' came through inviting me to invest as little as US$500 in the painting 'Ecstatic Figures' by George Condo. The painting's "offering price" is $3,885,000 with the shares IPO price $20 each. So I ended up paying US$500 for 25 shares, plus there was a $20 processing fee. For simplicity I just paid this via a credit card, and the total cost ended up being A$758.76. For a 0.013% stake in this painting ;) Interestingly the SEC Filing stated that the minimum investment amount was $15,000 but they could vary the maximum and minimum investment amount 'on a case by case basis' at their sole discretion. According to the filing Masterworks bought this Condo from a private seller for $3,500,000 on 22 July 2022.

Masterworks has previously sold one Condo painting for an annualized return to investors of 31.7% net of all costs and fees. And the historic price appreciation for 'similar works' is 18.6%.

I'll probably add to my Masterworks 'portfolio' over time, depending which paintings are on offer and catch my eye. The amount invested is trivial, so it will be a low risk way of monitoring how this 'investment in art' actually performs over time. If nothing else, it is a bit of fun.

I thought this painting was quite nice - I could at least tell it was a crowd of people, the colour scheme seems coherent (to me), and stylistically it reminds me of Picasso (but what do I know about art).

Masterworks has several paintings by George Condo in their Portfolio, including:

'Staring into Space' $1,760,000 Est. price change 49.4%

'Gargantua' $1,650,000 Est. price change 33.8%

'The Age of Reason' $2,997,000 Est. price change 11.6%

'Listening to Voices' $3,330,000 Est. price change 14.5%

'Mary Magdalene' $644,000 Est. price change 49.4%

'Transparent Figures' $3,413,000

'Ecstatic Figures' $3,885,000

Subscribe to Enough Wealth. Copyright 2006-2022

Tuesday 2 August 2022

Net Worth: JUL 2022

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 improved slightly, but as I have eliminated my use of gearing and moved some of my investments into cash in preparation for settlement on my off-the-plan investment apartment at the end of this year, my 'Stocks' figure was only up $5,060 (1.93%) with $267,841 net equity.

Our estimated house price for June (my half) was down (-$12,956) to $1,166,000.

The value of my retirement savings recovered most of last month's losses to end the month at an estimated  $1,405,065 (up $71,166 or 5.34%).

The bullion value of my proof gold and silver coin collection decreased slightly, down -$1,266 (-4.72%) to $25,452 due to an overall decrease in gold and silver spot price during July.

Overall, my estimated NW recovered somewhat to $3,175,000 over the past month - up by $62,273 (2.00%). If I was tracking the estimated market value of my lakehouse/hobby farm and the likely increase in the value of my off-the-plan apartment since I paid the deposit, my NW would have improved by a further $18,000 or so during July.

I started doing a few evenings of Doordash deliveries during the month, earning $294.64 gross. 

Subscribe to Enough Wealth. Copyright 2006-2022

Sunday 31 July 2022

Buying some WEAT and CORN

I decided to transfer another A$500 into my Superhero trading account and use the funds to buy some Teucrium WEAT and CORN ETF units. Global food shortages and price increases seem likely given inflation, population growth (still increasing despite there also being a problem with population decline and aging demographics in most developed countries, and even Russia and China), the impact of the Russia-Ukraine war on grain shipments this year, and grain production next year (due to impact on productivity (fertilizer availability and cost) and production (hard to focus on farming in Ukraine during a war)), and climate change impacts.

The Teucrium ETFs seem to be a reasonable way to gain some exposure to grain as a commodity. The Teucrium Wheat Fund (WEAT) provides investors an easy way to gain exposure to the price of wheat futures in a brokerage account, and the Teucrium Corn Fund (CORN) provides investors an easy way to gain exposure to the price of corn futures in a brokerage account.

I had no real reason to invest in both funds rather than invest twice as much in one of the two funds, aside from it being better to diversify than not, as a general rule. I placed the order on Sunday, so I don't think it will be filled until Monday (I'm not sure what the trading hours are for my time zone).

These ETFs have been in an uptrend for the past two years, and had spiked higher at the outbreak of the Ukraine war on 24 Feb, but have since dropped back to the long term trend line, so appear to offer reasonable value at current prices, assuming the long term price appreciation for grains continues.

There seems to be reasonable potential for more upside given previous high prices about a decade ago.

This isn't any sort of recommendation to invest in WEAT or CORN, just an update on a small trade I recently did 'for fun' (to be honest, a $500 investment won't have a noticeable impact on my NW whether it shows massive gains or losses).

Subscribe to Enough Wealth. Copyright 2006-2022

Wednesday 20 July 2022

Thinking of dabbling in unitized art investing

I had seen some online adverts and reviews for the  investment scheme, and Moomin had made some investments via Masterworks. I've recently added some regularly small investments into gold, silver and platinum to my overall asset allocation, and thought that also putting a small allocation of future investment funds into art might also be good idea (or at least no worse than my previous forays into agribusiness investments (that went bust), unlisted pre-IPO internet company GEM in 1999 (which went bust before getting to IPO stage, just before the boom), and various 'good story' small cap stocks (such as Aerodata, Holyman Ferries, etc.) that turned out to be not as good in reality as the company annual reports had anticipated). Due to the upcoming settlement of my off-the-plan apartment investment I might not have a large amount of free cashflow to invest, but I thought I might as well 'apply' to join Masterworks and find out some more about the process.

I filled in the online 'application' and, probably due to indicating I was thinking of investing up to $20,000 in the first 12 months, was 'fast tracked' to arrange an on-boarding 'interview' (aka 'sales pitch') later that evening (1am Sydney time was a convenient 10am local time appointment for the allocated Masterworks 'adviser').

The phone interview was reasonably low pressure (I wasn't pushed into making an initial investment straight away, although that was definitely suggested several times as a good way to 'get started'), and I clarified a few questions about the initial mark-up when artworks purchased by Masterworks are unitized and the investment processed via the SEC (the mark-up or "true up" as Masterworks calls it is around 5-8%, which doesn't seem too outrageous as there are costs involved in researching, selecting, acquiring the artwork and then setting up the investment offer). Ongoing annual fee is 1.5% (which is similar to many specialist active investment funds or niche investment funds), and Masterworks retains 20% of any realized profit when the Artwork is eventually sold (the remaining 80% of the profit is distributed to unit holders).

The 'normal' minimum investment amount is currently around $15K USD, but can be varied according to your situation (Masterworks wants to attract new investors, but reasonably affluent ones). In my case an initial $5K USD investment was suggested, which seems reasonable to 'get started'. At the moment I've deferred taking the initial plunge, as I want to digest the details of the current handful or artworks on offer (Masterworks brings on maybe 1-2 new artworks every month or two, and the units are available until the investment is fully subscribed - which can vary from a few days (or hours) for a 'hot' artist like Banksy, or be a few months).

One thing I'm slightly uncomfortably with is the fact that Masterworks decides when (and if) to eventually sell the artwork. The stated 'suitable' investment timeframe is 8-10 years (due to it being a volatile/risky asset class), but recently sales have often occurred after a holding period of only a few (2-3) years. My concern is that Masterworks, while always purchasing artworks that they expect to make a profit, would be tempted to sell artworks that rapidly appreciate as expected (as this will make investors happy, provide Masterworks with a healthy 20% of the profit, and provide great average annual return data to spruik and grow their AUM and annual fee revenues) and might hold onto poorly performing artworks indefinitely. That way mistakes and poorly performing (e.g. artists that fall out of fashion) art can be 'hidden' by never selling at a loss and realizing negative returns. While still proving Masterworks with an annual 1.5% management fee. Indeed one of the 'welcome emails' mentions "a low probability of any price declines over the last 25 years".

This is similar to the way active fund managers keep (and advertise) funds that perform well, but close down poorly performing funds (often citing lack of investor interest as the fund shrinks due to poor returns and investors making withdrawals from underperforming funds). Once a fund is closed the data no longer appears in fund managers 'available funds' performance charts, ratings etc.

In Masterworks case it would be the most successful investments would be sold fairly quickly, providing examples of great annualised returns, but 'dogs' would be left quietly sitting in investors accounts and never sold. The "Net Annualized Track Record" is for the overall 'portfolio' of 119 purchased artworks and is a mix of actual realized prices for sold artworks, and Masterworks estimates of the value of artworks still retained.

However, this isn't any worse than investing in artworks directly. You always have considerable holding expenses (if you insure your artworks) and considerable selling costs (if you sell via an auction) and uncertainty about the value of the 'investment' until it has been sold. And on the plus side, investing via Masterworks allows you to make a relatively small investment to get an interest in an artwork that would otherwise be out of one's price range.

I've yet to work out the technicalities of making the first investment - I'll setup another appointment when I feel ready to make my initial investment (you can't just transfer some funds into your 'account' and then make a unit purchase online. Apparently all investments are done with the assistance/via your investor relations manager). There will be some bank fees (and FX cost) to send the USD amount via a wire transfer. But it shouldn't be a huge cost - my bank charges $50 for an AUD transfer to a foreign currency, plus there will be an exchange rate 'spread' of up to 4% (I'll have to check what the actual costs will be - Moomin apparently used OSX for the money transfer). Sending $5,000 USD via Western Union would currently cost me around A$7,350.

I don't intend to make artworks a significant percentage of my overall asset allocation, so I've yet to decide if making a relatively small investment will actually be worth the time and bother compared to the likely impact on my overall NW performance. Another factor is that the investment is in USD, so you are also getting a currency speculation along with you underlying asset performance.

Subscribe to Enough Wealth. Copyright 2006-2022

Sunday 17 July 2022

Boredom 'Gig Economy' Job

As I don't have any tertiary studies at the moment (haven't applied to any other unis for a PhD candidature since WSU declined my application) and I haven't enrolled in the course I will need to do to qualify to sit the CFP exam, I decided to apply to become a Doordash delivery driver to do some part-time 'gig economy' work in my 'spare time'. I used to do some Ubereats deliveries (before the pandemic) and quite enjoyed driving around. Since I gave my old Ford Escape to DS1 as a 21st birthday present, I now only have the 2002 S-type Jag to drive around in (not that I've done much driving since I transitioned to working from home) and I only have limited km (10,000 pa) comprehensive insurance for that car (it was a lot cheaper than unlimited km coverage).

I applied to Doordash just before I came down with the 'flu, so only started driving yesterday evening for the first time. I did about 2.5 hrs from start to finish (a bit longer than the time I was logged into the DD app, as I had to drive home when I logged off) and earned $64.51 making 5 deliveries while logged in for 2hr 13 mins. Of course you have to allow for expenses (petrol and car running costs) and taxes, but it is still an OK casual job for time that I would be otherwise just spend sitting at home watching youtube or old movies on TV ;)

I didn't do another session today as I was feeling a bit 'off' after getting both my free 'flu vaccination and my 4th 'winter booster' for Covid yesterday afternoon (and I still have a slight cough from the 'flu I caught two weeks ago - probably a bit of a chest infection). I'll probably do another three-hour stint tomorrow night during the 6-9pm 'peak period'.

Using the Doordash App wasn't quite as intuitive as the UberEats App - you have to 'exit' out of the driving directions to see the pick and delivery details when arriving close to your destination - which made me park a bit further from the destination that I would have if I'd seen the street address while approaching the destination. And the delivery process also included taking a photo of where you left the delivery (although this may be a new requirement caused by most customers requesting their order be left at the door, rather than handed to them). I also only achieved 60% 'on time or early' rating, as the food wasn't ready to pick-up for 2 of the 5 locations (and apparently you can also get offered tasks after others have declined them, which means less time remaining when you accept the job). Overall the App was quite easy to use. Not sure about the 'scheduling' requirement though, as I currently have 'Top Dasher' status as a new driver for the first month (normally you have to have done 200+ deliveries and 100+ in the previous month, meeting various KPIs, to get 'Top Dasher' status. As a 'Top Dasher' you don't have to pre-schedule a time block to gain priority for available jobs, so you can just log in to 'Dash' at any time and should get some work (during peak times).

One nice feature of Doordash vs. UberEats is that you set a home location/area and the jobs will all be within that area (unless you choose to change area that you are logged in), so a sequence of jobs won't take you further and further away from your starting point (which sometimes happened when using UberEats, as it offers you jobs close to wherever your previous delivery took you).

One bad feature of Doordash is that the App seems a lot less mature and more 'buggy'. After my first session I had some Earnings accumulated, but the App required some 'additional information' before being able to make the weekly payment (due on Monday). I had to use to online 'chat' feature on my laptop to find out how to be able to enter my bank account details for payments (it required shutting down the App, uninstalling it, reinstalling it, and loggin back in before the 'bank details' icon would let me enter my details. The App's Earnings page is still showing that I need to etner more details -- although it then takes me to the banking details screen (which is now showing the bank account details I had entered). So I have no idea if I'll receive payment on Monday or will need to have another chat session with Doordash help...

I plan on doing up to three sessions (Fri, Sat and Sun nights) of 3 hours or so driving whenever I'm not busy (and it isn't raining!), and I expect to earn around $32/hr and travel around 54 km during a 3-hour session. I had previously logged my actual mileage, fuel and other vehicle expenses while doing UberEats deliveries and using my car for business use for my financial planning business, but it turned out that the pro-rata actual expenses method provided less of a deductible amount than simply using the ATO's standard 78c/km deduction for work-related car travel. So I will simply claim 78c/km for the mileage done doing Doordash deliveries.

I don't know how often I will actually end up doing evening deliveries, but the maximum would be 3x3-hr sessions (Fri,Sat,Sun) per week, and up to 50 weeks per year (allowing for a few rainy days where it isn't worth doing deliveries). So based on this maximum figure, the annual results might be:

Maximum 8,100 km pa = around $14,400 pa income

-$6,320 tax deduction for car expenses (at 78c/km)

= $8,080 taxable income, taxed at a marginal rate of perhaps 32.5c/$

= $2,630 additional income tax

Hence, maximum net income after taxes would be $11,770 if I do 3x3 hrs every week.

Petrol for my S-type Jag costs around 31c/km travelled, so fuel expenses would be $2,510 pa.

Hence, actual cash income (after tax and fuel) would be $9,260 (around $20.58 /hr).

I probably won't approach this maximum figure, but any amount will help fund the negative cashflow likely to result from my investment unit once I have settled at the end of this year and mortgage interest payments and expenses exceed rental income.

I'm also hoping to acquire some clients for my financial planning business this year, but but so far it has been a slow process to find any prospects or convert them into clients. I might start doing 'cold calling' of local residents for 3-hrs in the evenings that I'm not doing Doordash deliveries (the 'cold calling' regulations permit calls before 8pm on weekdays, so calling from 5-8pm Mon-Thu would be possible. I'm still working on extracting a listing of local phone numbers from the online 'white pages' phone directory and 'washing' it against the 'do not call' register. (DS1 wrote some software to automatically skim data for a list of surnames in local postcodes, but I need to get him to show me how to run it for myself as he wrote it in C# (my attempt in python didn't work) and I haven't used C# since I did my GradDipAppSc (Industrial Math & Computing) degree in 1995!

Subscribe to Enough Wealth. Copyright 2006-2022

Saturday 16 July 2022

A Tale of Two Bloggers

One of the PF bloggers I follow is Moomin as he is located in Australia and we met briefly when he was in Sydney when he returned to Australia from the US several years ago. It is interesting (to me) to compare our NW progress, as we both publicly track our NW using Networthshare (although he tracks combined household NW in USD terms, whereas I track my personal NW (excluding DWs NW) in AUD terms). I grabbed screenshots and did a simply offset to remove the impact of gifts/inheritance, and the result is quite similar - probably due to us both have a signficant exposure to AU and international stock markets as part of our asset allocations. Although Moomin is a professional economist and makes more exotic/sophisticated investments than me these days.

 Moomin is several years younger than myself, and has a younger family, so he is actually doing quite a bit better than myself an on age adjusted basis (and at the current USD-AUD exchange rate), but the general trend and impact of global events is quite similar. One difference is that I was making significant use of gearing via margin loans up until 2007, so the impact of the GFC was more obvious on my NW than on Moomins. On the other hand, I have stuck with simply index fund investing for my superannuation investment, whereas Moomin makes use of much more sophisticated investment vehicles (due to his expertise as an investor and economist) which has produced superior results compared to my basic approach in recent years, but appears to have been more exposed to the market decline in recent months.

Another difference is that I shifted our SMSF out of Vanguard High Growth Fund and into a mix of Vanguard Diversified and Conservative Funds in Feb 2018, so avoided the worst of the pandemic-induced market crash. I have a larger % of my NW tied up in real estate (our home and the lake house I was gifted), which probably accounts for Moomin's relative out-performance during 2019-2021.

Subscribe to Enough Wealth. Copyright 2006-2022

Sunday 10 July 2022

Boredom trading

I've had the 'flu for a week and didn't feel like doing much CPD study, my Kaplan assignment on SMSFs, or anything else of much purpose, so I've been watching some youtube miscellany. One of the channels I've quite enjoyed was Jack Broe, was has an interesting background (ESL teacher in S Korea, then USAF missile silo operator, and more recently left the USAF to pursue other interests. He does a bit of trading on the US stock market and recently bought put options on the Nasdaq in the expectation that the current market downtrend would continue for a while. Of course as soon as he had opened his short position the markets recovered a bit, so he's down a bit atm but hopeful he will end up 'in the black' before his options expire in a few months.

I thought I might similarly short the Nasdaq with a tiny bit of 'play money' so I transferred A$100 into my superhero trading app, converted into about USD$68 and placed a market order for about $68 worth of SQQQ (ProShares UltraPro Short QQQ ETF). The US market is currently closed, but latest bid/ask price was around $49.90. I'm not sure if there is fractional trading on this ticker, but I should end up with either 1 SQQQ share for around $50, or else whatever fractional amount of SQQQ my $68 buys.

Of course it won't matter much whether I make or lose money of this A$100 trade, but it is nice to have a bit of a 'flutter' (my version of gambling I suppose) now and then. The only other holding in my Superhero trading account is the 3.17305 units of iShares US Aerospace and Defence ETF (ITA.US) I had bought in early January. After initially rising for a few months it then dropped and recently recovered slightly, so overall I'm down by about -6.5% on that trade. If I make a small profit on the SQQQ position over the next 6-12 months I'll probably close out the SQQQ position and add the funds to my ITA holding for the long term. I'd probably dollar cost average more into my ITA investment via a regular savings plan, but I won't really have much 'spare' cashflow to invest once I settle the purchase of my off-the-plan investment apartment at the end of this year and need to fund mortgage repayments.

Subscribe to Enough Wealth. Copyright 2006-2022

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.

*edit: turned out our SMSF investment probably wasn't down quite as much in June as I initially calculated - there was a sizeable distribution paid out on 30 June which wasn't reinvested in additional units until 1 Jul. Although the unit price dropped on 1 Jul to reflect this, the actual unit price used for the reinvestment ($1.6855) doesn't seem to match any of the 1 Jul unit pricing:

01 Jul 2022 $1.7002 $1.6974 $1.6988
30 Jun 2022 $1.7666 $1.7636 $1.7651

Subscribe to Enough Wealth. Copyright 2006-2022

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).

Subscribe to Enough Wealth. Copyright 2006-2022

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'.

Subscribe to Enough Wealth. Copyright 2006-2022

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).

Subscribe to Enough Wealth. Copyright 2006-2022

Friday 20 May 2022

Economics - a really 'soft' science

Economists like to think of economics as a 'science' but although it uses a lot of graphs, numbers and statistics it is firmly rooted in psychology and crowd behavior which means any one event often has several competing theories trying to explain what has happened, and none of them may be very 'correct' (think of it like curve fitting a fourier transform to past data points - you can get many equations that will fit the past data points very precisely, but none of those equations will make a good prediction of future data points).

For an example of how woeful economic predictions can be in practice, have a look at Statistica's predictions out to 2026 for Turkey that were published at the end of Nov 2021:

Turkey GDP projection:

Turkey Inflation projection:

One gets a sense of just how insanely optimistic the Author Aaron O'Neill was in the commentary about Turkey's economy "By 2030, Turkey is estimated to be one of the countries with the highest gross domestic product worldwide."

Of course, reality has already diverged widely from the four year forward projections made less than six months ago:

Turkey actual GDP data isn't available as promptly, but it looks likely to turn out more like this: 

considering how inflation has been taking off in 2022:

Turkey actual inflation:

Now, inflation may suddenly drop and GDP pick up in Turkey so that the '2026' predictions turn out to be accurate, but I doubt it.

Subscribe to Enough Wealth. Copyright 2006-2022

Monday 16 May 2022

DS1 left the nest

DS1 finished his IT degree at the end of 2020 and started working at the Sydney office of a large local IT startup that has grown into a significant international online during the past decade. His starting salary was similar to my current salary, and after a year at work he has received a promotion already earns more than me ;) He wanted to purchase an investment property in Sydney, but prices were too high for any decent property to be within his borrowing capacity, so he purchased a rental property in Brisbane late last year. He had a short holiday (two weeks) in the US in April and when he got back he moved out of home to live in a shared apartment with two of his high school friends. It is closer to his workplace than our house (reducing his commuting time by about 30 minutes each day) and it will also be good for his social life to be living closer to the city.

DS2 us currently in year 10 High School, so has another couple more years before his HSC exam and then (probably) will also do an IT degree like his older brother. So he'll probably be living at home for at least another 6-7 years. He'll probably be moving out around the same time I retire from full-time employment.

My parents are in the process of putting their rural property up for sale, and have decided that they probably won't be moving into the lake house property as it is a bit far from the nearest shops and doctor, and a long (>1 hr) drive from the nearest decent hospital. This would be an issue as mum's eyesight isn't good enough for driving these days, and my dad has also had a few 'dizzy spells' that make driving inadvisable. They *might* move into my 'off-the-plan' investment property in Sydney when it is completed in late 2022/early 2023. I would have to charge them the going 'market rent' (so that the loan interest and other expenses are still tax deductible and the rental income will be taxable). It would probably be a 'good fit' as they will have plenty of cash available to pay rent after they have sold their current property, and as they are both around 90 years old they won't have too worry too much about making their money last (they also get the full Age Pension). The apartment is only a few minutes walk from local shops and restaurants and a major hospital. It is also only a few minutes walk from a train station and will also be a few minutes walk to the new metro station when it opens in a couple of years. As it will only be three train stops (two metro stops) to the Sydney CBD, it will be very convenient if they want to visit museums, art galleries etc. in the city.

Subscribe to Enough Wealth. Copyright 2006-2022

Friday 6 May 2022

Degearing my stock market positions

As I think I mentioned in my monthly NW update, I decided to liquidate my stock market and mutual fund investments in my St George and Commsec margin lending accounts, as I was concerned that the market may be at the start of a significant bear market/correction phase due to a combination of high inflation, rising interest rates, Covid lockdown impact on Chinese economy, and Russo-Ukraine war impact on global food supplies, etc. All of which could negatively impact global GDP and stock markets over the next 1-2 years. Borrowing at relatively high margin loan interest rates (with interest rates rising) doesn't make much sense in a bear market.

I had sold off my speculative investments in oil (OOO.AX ETF) and food/agribusinesses (FOOD.AX ETF) as the price hadn't moved in the direction I had anticipated at the start of the Ukraine invasion, and as I had decided to ungear overall, I thought I might as well close out those positions. To sell the Vanguard International Index Fund and Diversified High Growth Fund holdings on my St George margin lending account I had to fill in a St George form requesting the Redemption of those managed funds, which SGML then forwarded to Vanguard Australia for execution. That redemption appears to have been processed on 3 May, although the funds haven't cleared yet.

To sell the Colonial First State Geared Global Share Fund holding on my Comsec margin lending account I had to fill in the redemption request from from CFS (which meant filling in the PDF form, printing it, physically signing it, then taking a photo to send as a PDF to Comsec ML for action). I got a response from Comsec enquiries the next day stating that the form was dated more the 12 months old so couldn't be processed. Upon checking it turned out I had put my birthdate in the signature section instead of the current date (D'Oh!). I had been in a rush to fill in the PDF form to email it to DW at her workplace so she could print it out for my signature (as I don't have a printer at home). So I then had to change the signature date and initial that change, take another photo/PDF image and email the updated form to Comsec ML. It doesn't appear to have been processed as yet, so the redemption price will be lower due to the recent slump in the US and local share markets. Fortunately the CFS mutual fund investment was only about $55K whereas the Vanguard mutual fund investments were about $115K, so at least I got the larger holding sold off at the better price.

I'll use the sale proceeds to pay off any remaining margin loan amounts (probably keeping a few hundred dollars sitting in the  ML 'cash' accounts to keep these margin loan facilities active in case I want to invest again in future), and pay off the balance of my St George portfolio loan (that had been used to fund the initial deposit and stamp duty when I bought my off-the-plan investment apartment a couple of years ago). Any residual cash I'll leave in my 'high interest' online savings account (currently paying 0.45% interest) until I need cash to 'settle' my off-the-plan apartment purchase when construction is completed at the end of this year or early next year.

I'll retain my long term investments in the Vanguard High Growth Fund inside out SMSF, as I don't plan to retire for at least 5-7 years, so may as well ride out any market gyrations. I also will retain my current investment allocations in my Investment Bond (as that is intended as a very long term investment to form the core of a testamentary trust investment upon my death).

It will be interesting to see how the markets perform over the next few years. I suspect the US market and European markets will see significant declines, which might also drag down the Australian share market. There may be a good 'buying opportunity' in a few years time if/when markets bottom out. A comparison of the S&P500 US index and the Australian All Ords index shows that often when there is a major correction in the US market the Australian market gets pushed down well below the long term trend line, which suggests it is often a good time to buy into the Australian stock market at the tail end of a major correction in the US share market.

Subscribe to Enough Wealth. Copyright 2006-2022

Tuesday 3 May 2022

Net Worth: Apr 2022

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

Stocks and managed fund investments suffered from US and local market declines during this past month, down -$16,494 (-5.45%) to have $286,130 net equity in my geared share portfolios. I am in the process of liquidating most of my geared share and managed fund investments outside of superannuation, as the market seems poised for a substantial bear market due to the war, rising inflation and interest rates, and impact of severe Covid lockdowns in China. I can't see much upside potential and I might need liquidity when my off-the-plan investment unit construction is completed towards the end of this year and I need to access funds for settlement (and might not be able to arrange a mortgage). This reduction in geared stock portfolio holdings will be reflected in next month's data.

Our estimated house price for April (my half) rose $30,057 (2.58%) to $1,196,057. There is still a mild decline in Sydney real estate but our suburb reported some price appreciation during the month.

The value of my retirement savings decreased during April due to the stock market weakness to $1,447,656 (down -$40,922 or -2.75%). Overall, my estimated NW decreased slightly to $3,266,965 by the end of April - down by -$25,613 (-0.78%).

However, if I was including price movements in my holiday home (lake house) and the estimated value of my off-the-plan apartment my NW would have slightly increased.

Subscribe to Enough Wealth. Copyright 2006-2022

Thursday 28 April 2022

Stacked some silver

I normally just have a regular $200/mo savings plan with Perth Mint Online Depository to purchase $100/mo of silver and $100/mo of gold at a 0.5% premium to the spot price. It is one of the cheapest ways to add some precious metals to my overall investment portfolio as there is no fabrication, shipping or storage costs involved. However, there is still something nice about holding physical gold and silver. But as I already have some piedfort proof gold coin sets and some miscellaneous 1oz silvers coins and 'bars' I normally don't both to buy physical bullion products due to the fabrication and other costs.

But the rectangular silver 1oz 'dragon' bars are just so pretty I had to buy one:

I was toying with the idea of buying a 'tube' of 20 coins, or even a 'monster box' of 200 coins (which would cost around A$8,000) but in the end I decided to just buy one coin to admire. The 'premium' above the 'spot price' is pretty horrendous:

1oz coin             A$40.51

shipping             A$17.50

bullion insurance    A$ 0.75

credit card fee      A$ 0.77

TOTAL                A$59.23

This includes A$1.63 GST, which doesn't apply to my online depository account bullion purchases.

At the time of purchase the spot silver price was around A$32.90, so buying the physical 1oz coin cost an 80% premium over the spot price. And about 60x the "face value" (which is $1).

Not a very sensible 'investment' but I can afford this once a year as a frivolous expense for fun.

Subscribe to Enough Wealth. Copyright 2006-2022