Sunday 22 December 2013

December 2013 Review

I'm closing the month a few days early before some festive travel. I'll do some more detailed analysis of 2013 in January, along with planning for the new year.  Wishing you all a Merry Christmas and a Happy New Year!

December saw my net worth increase by 0.6%, with good savings offset by weaker investment performance.

The value of my investment portfolio was down over 1% following decreases in many equities markets along with some adverse fx movements. Purchases were limited to standing monthly purchases of the HK and China indices. Dividends were healthy, as they have been for the past 4 months. The critical mass of regular dividend paying ETFs is starting to contribute a reliable (albeit small at this stage) income stream.

My pension fund unit values fell around 1% during the month in line with global equities.

Property rental income was back to normal with no further expenses.

Cash balances increased with minimal investments and a good savings rate. I'm expecting most of my Christmas costs to come through in January.

Year to date net worth growth: 39.5%
Year to date savings rate: 69%


Tuesday 10 December 2013

Adverse fx movements, or are they..

Over the past 6 weeks or so i've noticed the unit value of a number of my ETFs declining, without seeing the same degree of falls in the underlying equities markets.  This has been particularly apparent in asia pacific and emerging markets ETFs, which have dropped more materially.

However, a lot of the fall seems to be due to foreign exchange movements rather than underlying equities performance, with a double whammy of a number of currencies weakening against the USD, and GBP (many of my ETF investments are UK listed and GBP denominated) rising against USD.  So for example, when i view the performance of my asia pacific property & high dividend ETFs in GBP, the value is down quite a lot recently.

This isn't a big concern for me for a few reasons:
- firstly i plan to hold long term so try not to focus too much on day to day price movements as long as the fundamentals remain solid
- although the investment values in GBP are falling, the value of the investments in their underlying currency are actually holding up well
- i am looking to reduce GBP exposure over time, so the fx movements will actually be favourable for investing in other currencies should i choose to sell GBP and buy USD, HKD or AUD for example.

The caveat to all this is the magnitude of the movements.  Whilst i am comfortable with the size of the recent trend i would be concerned if this was the tip of a longer term and larger shift in the markets that could materially alter the overall value of my assets.

The other big unknown looking into 2014 is what impact QE tapering will have on global fx and equities markets and when we'll start to see this feeding through.

I'll pay closer attention to fx movements over the coming weeks and may look to re-balance if opportunities arise.