Monday, 30 March 2015

3 things to consider before investing for dividends

There have always been investors  for whom dividends is the most important element of a share investment.  Growth in share price has not been their primary concern.  Some bloggers (such as Dividend Mantra) have their whole investment strategy built around dividends and replacing their income and achieving financial independence through them.

In the current low interest rate environment this approach has become much more common.  Investors have not been able to get the yield they desire from term deposits and online savings accounts so they have turned to high yielding shares (such as banks and infrastructure shares) in order to get the yield they desire.  Why would you invest in a bank account at 2.5% p.a. when you can easily invest in a bank and get a 5.0% yield on a commercial bank or infrastructure stock?

A problem occurs when some investors look at these stocks and their dividend yields like they would a term deposit which is completely the wrong way to go about it.  This post will try and highlight some of the things you should be looking out for when you invest in stocks for their dividend yield.

Things you should consider when investing for dividends is your focus

There are risks when investing for dividends is your primary focus especially in an environment like this.  Below are just a few of the questions you should be asking yourself whenever you undertake an investment like this

1. If interest rates revert to more 'normal' levels what will happen to the value of this stock?

A lot of high dividend stocks have been driven up in price as people search for yield outside the fixed interest sectors.  If interest rates return to more 'normal' levels and people no longer have to invest in these stocks to get the yield then the value of your investment in these stocks may fall.

This is a function of the current market that you can't avoid and is a risk you need to know that you're taking on by investing in high yielding stocks.

2. What is the outlook for the company that you are investing in?

Dividends can be cut.  It actually happens far more

Friday, 27 March 2015

Importing my Japanese spots car...Step 3: Getting the car into Australia

As many readers would know I'm importing a sports car into Australia for a variety of reasons and I have been blogging about this along the way.  Part 1 of the series outlined the process of finding, inspecting and bidding for the car.  Part 2 involved all the steps involved in getting the car to the shipyard and all the nasty surprises in between.

This post will cover actually getting the car into Australia including the shipping, insurance, customs and tax requirements.  The paperwork and process is actually incredible.  I'm so happy that I paid the $1,100 to have an import broker doing all the work because the number of people involved blew me away.

Appointing an importer and compliance workshop

The first step to get my car into Australia was to appoint a compliance workshop (who also did the import approval process to get my Skyline into Australia).  I was required to put a down payment of $650 for the compliance work and then they swung into action.

Your compliance workshop is basically the place that will get your car legal for Australian road standards.  Different countries have different laws when it comes to car safety and the compliance workshop basically does everything to ensure that your car will be registered (as an added bonus they also give the car a service and change the oil etc so you don't need to worry about it).

Getting import approval...don't forget this step!

Before the car can actually enter

Monday, 23 March 2015

I have the goal...I have the now what?

I should start this post by apologising to my regular readers for the significant drop off in posts in the last month or two.

Part of this was related to burn out (I was simply trying to do too much at one type) but a lot of it also had to do with the fact that I was simply executing on the plans I have been writing and talking about for so many years.  Planning is something I can write about all day...but execution stuff is boring and actually fits quite neatly into my monthly net worth and expenditure tracking posts.

The good news is that my financial plan is working...

I guess I shouldn't be surprised but the truth is that it is slightly disconcerting when everything falls into place exactly how you expect it to.  I'm saving where I'm meant to be saving.  I'm investing where I'm meant to be investment (and being more active about taking profits and re-investing other opportunities) and I'm spending within my planned goals and budgets.

The one area where I am perhaps a little bit behind is my long running plan to start my own business.  Last year I started Banker's Pitch - a blog about Investment Banking and my original plan was to turn this into an information resource which could then be used as a platform to sell further services and informational products.  Although I haven't pulled the plug yet I'm thinking of re-focusing my attention and efforts elsewhere for reasons I will go into at a later point.

With the exception of the above though everything is tracking remarkably smoothly.

As a quick aside - the expenditure smoothing approach I took to big expenses a few years ago is probably the best financial thing I have ever done.  My wedding is fully paid for more than 3 months out from the big day and saving for the honeymoon is going to be a walk in the park.  We have managed to fund both these massive expenses without ever having to dip into my savings and investment portfolio which is exactly what I wanted.

The bad news is that a working financial plan is...well...boring

Having a plan that is working exactly how you want it to is exactly what you want...but it does tend to be a bit boring.  There is nothing to 'fix', there are no new strategies I'm keen to try at the moment and everything is tweaking around the edges.

That tends to make for a pretty boring financial blog...but a pretty good financial plan.  Half my effort in recent months has been to stop myself doing things for the sake of doing them.  Combined with this is the fact that I'm in the middle of wedding planning (which is the most painful thing I have ever done) which makes me want to focus on my financial life (or anything else for that matter).

So what's next?

My real focus at the moment has been my share portfolio.  I'm getting incredibly uncomfortable with the level the market is getting to and the valuations in markets.  The big problem I have is that I'm already very long cash and I'd rather not hold cash for long periods of time in a low interest rate environment and I can't find any alternative investments I'd rather be in.

Opportunities do rear their head from time to time but it is certainly not the share buyers market that it was 3 or 4 years ago when I was writing lots of posts about what I wanted to be investing in next.

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Thursday, 5 March 2015

Importing my Japanese sports car...Step 2: Between the auction yard and the ship

I am importing a sports car from Japan into Australia for a variety of reasons I have outlined before.  In my last post I outlined the process of finding, inspecting and bidding for the car before actually winning my car at auction.

I thought it would be a quick and easy process from that point on...but unfortunately I was mistaken.  The whole importing process turned out to be much longer and far more frustrating than I first thought.

Working out who and what you are paying is far more convoluted than you first think

When I first researched buying a car from overseas I thought I understood all the costs and where all the different fees and services went to.  In fact it was far more complex than I first imagined and if I'm going to be honest I still don't know exactly where all the money went to.

The problem really stems from the fact that when you talk to your car import broker you are talking about a landed and complied cost (that is the cost to actually get the car into Australia and to your door step), back solving all the different costs along the way becomes incredibly complicated.

My car purchase was a case in point.  When I bought my car I was told that I had won it for a FOB (free on board) price of JPY707,000 however the actual price the car sold at auction for was more like JPY597,000.  The difference is approximately A$1,000 and although I knew that auction fees and transport costs had to be paid to the port I certainly couldn't work out how this could cost 1/6th the cost of the car.

Complicating this was the actual person I was paying.  The bill I received actually wasn't from the auction house at all - it was from what looked like a broker operating out of Japan so presumably they put a margin on top as well.

This was only the start of the number of fees that I had to some point I should add them all up.  You may ask why I didn't kick up a bit of a fuss about the fees I was paying to unknown parties.  The fact is that if I get my car for the landed and complied cost that my broker was talking about I would still have gotten a deal compared to Australian I kept my mouth shut.

Paying the auction cost involved using a foreign exchange broker

Next I actually had to pay the JPY 707,000 to the broker in Japan.  I had their banking details and I was going to go into the bank

Monday, 2 March 2015

February 2015 Net Worth: $537,000 (+5.5%) and Goal Tracker

I have been doing these net worth posts for almost 5 years now and I am constantly refining the process.  As explained in my last post I have 'reset' my measurement methodology to account for future committed liabilities (like my wedding and honeymoon) to more accurately reflect what my net worth position was.

This is the second month where I have included these future liabilities and is a clean month (i.e. you can compare back to last month easily).  My future liabilities balance currently sits at $65,000 so add this to my net worth if you want to know what I would have been at if I had not restated it.

February 2015 Net Worth: $537,000 (+5.5%)

% Change
Net worth

I can't believe the month I just had.  In absolute terms this was the best monthly performance that I have had (outside of months where I am paid my bonus) since I started tracking my net worth.  The best bit is that it was a 'clean' result - there were no restatements or inclusions of big swing factors.

Below I have outlined some of the positive and negative factors which affected my performance.

Positive Factors

  • My share portfolio performed incredibly strongly
    • Australian shares have had an incredibly rally since the end of the last calendar year and my portfolio benefited significantly from these moves
    • A couple of stock specific bets really paid off this month and I took the advantage to sell some of my FKP (now AOG) stock which I have written so much about.  I have sold approximately 1/3 of my portfolio locking in a ~90% gain (although  did crystalise a capital gain which increased my liabilities a bit)
    • Additionally the Australian dollar continued to depreciate against the USD which helped my international shares which make up just under 50% of my portfolio
  • My employee share plan vested
    • I get a significant bump in

Wednesday, 25 February 2015

Importing my Japanese sports car...Step 1: Buy the car

As some readers of this blog may know - I have been looking to get a sports car for years.  I finally decided to stop talking and do something about it.  After looking for a while and trying to work out what I actually wanted to buy I settled on buying a Nissan Skyline...the only problem being that I had to buy an import from Japan.

I could either buy one that had already been imported by someone else (and run the risk that the clock had been wound back) or I could import one myself (and go through all the hassles that that entails).  In the end I decided to import the car myself and I appointed an import broker to help me through the process (you can see that post here).

Finding the car was much more involved than I first imagined

I had originally planned to let my import broker do all the work.  He could scour the lists of cars coming up for auction and then could contact me when one met my requirements, give me a price estimate and a history of the car along with the results of any tests and the whole process would be easy.

However I got much more involved than I previously intended to be

I love cars and I couldn't help myself - every day I would scour the auction lists on the import brokers website looking for any car that could meet my requirements.  After a while I started to get bored and started to loosen my requirements - I was looking at older cars that didn't have the specifications I wanted in colours I was previously not interested in.

I also started to get a better idea of what specific cars would sell for - after a while I was pretty confident that I could estimate how much a particular car could go for given it's specifications and after taking a look at the pictures.

I found several cars...but they needed to pass muster first...

This is where having an import broker really started to pay dividends.  I found several cars that met my requirements and I would get my import broker to send along a guy to test the car and give a report back (along with photos) of what he found.  Some of them turned out to be duds mechanically while another had a smokers smell (which is something you would never see in pictures)

...and then I came across one which I thought may just be the one

After a few weeks of absolutely nothing and as

Thursday, 19 February 2015

You are never too young to have a Will

Recently a friend of mine passed away.  He was very young, not sick and it came completely out of the blue.  He had no dependents, lived at home and like most young people (including myself) he had no will nor had he given any thought (or provided any indication) about how he would like his personal possessions dealt with.

If you have no dependents you don't really need a will...right?

Honestly that was pretty much the approach I had taken until now.  I have no dependents and if I passed away people could do with my stuff as they liked...I'm no longer here and there is no one I need to look no worries right?

As I found out I couldn't be more wrong

Even if we are not 'responsible' for anyone our affairs (especially our financial affairs) still need to be dealt with by someone.  Normally it will be a family member who will step up but essentially you are putting the responsibility on them of deciding what should be done with your things and how it should be split up.

Does your next of kin know what you want done with your affairs and who you want taken care of?  Do they even know how many bank accounts you have or where everything is?  Are you going to create problems for them if you don't have a plan that you have thought through?  Do you care who gets looked after and who misses out?

Honestly these are all very real questions.  It is hard enough to deal with these issues when a family is functional and close (as my friend's family is) however can you imagine if this happened in a family where there was dysfunction (as many are)?

Having a will is the easiest way of ensuring the basics are taken care of

Honestly having a will is the easiest way to ensure that
  1. The people and causes you care about are taken care of
  2. The person you want to deal with your financial affairs will be the one who does so
  3. A reduced chance of fighting and dysfunction occurring on your behalf
  4. It doesn't leave your assets and their disposal in the hands of the government (in the event of no will there is a specified order of preference for who receives your assets)
Wills don't have to be incredibly expense.  In some