May saw my net worth grow by 1.4%, with a good savings rate and strong pension performance more than offsetting a one-off investment loss.
The investment portfolio was down 2.6% for the month mostly due to a loss realised on the disposal of my Co-op bank pref shares (i'm somewhat comforted by the continued decline in price after i sold). This was compounded by declines in some of the ETFs at the end of the month, although partly offset by the receipt of a number of dividends in the month. Gold & Silver both also continued their recent decline.
My pension fund unit values were up strongly (around 4.5%), due in part to a heavy weighting in the uk market which hit new 12 year highs during the month.
My property remained occupied with no out of plan expenses.
Cash balances increased with good income & low expenses, along with the cash freed up from an investment disposal. I've decided to increase my monthly income tax accrual to avoid another large catch-up later in the year.
Year to date net worth growth: 27.4%
Year to date savings rate: 80%
Friday, 31 May 2013
Thursday, 30 May 2013
Tenancy renewal update
I mentioned a couple of weeks ago that i'd started the process of negotiating a new rental contract for where i'm living in HK.
After a couple of offers & counter-offers we have settled on an increase of around 4.7%, which i'm quite happy about for a couple of reasons:
Firstly, it means i don't have to move - i hate moving!;
And secondly, this means that over a 4 year period (the last 2 years and the next 2 years) a 4.7% increase is actually very reasonable and well below the local inflation rate over the time period in question.
This also gives certainty to an important component of my expenses, and the increase will not have a material impact on my savings rate.
After a couple of offers & counter-offers we have settled on an increase of around 4.7%, which i'm quite happy about for a couple of reasons:
Firstly, it means i don't have to move - i hate moving!;
And secondly, this means that over a 4 year period (the last 2 years and the next 2 years) a 4.7% increase is actually very reasonable and well below the local inflation rate over the time period in question.
This also gives certainty to an important component of my expenses, and the increase will not have a material impact on my savings rate.
Saturday, 11 May 2013
Expenses review - six months on
Having built up around six months of detailed expense data i'm now in a better position to understand and evaluate my expenses.
Here's a summary of my findings:
Overall: total expenses (incl rent and tax) have been tracking under 40% of gross regular income, resulting in a consistently high savings over 60%.
Tax: whilst being a big number in absolute terms, it is considerably lower than it would be in many countries, resulting in a material net worth benefit over the last few years.
Rental expense: a large item and so far the most stable, although this is currently under review and is likely to change in the near future. I'm not really willing to spend much more than i do now.
Bills: fairly consistent and relatively low, especially utilities. I've also learned the hard way not to use data roaming overseas!
Travel: low so far, as i haven't been able to take much holiday this year due to work commitments. I have budgeted a large amount for this item and intend to make a few trips later in the year.
Food & drink: this is an area i know i could cut back on if i wanted to. Its a little higher than budgeted at the moment, but not enough to be of concern.
Entertainment & luxuries: despite a few sporting events, concerts & gadgets, this is still under budget.
Other items: gym membership is budgeted and property costs have been low.
In summary, i'm broadly in line with what is quite a conservative spending budget, with a few items over and a few items under. I'm also tracking the cumulative amount under/over through the year, with the intention of using any under-spend to top up my luxuries budget as required.
Here's a summary of my findings:
Overall: total expenses (incl rent and tax) have been tracking under 40% of gross regular income, resulting in a consistently high savings over 60%.
Tax: whilst being a big number in absolute terms, it is considerably lower than it would be in many countries, resulting in a material net worth benefit over the last few years.
Rental expense: a large item and so far the most stable, although this is currently under review and is likely to change in the near future. I'm not really willing to spend much more than i do now.
Bills: fairly consistent and relatively low, especially utilities. I've also learned the hard way not to use data roaming overseas!
Travel: low so far, as i haven't been able to take much holiday this year due to work commitments. I have budgeted a large amount for this item and intend to make a few trips later in the year.
Food & drink: this is an area i know i could cut back on if i wanted to. Its a little higher than budgeted at the moment, but not enough to be of concern.
Entertainment & luxuries: despite a few sporting events, concerts & gadgets, this is still under budget.
Other items: gym membership is budgeted and property costs have been low.
In summary, i'm broadly in line with what is quite a conservative spending budget, with a few items over and a few items under. I'm also tracking the cumulative amount under/over through the year, with the intention of using any under-spend to top up my luxuries budget as required.
Friday, 10 May 2013
Portfolio Sale CPBB.L
I've just sold my pref shares in the Co-op bank, following (a) its failed attempt to buy a portfolio of Lloyds branches, (b) the downgrade of its debt to junk status, and (c) the exit of its CEO.
I managed to get out at around 98p, around a 25% loss from its purchase price last month. This loss in theory should be softened by the receipt of a preferred dividend later in the month (assuming it is still paid!).
I didn't need to sell, but there is no obvious reason to hold on to this now, despite the yield that attracted me in the first place. The market may have over-reacted today, the price may recover and this may have gone on to be a solid investment. However I decided to cut my losses primarily due to the individual counterparty risk this investment gave me. If this had been a broad ETF suffering from a market wide event i would have probably held on, but i have found the chance of failure against one struggling counterparty to be unacceptably high.
Lessons learnt:
Stick to the original strategy of broad diversification
Understand and accept the risks associated with high yield
Do more due diligence and research prior to investment
Fortunately this has not had any material impact on my finances, with the original investment being well under 1% of total assets. I hope the experience and lessons learnt may well go on to save me a lot more in the future than i lost today.
I managed to get out at around 98p, around a 25% loss from its purchase price last month. This loss in theory should be softened by the receipt of a preferred dividend later in the month (assuming it is still paid!).
I didn't need to sell, but there is no obvious reason to hold on to this now, despite the yield that attracted me in the first place. The market may have over-reacted today, the price may recover and this may have gone on to be a solid investment. However I decided to cut my losses primarily due to the individual counterparty risk this investment gave me. If this had been a broad ETF suffering from a market wide event i would have probably held on, but i have found the chance of failure against one struggling counterparty to be unacceptably high.
Lessons learnt:
Stick to the original strategy of broad diversification
Understand and accept the risks associated with high yield
Do more due diligence and research prior to investment
Fortunately this has not had any material impact on my finances, with the original investment being well under 1% of total assets. I hope the experience and lessons learnt may well go on to save me a lot more in the future than i lost today.
Wednesday, 8 May 2013
Tenancy renewal (this time for me)
I'm currently renting an apartment in HK. Whilst i don't enjoy giving away my money to pay someone else's mortgage, i currently have little choice given (a) the relative cost of property here, (b) the new tax measures in place to deter non-residents from buying property, and (c) my lack of a long term plan of how long i'll be based here.
Rental contracts in HK are typically for 2 years, with the ability to exit after around 1 year. I've been in the same apartment for close to 2 years now, and whilst i'm reasonably comfortable with the amount of rent i currently pay, my contract is close to ending.
I'd like to stay where i am (its a good location and i hate moving), and i've made initial contract with the landlord to negotiate a new tenancy agreement. I'm waiting for feedback on the new rental level to be proposed by the landlord.
I've heard many stories of extortionate increases being requested, so i'm expecting the worst and i'm prepared to move if the proposal is too high. The one thing in my favour is that there has recently been a shift in market sentiment for HK property, which will hopefully keep the negotiations to a sensible level.
To be continued...
Rental contracts in HK are typically for 2 years, with the ability to exit after around 1 year. I've been in the same apartment for close to 2 years now, and whilst i'm reasonably comfortable with the amount of rent i currently pay, my contract is close to ending.
I'd like to stay where i am (its a good location and i hate moving), and i've made initial contract with the landlord to negotiate a new tenancy agreement. I'm waiting for feedback on the new rental level to be proposed by the landlord.
I've heard many stories of extortionate increases being requested, so i'm expecting the worst and i'm prepared to move if the proposal is too high. The one thing in my favour is that there has recently been a shift in market sentiment for HK property, which will hopefully keep the negotiations to a sensible level.
To be continued...
Wednesday, 1 May 2013
Sell in May?
May has been a bad month for stock markets for the last 3 years, prompting the saying 'sell in May and go away'.
I think a sign of my changing investment mindset is that i would actually welcome a fall now, i have no plans to sell my existing investments and have plenty of cash available should buying opportunities emerge.
In particular i'll be keeping an eye on the US markets. Apart from a small holding in Apple, i'm light on US equities exposure but have been holding off given the record highs being set in the major indices. If there is any material correction i'll be looking to invest in some form of dividend or property ETF.
I'm also looking at a few more emerging markets options, potentially adding to my China ETF or looking at some more emerging markets high dividend ETFs.
After making a few new purchases in April i'm relatively comfortable with the growth rate of my investment portfolio, so i'm not in any rush to continue buying at current levels. Instead i'll probably sit back and see what happens, allowing standard monthly purchases to keep the portfolio growing at a steady rate whilst being ready to add to these when opportunities emerge.
I think a sign of my changing investment mindset is that i would actually welcome a fall now, i have no plans to sell my existing investments and have plenty of cash available should buying opportunities emerge.
In particular i'll be keeping an eye on the US markets. Apart from a small holding in Apple, i'm light on US equities exposure but have been holding off given the record highs being set in the major indices. If there is any material correction i'll be looking to invest in some form of dividend or property ETF.
I'm also looking at a few more emerging markets options, potentially adding to my China ETF or looking at some more emerging markets high dividend ETFs.
After making a few new purchases in April i'm relatively comfortable with the growth rate of my investment portfolio, so i'm not in any rush to continue buying at current levels. Instead i'll probably sit back and see what happens, allowing standard monthly purchases to keep the portfolio growing at a steady rate whilst being ready to add to these when opportunities emerge.
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