December saw my net worth increase by 1.5%, with good savings and increases investment / pension valuations.
During the month my ETF investments all increased in value, and i also received a couple of large dividends. I purchased a European high dividend ETF during the month which has had a great run, increasing over 5% in value in just over 2 weeks! These ETF gains were partly offset by the recent fall in gold.
My pensions had their best month since February with solid increases in unit values as equities rallied.
My property was occupied, although there was one minor maintenance issue that should come through in January. I've left the valuation unchanged for a number of months now as the market has been fairly flat.
Cash increased despite the ETF investment and higher Christmas expenses, although i expect some extra expenses to come through in January.
On a full year basis, my net worth has increased by a very satisfying 41%, mostly from healthy income & savings, but also helped along by higher property, pension & investment valuations. I'll do a separate full year 2012 annual review in January.
Thursday, 27 December 2012
Monday, 24 December 2012
Passive income
A recent addition to my financial management spreadsheet is the monitoring and forecasting of passive income.
This represents the income my assets yield from me sitting back and doing nothing, whether in the form of rental income, dividends or interest. By monitoring both my asset allocation along with the average yield on each asset class, it will help me to focus on portfolio optimisation, and finding the best return for my risk appetite.
What stands out straight away is the difference in yield on my different assets. My property is generating the highest regular income, at close to 5% against the current property valuation. Its a little early to have a good feeling about the average yield on my ETFs but i expect this to be at least 4% from dividends if not higher. My cash or near cash assets are earning just under 2% on average, which is reasonable given the current zero interest rate environment, but is below inflation and really re-emphasises my objective to reduce cash balances over the coming months.
My short term aim is to reinvest all surplus income into further asset accumulation (and thus further grow passive income).
My long term aim is to use passive income to remove my dependence on employment income, allowing much greater freedom in my employment and lifestyle decisions in the future.
This represents the income my assets yield from me sitting back and doing nothing, whether in the form of rental income, dividends or interest. By monitoring both my asset allocation along with the average yield on each asset class, it will help me to focus on portfolio optimisation, and finding the best return for my risk appetite.
What stands out straight away is the difference in yield on my different assets. My property is generating the highest regular income, at close to 5% against the current property valuation. Its a little early to have a good feeling about the average yield on my ETFs but i expect this to be at least 4% from dividends if not higher. My cash or near cash assets are earning just under 2% on average, which is reasonable given the current zero interest rate environment, but is below inflation and really re-emphasises my objective to reduce cash balances over the coming months.
My short term aim is to reinvest all surplus income into further asset accumulation (and thus further grow passive income).
My long term aim is to use passive income to remove my dependence on employment income, allowing much greater freedom in my employment and lifestyle decisions in the future.
Tuesday, 18 December 2012
2012 Investment performance
Since October i've started to build a portfolio of ETFs, primarily but not exclusively focusing on dividend stocks. I've also bought some gold in non-physical form through my HK bank. Here's my current portfolio and how it has performed in the past couple of months:
The return figure is inclusive of both dividends and valuation gains. SEDY (emerging markets), IASP (asian property) and IUKD (uk high dividend) have all paid dividends in either November or December which has boosted the return in the short period of time i've been holding these. IDVY (euro high dividend) has had a good week, rallying 3.4% in the week since it was purchased.
Gold has lagged a bit. Fears around europe and the fiscal cliff seem to have eased recently, which can be seen in the increase in equities and risk currencies.
Going forward i'll measure investment returns using a CAGR (Compound annual growth rate) formula, which factors in the timing of cashflows such as purchases & dividends to generate an annualised return. For those excel fans its the 'XIRR' function! I haven't shown it here as the numbers are a bit meaningless given the short period of time i've held these investments.
The % Assets represents my total assets rather than just the investment portfolio. You'll see my default target holding for now has been 1% of total assets per investment, which over time will be varied up or down depending on my comfort with the investment, and the overall degree of diversification i'm aiming for.
I will be looking to build up this portfolio over the coming year, primarily targeting high yield investments & ETFs listed in the UK or HK.
| Name | Return | % Assets | ||
| SEDY | 4.4% | 1.05% | ||
| IASP | 4.0% | 1.05% | ||
| SHYU | 0.9% | 1.05% | ||
| IUKD | 5.3% | 1.07% | ||
| IDVY | 3.4% | 0.64% | ||
| GOLD | -1.4% | 1.01% | ||
Gold has lagged a bit. Fears around europe and the fiscal cliff seem to have eased recently, which can be seen in the increase in equities and risk currencies.
Going forward i'll measure investment returns using a CAGR (Compound annual growth rate) formula, which factors in the timing of cashflows such as purchases & dividends to generate an annualised return. For those excel fans its the 'XIRR' function! I haven't shown it here as the numbers are a bit meaningless given the short period of time i've held these investments.
The % Assets represents my total assets rather than just the investment portfolio. You'll see my default target holding for now has been 1% of total assets per investment, which over time will be varied up or down depending on my comfort with the investment, and the overall degree of diversification i'm aiming for.
I will be looking to build up this portfolio over the coming year, primarily targeting high yield investments & ETFs listed in the UK or HK.
Friday, 14 December 2012
Falling rates
One of the unfortunate side effects of the latest round of central bank interest rate & QE announcements seems to have been another round of savings rate cuts both for existing variable rate accounts & potential new fixed rate time deposits.
It is becoming quite a mission to hunt down an lock in decent interest rates. I'm not keen on long term fixed rate accounts beyond a year or two, and many variable rates have fallen quite sharply in the last two months or so.
In an attempt to build a respectable yield i've been flirting with the idea of moving more cash into corporate debt ETFs. Its really a case of weighing up the transaction cost and credit risk against the difference in yield, but i'm increasingly finding that my desire for yield is starting to overcome my natural risk aversion.
It is becoming quite a mission to hunt down an lock in decent interest rates. I'm not keen on long term fixed rate accounts beyond a year or two, and many variable rates have fallen quite sharply in the last two months or so.
In an attempt to build a respectable yield i've been flirting with the idea of moving more cash into corporate debt ETFs. Its really a case of weighing up the transaction cost and credit risk against the difference in yield, but i'm increasingly finding that my desire for yield is starting to overcome my natural risk aversion.
Tuesday, 11 December 2012
2012 Pension performance
Across December and January i'll do a few annual reviews of my major asset groups, starting with my work pensions.
I currently hold one old (now frozen) and one current (regular monthly contributions) defined contribution pension schemes. The old one is 100% global equities, the current one is around 80% global equities, 20% bonds.
After stripping out both employer & employee contributions in 2012, the combined value of the 2 schemes has increased by around 12.6%, up to the middle of December. Normally i'd be quite happy with this level of return, but i've had a feeling for some time these schemes have been under-performing the major global indices.
In light of this i thought i'd do a quick spot check of the US, UK, HK & Eurostoxx indices' YTD performance to see how my pensions have performed:
UK up 6.4%
US up 12.8%
EUR up 12.8%
HK up 21%
The results are better than i thought, with my pensions performing broadly in line with the major equities indices. I do have the ability to vary both the asset allocation, and also to some extent the geographic composition of the schemes, and i plan to critically review and more actively manage these variables in 2013 where i feel changes are appropriate.
I currently hold one old (now frozen) and one current (regular monthly contributions) defined contribution pension schemes. The old one is 100% global equities, the current one is around 80% global equities, 20% bonds.
After stripping out both employer & employee contributions in 2012, the combined value of the 2 schemes has increased by around 12.6%, up to the middle of December. Normally i'd be quite happy with this level of return, but i've had a feeling for some time these schemes have been under-performing the major global indices.
In light of this i thought i'd do a quick spot check of the US, UK, HK & Eurostoxx indices' YTD performance to see how my pensions have performed:
UK up 6.4%
US up 12.8%
EUR up 12.8%
HK up 21%
The results are better than i thought, with my pensions performing broadly in line with the major equities indices. I do have the ability to vary both the asset allocation, and also to some extent the geographic composition of the schemes, and i plan to critically review and more actively manage these variables in 2013 where i feel changes are appropriate.
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