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