Saturday 30 November 2013

November 2013 Review

November saw my net worth increase by 0.9%, with a lower than average savings rate and weaker investment performance.

The value of my investment portfolio was down around 1% following a very strong October, with emerging markets and metals falling.  New purchases for the month included more units of the Emerging Markets High Dividend ETF (SEDY.L) and a small amount of gold.

My pension fund unit values were fairly flat for the month.

Property rental income was lower following a few repairs needed at the start of a new tenancy.

Cash balances were fairly flat with new investments offsetting monthly savings. Income was a little lower than average and expenses were higher, including my annual gym membership paid in one go.

Year to date net worth growth: 38.6%
Year to date savings rate: 70%

Thursday 28 November 2013

SEDY.L Purchased

I've recently added to my existing investment in the ishares Emerging Markets high dividend ETF listed in the UK.

Whilst this has been a reliable dividend payer over the last year (yielding over 4%), it has been depreciating in value mainly as a result of adverse foreign exchange movements along with weakness in some of the underlying equities markets.  The decline had accelerated in the past few weeks, which tempted me to add some additional units at a price lower than my initial investment.

The geographical mix is quite broad, including Taiwan, China, Brazil, South Africa, Turkey & Malaysia with just over 100 individual stocks held.

I do expect to continue seeing some volatility in price, but i'm happy to take a long term view with this investment and continue to take the dividends in the meantime.

The new units were purchased for around GBP16.86, and this is now the second largest holding in my investment portfolio.

Monday 25 November 2013

Gold Purchased

Today i made a small purchase of Gold (paper rather than physical).

This is the first gold purchase for over a year, during which my existing holdings have declined over 20% in value. I hadn't considered adding to this investment until the recent downward leg towards $1200 an ounce.

Whether it is true or not $1200 is often quoted as the break even point for current production, leading many commentators / analysts to view it as a potential floor at which supply will cease to increase. Whilst i'm not sure about this theory (demand could still evaporate!), i decided to average down the purchase cost of my investment with a small additional purchase.

My holdings of metals are still a small proportion of my investments (and a tiny proportion of total assets) and i intend to keep it this way.  The purchase roughly equates to the loss in value of the original holdings.

Friday 22 November 2013

Gym membership renewed

Back in January i set out some financial and non-financial objectives for the year.  On the non-financial side these were (a) get fitter, and (b) achieve a better work balance.

Whilst (b) is still a work in progress (i'll cover this separately!), (a) has shown some recent signs of improvement.  I've had a gym membership here for a few years now, but seem to go through phases of regular and not so regular exercise.

I'd say in this regard it has been a year of two halves. The year didn't start well, with excessive workload breaking up my usual regime of trying to get to the gym at lunchtimes. However, the last few months have been a lot better, with 3 to 4 visits a week and fitness improvements starting to become more noticeable.

This made the decision to renew my membership earlier this month quite straightforward. Whilst the cost went marginally up, i did negotiate a little discount and with my renewed motivation, regular attendance and health benefits, this feels like a good investment.

Saturday 9 November 2013

Beginners advice - part 3

Ok, hopefully by now you have some high level financial goals in mind, along with an understanding of your current financial position. Now its time to pull these together & evaluate where you are in the context of where you'd like to get to:

Step 5)  Evaluate your current position
Contrary to what financial advisers will tell you, i really don't think you need to be (or pay for) a financial adviser to do this. The following points are some things that may be worth considering in assessing how you are doing, turning basic financial information into something a bit more meaningful:

Net Worth:
This is generally defined as assets minus liabilities, ie how much you are worth at any point in time.  This can also be projected forward by adding on the difference between your income & expenses.

Lets say your assets are 2000 and your liabilities are 500. This would result in a net worth of 1500.  Now lets say monthly income less average expenses results in savings of 100. Over a year you'd save around 1200, suggesting your net worth in a year's time may be around 2700.

This is particularly useful to understand if one of your goals is to save a certain amount over a set period of time.

Savings rate:
There are different ways of defining this, but my preferred approach is to think about how much you save each month (after putting aside a tax accrual) as a proportion of total income.  This will become a useful tool to measure the pace at which you expect to grow net worth, and can also be used in setting personal targets to achieve certain goals.

Asset Allocation:
This is the proportion of your assets held in each asset category. This can be as detailed as you like, but i tend to focus on 4 broad categories, being Cash (bank accounts), Pension schemes, Property and other Investments (eg shares).

This is important to understand as it determines the relative riskiness or volatility of your wealth - we'll come back to this point at a later stage. It can also be used to assess the level of income/growth your assets may generate through interest, dividends, capital growth or rent.

Cash buffer:
Take the value of all your readily available cash balances and divide it by your typical monthly expenses. This will give an idea of how many months worth of cash are available for emergencies, for example if you lose your job or get hit with any large unexpected expenses.  I consider this an important metric in understanding short term financial security, and it may be one of your goals to maintain a cash buffer of a certain size, depending on your individual appetite for risk.

There are many other things you could look at, but i consider these to be a good starting point in evaluating your current financial position.  They can also be used as metrics or KPIs to assess progress towards goals or for setting specific targets.

Now we have all this information it is possible to start monitoring and making some decisions...

Friday 1 November 2013

Beginners advice - part 2

In my first post on this topic, i covered the basic foundations of managing personal finances which are to understand your assets, liabilities, income & expenses.

Before diving into any further detail with this information i think it would be a good idea to step back and think about your financial goals:

Step 4)  Consider your goals
These will be different for every individual, and may be vague (eg financial security), specific (saving up $xxx for a property deposit), long term (retirement planning) or shorter term (eg planning for travel). It could even be as simple as just gaining confidence in how to understand and manage your finances more effectively.

My goals probably cover all these. For example, in the longer term i'd like to get myself into a position where i can have a comfortable (and hopefully early!) retirement. In the medium term i'd like to have financial security and to be able to provide for a family.  In the short term i'd like to make sure i can live comfortably and happily but without going too crazy and jeopardising the success of these longer term goals.

An important point to recognise is that these goals will and do change through life, so whilst it is worth stepping back and giving them some initial thought, the process shouldn't be too rigid.


Once you have an idea of your goals, you can start viewing them together with your current position (assets & liabilities) and your outlook (derived from your income & expenses) to shape the current & future financial decisions needed to achieve these goals.

We'll save more on that for next time...