Sunday, December 07, 2014

Cash flow - not an issue

In the post on the first anniversary of my retirement I commented that the current break even cash flow was not as good as it looked because of the effect of the special dividend from HWL (HK:13) and only taking two holidays instead of three this year. Without the special dividend and with three holidays scheduled for 2015, income from investments will fall a little short from meeting all of our cash outflows.

I have spent a bit of time playing with my spreadsheet and concluded that that assessment was unduly pessimistic - the short fall is a very small one. I will finish my master's degree next year and will stop paying course fees after that - this is more or less enough to wipe out the deficit. In the short term, part time incomes of either myself or Mrs Traineeinvestor or the return of my remaining capital from firm will also more than cover the shortfall. In fact, if we continue with both part time arrangements through to mid-2015 then, with the capital return, we are good for about four years. It is possible that rising dividend levels over those four years will deal with the issue after that. Reinvesting more of the cash currently held (in addition to the carpark just purchased) will also help. In the longer term, the mortgage on our home will be paid off in about seven years and cash flow will be strongly positive from then on.

Lastly, if things get tight, there is plenty of room to cut our expenses without having much effect on our standard of living. We can also shift non-income producing assets into income producing ones if we have to.

Financial Review - November, 2014

November was a poor month for my investments.

Net worth declined.  Asian equities appreciated slightly, but not sufficient to overcome the decline in my Australian/New Zealand equities and commodities and adverse FX movements. Expenses were moderate.

Here are the details:

1. my Hong Kong equity portfolio appreciated in line with the local market. There were no transactions this month;

2. my AU/NZ equities fell. I added shares in New Zealand Refining to the portfolio; equity ETFs were higher (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

4. my commodities fell. Silver is my only position;

5. the properties are at full occupancy and all tenants are paying on time. However, I will have at least one vacancy just before Chinese New Year in 2015. There were no repairs this month. I completed the purchase of a car parking space in the building where we live. It has already been rented out;

6. currency movements were negative with falls in the NZD and the AUD;

7. my position in bonds remains small;

8. expenses were moderate;

9.there were no transfers to Mrs Traineeinvestor this month.

My cash position fell slightly. I currently hold 35.2 months of expenses in HKD cash or equivalents.

For October, my net worth fell by 0.6%. The year to date increase is 4.46%.

Monday, November 03, 2014

Retirement - first anniversary

The first anniversary of my retirement (30 September, 2013) came and went without registering so this is a month late.

From a financial perspective, things have gone well. It would have been nice to start with a raging bull market and watch my equity portfolio appreciate by 20% but at least it was not a full on bear market. After all the ups and downs, during the first year of retirement, net worth increased by 4.9% after paying our living expenses during that  period. In effect, I have paid the bills and beaten inflation.

 On a cash flow basis, I have more or less broken even - a calculation which includes the principal component on our home mortgage and does not take into account either my or Mrs Traineeinvestor's part time incomes (trivial in my case). However, we took one less holiday than normal during this period and had the special dividend from Hutchison (HK:13) and, if those are taken into account, the cash flow situation is not quite so good once the two part time jobs come to an end. We will probably find that dividends and net rents do not quite meet all outgoings but that situation will reverse when the home mortgage is paid off in about six and a half years from now.

The home rennovation project has been delayed yet again. We will do it as and when the tenant moves out of one of our investment properties (rather than go to a serviced apartment for 3-4 months). An accrual has been made for most of the expense.

In terms of other issues:

1. the part time study is going very well - I am on track to finish in mid-2015 and will need to line up my next project after that;

2. progress on the novel has not been as good as I would like but is not terrible either - instead of finishing a rough first draft by the end of this year I am looking at early 2015;

3. I had some minor sporting injuries (plantar fasciitis) which have taken a long time to clear up with consequent adverse impact on fitness and weight - this has been the only serious disappointment in my retirement so far;

4. volunteer activities have gone as planned - fostering kittens for the SPCA, serving on some Law Society committees and two other positions;

5. I have spent a lot more time with my children.

All in all, retirement is off to a good start.