Friday, 30 December 2011

December 2011 Net Worth - $207,000 (+4%)

Assets: $561,000 (-1%)
Liabilities: $354,000 (-4%)
Net Worth: $207,000 (+4%)

The increase in net worth this month was driven by the 10% discount that I got from repaying my student loans as predicted last month. This, however, was also the factor that drove my assets lower.

My assets were affected by several factors for the month including

  1. Negative stock returns over the month. My listed equities decreased marginally over the month even though 2 dividends were paid during the month. Both of these were stocks where i subscribe to the DRP so they supported my listed equities valuations which would have been even lower without them

  2. As discussed above the repayment of my student loans in full hit my liquid cash funds

  3. In terms of movement within asset classes, I had originally planned to invest some of my liquid cash into the stock market during December however I held off on this and the market has gone down so I will be looking to move more funds into the market in January

Liabilities were affected by

  1. The decrease in my student loan balance (to $0). This means that my only liabilties currently is my loan for my investment property and my credit card debt

  2. Credit card debt increased for the month (as predicted) as I went on a bit of a shopping spree pre christmas

In January I dont foresee any big events driving the performance of my net worth as I have had in previous months (e.g. bonus payments, tax refunds, discount on repayment of student loans etc). My predictions for January are:

  1. Increase in credit card debt as several large bills fall due (especially car insurance - see my previous post on getting a good deal on car insurance)

  2. Movement of cash into equities. I think in January equity markets will continue to be fairly quiet so I'm not expecting a large increase here.

Jounry to 90 million now in the public domain

Until now I have not really made this blog public and I suspect that people have stumbled onto it through the blogspot world or else through random google searches.

Given that I now have a rhythm to my blog posting I have decided to actively market / push it on the internet. There are several sites / social media outlets that I have signed up to including

  • Twitter - @90millionblog. Every time I post or have a thought which is not really sufficient for a blog post I'll put it on twitter.

  • Technorati - I've submitted this site and am still awaiting approval

  • Other various blog catalogs / lists
Any feedback on the blog itself would be much appreciated


Thursday, 29 December 2011

Interactive Brokers - No DRP

I have now been using interactive brokers for ~2 months and while I am getting much more familiar with the way the trading system operates I discovered the first major disadvantage with the discount broker - you cannot participate in DRPs.

While this is rather minor for a short term trader (the type of investor IB is targetting) it definetely impacts the investment decision for a long term holder / believer in the stock (i.e. one who is looking to add to their position) and this is effect is further compounded where the DRP shares are issued at a discount to closing.

For example if the DRP discount is 1.5% and dividends are paid half yearly, the investor who cannot participate in the dividend is being diluted by 1.5% * (the proportion of investors that take up the dividend - typically ~30%)*(annual dividend) annually. Typically discounts on DRPs are availble for stable, high dividend paying stocks so if I assume a Dividend Yield of 6% (achievable on all ASX Bank stocks, property trusts and most utiltities) this results in an annual dilution of: 1.5% * 6.0% * 30% = 0.027% p.a.

This may not seem like a big amount over any period of time however the big issue isnt so much the discount as is the ability to add to your position for free (as DRPs typically incur no trading costs) and this is where the big saving is.

I currently have one high yielding property trust which I bought through interactive brokers which has a DRP plan with an associated discount that I cannot participate in. This does not worry me that much as it is a relatively short term trade. I am looking to buy some bank stocks in the near future however which look to be good long term trades and in this case I may buy it through my old (higher cost) broker in order to get access to the DRP.

Wednesday, 28 December 2011

Car Insurance - getting a great deal

It came time (once again) for me to renew my car insurance and I wasnt surprised to see a rather large increase in my premium. The floods in other parts of the country coupled with extreme whether conditions were putting pressure on insurers profits and no doubt they were going to try and make this up with premiums across the board.

I have no real loyalty to insurance companies (other than sticking to the big ones as I dont want to be fighting with small internet based insurance companies like Bingle, Budget Direct and Youi if and when I actually do have an accident). I decided to look around for a better deal. I know that a big deal is made of cost comparison websites such as iselect however I found that they do not cover all insurance companies. I suspect that they only cover those that give them commissions for referral which is fine from a business point of view but it also means that I'm definetely not going to use them!

Having established there was no quicker way of doing it, I then went to all the insurers that I was willing to consider (AAMI, RACV, GIO, Allianz etc) and did the online quotes for all of them. Allianz came out ~$100 cheaper for comprehensive insurance than my current insurer (AAMI) was offering me. However I called up AAMI to see if they would price match and they did relatively easily and without hassle.

The reason that you're able to save a fair bit of money by doing this is that insurers seem to love offering great deals to get new customers. An existing customer however is much more valuable from a profitability point of view (churn is expensive) so insurers are always willing to drop their premiums. Moral of the story - never ever renew your insurance premium at the offered rate!

Saturday, 24 December 2011

Investor Book Review - What they dont teach you at Harvard Business School

See my latest investing / business book review of Mark McCormack's "What they Dont Teach You at Harvard Business School"

As an aside, I haven't updated my book review site for investing books for almost 6 months. I was warned that the hardest thing to do with a website, especially a blogging one was to keep it up to date. While I do that with this site relatively often, Investor Book Review has somehow fallen through the cracks over the last 6 months. The one advantage I have is that book reviews dont really get stale so it does not necessarily need to be updated from week to week.

I have 3 more book reviews already written so look out for them over the next few weeks

Monday, 19 December 2011

Free Credit Card Upgrade

Last week I was rather surprised to find a new credit card in the mail (not one of the application forms but the card already there ready to go). I was originally a little put out having ignored every single application they sent me for an increase in credit limit ($12k already is way too high but i figure I'll buy a car on it someday) but there is something about having the new card in your hand which is very tempting.

My bank informed me that for now extra fees, no change in my credit limit and no extra requirements they were upgrading my card from a standard Awards card to platinum card. This seemed to be too good to be true so I read through absolutely every single piece of documentation and called them 2 or 3 times but in fact it turned out to be accurate.

I'm not 100% why they did it but for the first time in my life I think I got a free lunch from a financial services provider.

Thursday, 1 December 2011

November 2011 Net Worth - $199,000 (+6%)

Assets: $569,000
Liabilities: $370,000
Net Worth: $199,000

The increase in net worth this month is entirely due to the tax return I recieved from the government. This years tax return was large (in comparison to last year where I owed the government money) because it was the first financial year in which I got the benefits of my negatively geared property.

Without the tax return my net worth would have been flat. This is due to the significant decrease in the value of my investment portfolio during the month. I have not been keeping track of the month to month movement in my stocks however overall my portfolio is down 12% from when I started to build it (the big negatives come from my pre GFC purchases which I still hold on to).

Liabilities stayed broadly flat as well as I ended up using most of my free cash for a holiday. The upside is this liability did not increase at all during the month. December is the last month in which the government will give me a 10% discount if I pay off my student loans so I may use some cash on hand for that and get a 10% kicker to my net worth next month.

Last month I predicted that my net worth would be impacted by

  1. Holiday - takes cash: This ended up happening and I did not save anything (net) for the month

  2. My taxes would finally come through: As discussed above this did happen

  3. I would incur expenses relating to fixing my investment property: this has not occured yet so is likely to be a negative next month

My predictions for this month

  1. Christmas / December is likely to cause me to have flat / negative savings once more

  2. As discussed above I should get a 10% kicker from the repayment of my student loans

  3. Also as discussed expenses relating to my investment property may come through

Monday, 7 November 2011

Interactive Brokers - First Impressions

I finally got around to setting up my new brokerage account and ended up going with Interactive Brokers. I just couldnt go past the number of currencies / markets I could trade in coupled with the amazingly low costs.

The biggest downside so far has been the time required to set the account up. From starting my application to getting all my certified documents sent through and approved and funding my accounts it is a 1 - 2 week process (not the few days they suggest).

I'm not completely sure how to use the interface just yet however it does not appear to be as user friendly as my old Commsec account. Hopefully this is because it has extra functionality as opposed to being an archaic system. I will post updates as I become more familiar on how to trade with this software. Now the big decission is what to buy with my first trade!

Friday, 28 October 2011

October 2011 Net Worth - $188,000 (+6%)

Assets: $558,000
Liabilities: $370,000
Net Worth: $188,000

I'm doing this evaluation early as I will be away when the month ticks over and I do not want to leave it as late as I did last time (for consistency).

October's net worth figure was affected by a number of one off impacts including being paid out my entitlements from an old job which increased my pay significantly for the month. My long awaited tax return did not arrive as my tax accountant seems to have forgotten about my returns. Again, this will provide a decent increase in assets once it arrives.

Assets suffered a net decrease in October for several reasons. Firstly I used cash to pay down significant outstanding credit card loans which were due soon after the last measurement. Further there was a drop in the value of my managed investments (which I only measure quarterly) however this was offset by the increased pay amount as well as an increase in my share trading account.

Liabilities decreased significantly during the month with the significant reduction in the level of credit card debt.

Next month is likely to be impacted by two factors. 1. I am taking a week's leave without pay for holiday purposes (so I can save my annual leave for another time), 2. hopefully my tax return will FINALLY come through and 3. my investment property is likely to require some repairs and the cost of these is likely to fall due next month

Wednesday, 19 October 2011

Occupy Wall Street protests....why?!

Given that I spent the last 2 weeks lounging around in the sun, I missed the build up to the OWS protests and so when I turned on the news was confronted with the sheer size of them. I then came into work and found that similar protests have started in my city as well.

A couple of things sprung to mind when I was watching them

  1. I have no idea what these people actually want. They seem to be protesting against 'greed' with the slogan 'we are the 99%'. I couldnt help but think that they seem to want money which is currently possessed by someone else for themselves...seems like the definition of greed and self interest to me

  2. How do they have the time to do it during the day? I can understand in a country like the US which has unemployment issues at the moment - i.e. a person can give up a day of (presumably) job hunting to go and protest that they want the government to look after them and not corporations (again greed / self interest much?). HOWEVER in Australia we have no unemployment issues - in fact there are very real labour shortages here so any of those people can go and get a job

  3. Is it possible that we are seeing the beginings of a Russian-style communist revolution? I dont know enough about early 20th century Russian politics but I do know that communism didnt work too well for them so am hoping that this is not the case.

Anyway to all the protestors out there - get out of my way and let me make my money. You can make some money too...but I guess it's easier to sit down and occupy a public space for a couple of weeks

Monday, 17 October 2011

September 2011 Net Worth - $177,000 (+2%)

Assets: $561,000
Liabilities: $384,000
Net Worth: $177,000

The net worth for September was actually calculated as at 17 October 2011 as I have not managed to get around to it before this point.

While there was a decent increase in assets this month (+$19,000), much of this was due to the inclusion of my superannuation balance which is not accessible until I'm 60. I've decided to start including my 'off balance sheet' items as they definetely impact my savings rate (and effectively my ability to retire comfortably)

My liabilities also increased significantly (+$16,000) and again this was due to me including items which were previously not included - in this case my HECS (or univeristy) debts which are government funded and which get paid out of my taxes.

Last month I noted that I would do my taxes and should get a healthy return which would bump my net worth up. I did my taxes, however as I used an accountant this time and did not do them myself the refund seems to be taking longer than usual (and so should be reflected in next months or the month after accounts)

Wednesday, 31 August 2011

August 2011 Net Worth - $174,000 (+36%)

Assets: $542,000
Liabilities: $368,000
Net worth: $174,000

The significant increase in my net worth for August was due to my work bonus getting paid into my bank account as well as a small inheritance which I received.

Both of these amounts are still in cash though I am looking to increase my equity market exposure as my investments (net of any gearing) are still 50% property, 30% interest bearing securities and 20% equities.

I'm expecting a small bump to my net worth next month when I (finally) get around to doing my taxes.

Monday, 15 August 2011

Discounts on financial products

One the weekend I realised that I needed to renew my landlords protection and house insurance. Looking at the renewal amount I was surprised at how high the insurance cost was (~$840 which was a 30% increase from 2010).

I was not surprised that there was an increase given how hard insurers got hit with the floods that affected Queensland however 30% seemed outrageous especially given that I live in a area which never has flood problems etc. I therefore got a quote from another insurer and then took it back to my insurer who lowered the cost significantly.

This got me thinking about where else I was paying fees or costs that were too high. Since then I have renegotiated my bank account keeping fees (now paying nothing instead of $5 a month - same account - same everything...just no fees) and will be getting onto my phone next.

The moral of the story is that you can get significant savings (i'm already above $150 p.a.) for very little effort - just have to get out there and ask.

Monday, 8 August 2011

Market volatility - Buy, sell or hold?

With the unprecedented amount of volatility in the market many people are torn about whether to buy more in the market, to sell or just to stay on the sidelines and see what happens.

So far I have stayed on the sidelines though if the market gets down to the levels it was at on Monday / Tuesday last week I will start to buy. My (relatively conservative) picks are
  1. Commonwealth Bank of Australia (ASX:CBA): A bank with almost no international exposure or funding requirements and with a pure exposure to the resilient Australian economy. Based on the current share price of A$47.10 this implies an LTM dividend yield of 6.79% this bank is returning more than most high yield accounts and just reported a record net profit of A$6.4 billion (US$6.7 billion). CBA fell to ~A$43.50 last week which implied a yield of 7.4% and if it gets down to those levels again I will buy in for sure
  2. S&P 500 Index (ASX: IVV): You may wonder why I've put the ASX version of the S&P500 instead of just the regular US verison. The answer is simply the Australian exchange rate (which benefits me as an Australian). The S&P500 in A$ terms is now close to 10 year lows. When the price of the ETF dipped below $110 last week this was the all time low reached by the index. If you have any faith at all in the US economy this is a great buy for Australians. There is an in built protection as well in the exchange rate which is trading well above the long run average of 0.80 (currently 1.04).
Given how strongly the markets are recovering there are not the same options as last week. I may stay on the sidelines a little bit longer until the crazy volatility hits the market again and I can pick up stocks on the cheap.

Tuesday, 2 August 2011

July 2011 Net Worth - 128,000 (+3%)

Assets: 485,000
Liabilities: 357,000

Net worth: 128,000

The increase in net worth was less than expected due to negative movements in the value of my stock portfolio (especially from my U.S. holdings which now make up ~50 - 60% of my portfolio).

Credit card debt as also up after a trip overseas however cash spend was down during the same period which allowed for a greater than expected level of investment.

Tax returns and bonus payment next month should significantly increase August's net worth.

Monday, 25 July 2011

Are the first cracks in China starting to appear?

China in recent years has been the country that has underpinned much of the economic growth around the world. It's seemingly unstoppable growth has led to one of the biggest commodity booms ever seen. The demand out of China probably saved several commodity driven countries from really feeling the impact of the GFC (notably Australia and Canada).

Most of what we hear from China continues to paint this rosy picture - with growth still forecast at levels that the developed world could only dream of. However recently some factors have caused me to re-think the China growth story (and importantly what my asset allocation should be)
  1. I was recently in Hong Kong and got the South China Morning Post delivered to my room. Out of general curiosity I browsed the newspaper and was mildly shocked to see the number of articles dealing with failing factories in the manufacturing heart of China. These factors have been failing due to several factors including rising wages and rising rents
  2. Getting accurate data out of China is notoriously difficult. The propoganda and government controls make it had to seperate fact from fiction.
  3. Many factories in China cater exclusively for the U.S. With the problems the US is having at the moment how is the Chinese manufacturing sector going to survive?
  4. China's projected growth is already factored into the stock prices of many entities so there is only downside risk inherent in companies that have a significant exposure to China.

The dilemma in the above is finding stocks (especially global blue chip companies) that are not in some way dependant in China even through several degrees of separation.

Monday, 11 July 2011

Search for a broker - continued

After further digging I've narrowed my broker search to 2
  1. Interactive Brokers - Cheapest broker around by a long way and offers access to more markets than any other provider. Downside is that you require 10k minimum initial deposit AND US$120 of trading costs per annum which isn't great for buy and hold investors like myself.
  2. OptionsXpress - Not cheap relative to other online brokers but a very very intuitive system which has customer service in my area (and more importantly time zone). Downside is that it only offers access to US markets. Upside is that it is a super intuitive system to use.
I'm leaning towards optionsxpress. I don't trade often enough for trading costs to really factor into my decision. Given that I am expanding my effort into the international arena - I think the US market will offer enough diversity to me.

Monday, 4 July 2011

The broker dilemma

Until now I have been quite happy trading using Commsec, the brokerage division of Commonwealth Bank of Australia.

Recently, however, I have been looking offshore for investment opportunities as everything is so expensive on the Australian Stock Exchange due to the commodities boom. I have been looking at stocks listed on exchanges from the NYSE to the HKSE and the Frankfurt exchange. I then checked out how much the brokerage would be through my Commsec account and found that they would be ~$100 per trade (US$107)!!!!!!!!!

After looking around I found the following brokers which are open to international investors (i.e. not US only) and will post what I think about each of them as I research more:
The more I look the more I find (for unbelievably cheap rates)...will update once I have researched some more.

Sunday, 3 July 2011

Outrageous ATM receipt

The attached article from the Daily Mail has been going absolutely viral on the internet.

It deals with an ATM receipt left in the ATM (presumably by mistake) which has an account balance of $99,864,731!!!! A couple of things came to mind when I was forwarded this email:
  1. Wow - I wish I had that much in my checking account!
  2. Why does someone have that much in their checking account? Does that mean their investment accounts are many multiples of that?
  3. Why would someone with that much money in the account even print a receipt?!
Anyway if you haven't seen it elsewhere - enjoy!

Thursday, 30 June 2011

Net worth - $124,000 (+0%)

My first net worth update is for June 30, 2011. I considered doing a full breakout as Brian does on his 2millionblog however I confess I am a little more shy about sharing the full breakout of my portfolio.

Maybe in time I will disclose the same level of information that he does however for now I'm going to keep it pretty simple. The data below is all rounded to the nearest 1000.

Assets: $478,000
Liabilities: $354,000
Net worth: $124,000

Increase required to $90m goal: 89,876,000

Wednesday, 29 June 2011

How much money is enough?

Obviously this blog has my target of $50 million in 2011 dollars ($90 million at 2031) and after that point I'm free to do whatever I like (which will probably involve lying on a beach in some sunny climate)

I asked around my office (which, as a BB investment bank is probably not representative of the general population) and the general consensus was $5 million - $15 million as walk away money (though note that typically the younger the person asked the higher the number)

However after reading the attached post on Wall Street Oasis and couldn't help but wonder how many people who reached their target number would actually retire to enjoy it.

Maybe once you start making the money it is too tempting to stop?

Tuesday, 28 June 2011

Emotional investing - it couldn't happen to me!

I bought a stock on Friday for several reasons
  1. I though it was cheap;
  2. I think it has a near term catalyst to realise value; and
  3. The timing of that catalyst is relatively certain (2 - 3 months)
While I know the stock price isn't going to do a whole lot between now and then and I've set up various news alerts to let me know if anything happens - I can't help but check the stock price several times a day.

I realise that this doesn't make sense and I should leave it well enough alone but for some reason I'm getting worked up as the share price continues to fall (down 5% in 2 days of trading since I bought in). I suspect it's because I invested in this stock using a strategy that I haven't used before and put a fair amount of my liquid capital behind it.

I have never before subscribed to the idea of 'market emotions' but seeing my irrationality over the last two days I may be forced to rethink what other irrational emotions move markets...

Monday, 27 June 2011

Investor Book Review - The Intelligent Investor by Benjamin Graham

One of the ways I am developing to make money in the longer term is through my website Investor Book Review which aims to provide unbiased and educated feedback on finance, investment and business books.

The reviews are free although the site is add supported (though I have tried to make these as unobtrusive as possible) and there are links to amazon, book depository and fishpond which earn a small commission on every sale.

See my latest review of the value investing classic The Intelligent Investor by Benjamin Graham

The Beginning

Today marks the official beginning of the blog to track my journey to $90 million dollars in 2031.

If you're wondering why $90 million: I started off with the number I'd be willing to retire with today and never work again (as I'm in my mid 20s it has to be pretty high) and I settled on $50 million. I also set a super aggressive target to achieve this in 20 years - inflation adjusted (3% p.a.) that comes to $90m which is my target.