EOFY review - me vs 'Mr Market' and 'the Rich'

I won't be able to calculate my monthly updated NW estimate for June until early next week, so I spent a little bit of time updating some comparisons I had previously made of my NW performance vs the ASX200 index (monthly adjusted close values from yahoo finance) as a proxy for 'Mr Market' and vs 'the Rich' (the cut-off amount in AUD used for the annual AFR (previously BRW) Australia 'Rich 200' list), To be able to compare these figures I have divided to 'rich list' figure by 200 (my 'stretch goal' was to eventually reach 1% of the cut-off, but I seem to be stuck at about 0.5% for the last few decades), and to plot the ASX200 figures on a secondary axis. All plots are linear and start from 0, so the trends should be comparable.

The green line is the ASX200, the blue line is my monthly NW estimate, and the red line is monthly interpolation of the annual Rich 200 list cut-off.

My total portfolio performance is broadly in line with the 'rich', although my exposure to equities and use of gearing (via margin lending) up until the GFC meant that I was outperforming 'the rich' right up until the GFC gave me a real world lesson in the risks of using gearing.

The sudden increases in my NW estimate in Mar 2014 and Feb 2023 are due to receiving my hobby farm/lake house as a gift (early inheritance) from my parents in 2014, and then updating the estimated valuation for that property in 2023 (when I settled on the purchase of my investment apartment and decided to include monthly updates of all real estate values in my NW estimate).

One other notable thing is that my decision to shift all our superannuation investment from the 'high growth' option to a more conservative option when the Covid pandemic first broke out in China, and then move it back to our long-term asset allocation when things had settled down, was one of my (rare) better investment decisions.

When I can move my superannuation into 'pension phase' at age 65 (to reduce the superannuation tax rate) I'll use the mandatory minimum annual pension distribution to pay off my investment apartment mortgage while I'm still working. Current 'plan' is to keep working full-time until about 70 (by which time I should have completed my PhD and built up some clientele for my financial planning business) and then work part-time for as long as I feel like it (possibly until 80ish) and then sell off business for whatever it is worth (currently the standard for financial planning businesses seems to be about 4x annual revenue). This might provide another 'uptick' to my NW graph (but the business may end up not being worth anything).

How my NW tracks will mostly depend on how the stock and property markets perform over the next few decades (and if I stay healthy and employed).

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Superhero portfolio starting to pick up

My 'play' actively traded account with superhero has finally started to perform more in line with my expectations - finally WEAT has started to appreciate and my investment in RBTZ is still in the black and *should* perform OK in the medium-long term. I might xfer another $1,000 into my superhero account to invest per the monthly '12% Solution' recommendations of David Carter. Once I convert the funds into USD in my Superhero account it should not cost anything to make the monthly portfolio reallocation trades to track the '12% solution'.

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SMSF tax return for 2022 lodged

eSuperfund finally got our SMSF annual financial accounts and tax return for 2022 finished in early June -- not sure why is wasn't able to be completed prior to the standard 'due date' of 15 May 2023, but eSuperfund requested an extension from the ATO to 30 June 2023 and managed to get the tax return finalised and the financial statements audited by 6 June. After all three SMSF trustees (myself, DW and DS1) had reviewed and electronically 'signed' the lodgement approval, the SMSF tax return was lodged on 12 June. The SMSF was due to receive a tax refund of $29,878 - mostly due to having paid provisional PAYG tax each quarter due to realizing capital gains when we switched our asset allocation a couple of times during the first year of the pandemic. As we hadn't realized any capital gains in FY2022 the ATO had to refund the PAYG payments. The tax refund arrived in the SMSF bank account a few days ago, so we now have more than enough cash in the SMSF bank account to pay DW's annual minimum pension payment in July. She doesn't currently need the pension income (as she has started working full-time again), but having moved her superannuation into 'pension phase' when she was retrenched and initially decided to retire a couple of years ago, she is now required to make the mandatory minimum pension withdrawal each FY. She will use the pension payment to pay off some personal loan debt she had accrued while she was working in a part-time position for two years (about 6 hrs/wk) prior to getting her full-time position.

Looking at the financial accounts, our SMSF annual after-tax returns for the past few years have been:

2011FY    +9.65%

2012FY    -4.54%

2013FY    +21.54%

2014FY    +14.92%

2015FY    +12.15%

2016FY    +4.03%

2017FY    +10.42%

2018FY    +11.59%

2019FY    +9.17%

2020FY    +7.15%

2021FY    +19.26%

2022FY    -8.98%

Overall I'm quite happy with how our decision to invest via a low-cost SMSF using mostly the Vanguard High-Growth Fund as our asset allocation has worked out.

I'll be able to transfer my SMSF account from accumulation into pension phase when I turn 65 in a few years from now -- which will reduce the tax rate applicable to the bulk of our SMSF from 15% to 0%. I'll then have to also commence making the minimum 5% (for age 65-74) pension payments out of my SMSF pension account each FY, but as I'll (probably) still be working full-time I'll be able to use the tax-free pension income to start paying off my investment apartment mortgage.

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Net Worth MAY 2023

Chart updated to end of May in sidebar.

Stocks/cash increased $282.(0.16%) to $181,089

Retirement savings (SMSF etc) decreased by -$12,169 (-0.80%) to $1,502,944

Est. of Home valuation (my half) decreased by -$14.251 (-1.37%) to $1,022,194. Again this month Sydney real estate index rose overall during May, so it must be specific to the Northern Beaches part of Sydney.

Other real estate (my 'lake house' and the investment apartment) increased by $1,426 (0.07%) to $2,059,932

The outstanding balance of the investment property mortgage remains at $1MM (the loan is 'interest only' for another 4 years 9 months). Interest rate is currently 5.79%.

Other assets (my online depository bullion account and Perth Mint, and the bullion value of my gold and silver proof coin collection) decreased by -$352 (-0.95%) to $36,756.

Overall, NW decreased by -$25,064 (-0.65%) to $3,810,915 during May.

Not a particularly exciting month's performance, and the prospects for the next financial year are not looking very encouraging at the moment. Inflation is remaining stubbornly high in Australia, so there may be additional interest rate hikes before this cycle has peaked, which will subdue and delay any recovery in property prices. And several of the major economies are not looking very positive - China, Japan, Germany - so the global economy and Australia's export-focussed economy may be weak during 2023/24 FY. I'm guessing my NW will remain fairly flat (or decrease somewhat) over the next 12 months, which would be a decrease of 5%-10% in 'real terms' due to inflation.

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