Financial Review - October, 2015

October showed a partial recovery of the year's losses with equities moving higher, FX movements being favourable and positive cash flow from the rental properties.

Here are the details:

1. my Hong Kong/China equity portfolio appreciated. I added more shares in COSCO Pacific (HK:1199) through a dividend reinvestment plan (even though the shares have been suspended for some time);

2. my AU/NZ equities appreciated moderately. There were no new purchases;

3.my equity ETFs appreciated (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

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

5. all tenants are paying on time. We are back to full occupancy and negotiated a rent increase on one property;

6. currency movements were positive with the NZD and the AUD rising against the HKD/USD;

7. my position in bonds remains small;

8. expenses were moderate as we have now finished paying for renovations and moving expenses;

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

My cash position improved due to a lot of dividends being paid in October. I currently hold 34.3 months of expenses in HKD cash or equivalents. 

For October, my net worth appreciated by 4.74%.  The year to date decrease is 1.40%.

Retirement - second anniversary

As it has now been two years since my formal retirement at the end of September, 2013, here's a recap of how things have been going:

1. Financial (part 1): given the recent turmoil in the markets and the losses on my equity portfolio this year (compounded by adverse FX movements), I have obviously spent some time thinking about whether I should be worried about the sustainability of our finances. And while I have lost a bit of sleep over the issue, the short answer is "no". After adjusting for residual income received post-retirement and changes to accruals, the mark-to-market portfolio (the numbers I report monthly) have dropped by less than 1% after accounting for living expenses. Losses would have to get a lot worse before I would be at risk of outliving my resources. Also, my monthly net worth calculation does not reflect current property valuations - property is carried at historical cost. If I revalued the properties to current bank valuations, I would be comfortably ahead of where I was on retirement.

The consolidated balance sheet which includes Mrs Traineeinvestor's assets and takes into account current property values, is actually up from when I retired and does not yet reflect the most recent increase in HSBC on-line mortgage valuations.

2. Financial (part 2): the other aspect of our finances is cash flow. Cash balances have fallen due to a combination of new investments and spending exceeding income from investments. During the last two years, I have had to fully renovate two apartments in Hong Kong, paid a very large building renovation levy, had three months of vacancy on two properties while renovations where being done and paid for a master's degree. Assuming I don't get hit of any of these very large bills again, cash flow should be better going forward. Also, I can look forward to Q2 2018 when another mortgage will expire.

3. Work: I am still doing some very part time consulting. This has gone on for longer than I expected, but I'm enjoying it and am happy to continue as long as it doesn't interfere with anything else.

4. Health and Fitness: I encountered some unexpected health issues which were a cause of concern for a while but (hopefully) are no behind me. They did interfere with plans to improve my fitness but I am starting to get back into it again and plan to run a marathon at some point in the future.

5. Other activities: The highlight is completing a post-graduate degree and thoroughly enjoying the experience. I've also developed a few hobbies and habits which are keeping me occupied (mid-week hiking with another early retiree, a volunteer position with a non-profit and a few others), but need something to replace the formal study. I have finished the first draft of a novel and hope to finish editing by year end with a view to self-publishing early in 2016. One of the things I have learned about myself is that sitting around doing nothing is not something I enjoy.

6. Things I haven't done: I have a very long bucket list and while I am making reasonable progress, there are a lot of things which I haven't touched and sometimes I have a nagging feeling that I should be doing more. I'll review the list and pick a couple of items to bring to the front of the queue.

So far, I have no reason to regret the decision to take early retirement. It's been a great experience and I feel like I'm using my freedom well.

Financial Review - July, August and September

The last three months were a terrible time for my investments.
Net worth continued to fall on the back of falling stock markets with the losses being increased my adverse FX movements. Expenses were high as we moved homes (temporarily) and have mostly completed some renovations.

Here are the details:

1. my Hong Kong/China equity portfolio fell sharply. I added a few more shares in HSBC (HK:5) to the portfolio, attracted by the 6+% dividend yield;

2. my AU/NZ equities fell moderately. I purchased shares in Nine Entertainment (ASX:NEC) attracted by the 6+% dividend yield and the proposal to repurchase up to 20% of the outstanding issued shares which is currently being implemented;

3.my equity ETFs fell sharply (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

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

5. all tenants are paying on time. We are currently living in one of our rental units while our primary home undergoes some long overdue redecoration. It will be back on the market next week;

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

7. my position in bonds remains small;

8. expenses were very high as we have paid for our second round of moving costs and the second and third instalments on our home renovation project;

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

My cash position fell. I currently hold 33.7 months of expenses in HKD cash or equivalents. 

For July, August and September, my net worth fell by 2.4%, 6.3% and 0.65% respectively.  The year to date decrease is 6.11%.

Financial Review - June, 2015

June was a terrible month for my investments.

Net worth took big fall on the back of falling stock markets with the losses being increased my adverse FX movements. Expenses were high as we moved homes (temporarily).

Here are the details:

1. my Hong Kong/China equity portfolio fell sharply. There were no transactions this month;

2. my AU/NZ equities fell moderately. There were no transactions this month;

3.my equity ETFs fell sharply (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

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

5. all tenants are paying on time. We are currently living in one of our rental units while our primary home undergoes some long overdue redecoration;

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

7. my position in bonds remains small;

8. expenses were very high as we have paid for part of our moving costs and the first instalment
 on our home renovation project;

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

My cash position fell. I currently hold 35.3 months of expenses in HKD cash or equivalents. 

For June, my net worth fell by 4.05%.  The year to date increase is 3.46%. 

Financial Review - May, 2015

May was a poor month for my investments.

Net worth took hit.  Asian equities and Au/NZ equities more or less went sideways in local currency terms, silver nudged slightly lower but FX movements were highly unfavourable. Expenses were moderate.

Here are the details:

1. my Hong Kong/China equity portfolio went sideways. There were no transactions this month;

2. my AU/NZ equities were flat. There were no transactions this month;

3.my equity ETFs went sideways (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

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

5. all tenants are paying on time. We will move into a vacant rental unit while our primary home is undergoing renovation;

6. currency movements were strongly negative with the NZD and the AUD falling sharply;

7. my position in bonds remains small;

8. expenses were moderate.  Expenses next month will be very high as we are about to pull the trigger on our home renovation project;

9.I made a transfer to Mrs Traineeinvestor this month.

My cash position fell. I currently hold 38.7 months of expenses in HKD cash or equivalents. 

For May, my net worth fell by 1.3% - just about all of this was due to currency movements. The year to date increase is 7.41%. 

Sinolink Holdings sold

Last week I sold the rest of my shares in Sinolink Holdings (HK:1168). I held the shares from November 2012 and with a few sales and purchases along the way, made a net profit of around 37%. This was a reasonably reasonably large position for me so the overall impact on the household net worth was a decent one. However, like all my recent sales, I sold too soon - I had held my entire position until today, the net profit would have been close to 60%. Oh well ....

Financial Review - April, 2015

April was an unbelievably good month for my investments.

Net worth took big jump on the back of booming HK/PRC stock markets.  Asian equities appreciated, my Au/NZ equities more or less went sideways in local currency terms, silver nudged slightly higher and FX movements were marginally favourable. Expenses were moderate as I expensed the remaining half the cost of renovating a flat.

Here are the details:

1. my Hong Kong/China equity portfolio increased. I sold all my shares in Sinolink (HK:1168) for a very nice profit (too soon, of course);

2. my AU/NZ equities were flat. There were no transactions this month;

3.my equity ETFs appreciated (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

4. my commodities rose slightly. Silver is my only position;

5. all tenants are paying on time. One property is vacant and is currently undergoing renovation;

6. currency movements were positive with the NZD and the AUD gaining slightly;

7. my position in bonds remains small;

8. expenses were moderate as I paid for a short holiday to Japan over Easter and prepaid the air tickets for our summer holiday to take advantage of a special offer from Cathay Pacific. Expenses next month will be very high as we are about to pull the trigger on our home renovation project;

9.I made a transfer to Mrs Traineeinvestor this month and will make another one next month.

My cash position fell. I currently hold 40.8 months of expenses in HKD cash or equivalents. 

For March, my net worth jumped by 7.38%. Effectively, the portfolio generated enough positive return in one month to cover nearly three years of living expenses. The year to date increase is 8.79%. 

Sinolink - partial profit taken

With the recent run up in share prices, I have been asking myself whether it is time to take a little but of money off the table. Given that just about every decision to sell a share in the last few years has been a bad one, my judgement in these matters is clearly suspect.

In any case, I sold a few of my shares in Sinolink Holdings (HK:1168) at HKD 0.80 on Friday and a few more and HKD 0.82 this morning. Average purchase price (including transaction costs) was HKD 0.63. While it's nice to make a decent profit, given my opinion that the shares are worth considerably more than the current share price, I still hold most of my shares in this company.

Financial Review: March, 2015

March was another good solid month for my investments.

Net worth was more or less break even.  Asian equities appreciated, more or less offset by small falls in my Au/NZ equities and in commodities and slightly unfavourable FX movements. Expenses were high as I expensed the remaining half the cost of renovating a flat.

Here are the details:

1. my Hong Kong/China equity portfolio increased. I added HSBC (HK5) and sold China Starch (HK:3838) and Sichuan Express (HK:107);

2. my AU/NZ equities fell. There were no transactions this month;

3.my equity ETFs appreciated (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

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

5. all tenants are paying on time. One property is vacant and is currently undergoing renovation;

6. currency movements were negative with the NZD and the AUD being flat;

7. my position in bonds remains small;

8. expenses were high due to expensing half of the renovation costs of a vacant rental flat;

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

My cash position fell. I currently hold 32.1 months of expenses in HKD cash or equivalents. 

For March, my net worth was unchanged. Effectively, the portfolio generated enough positive return to cover the difference between my part time income and our expenses and the cost of the renovation work. The year to date increase is 1.69%.

Portfolio changes

A couple of weeks ago I decided to add HSBC (HK:5) to the portfolio. With a trailing yield of just under 6%, adequate capital adequacy and the battering of a series of scandals, I hoped that the share price had been pummelled to the point where not only had all the bad news had been priced in, but the market was anticipating more bad news.  I paid $65.50 for most of the shares I purchased and $67.40 for a small additional parcel.

Since I wish to keep a reasonable amount of cash on hand and would also like reduce the number of shares in the portfolio, I sold China Starch (HK:3838 and my smallest investment) at a loss and Sichuan Express (HK:107, a smallish investment) at a profit. Both of these companies have recently released disappointing results which followed previous disappointing results. The former has been blighted by significant increases in administration/marketing expenses and the latter by government polices adversely affecting toll roads.

Traits of Happy Retirees

This post about the 18 traits of happy retirees on the excellent Bogleheads forum caught my attention. We hit most of the 18 items on the list:

1. our pre-retirement household income was above the USD97K threshold for happiness. Given the cost of living in Hong Kong and that we have two school-age children, a high income was pretty much essential to saving enough for early retirement; PASS

2. our post-retirement household income is above the USD82K threshold for happiness. See1  above; PASS

3. our liquid net worth (cash, marketable securities, commodities) is well above the USD500K threshold. See 1 above; PASS

4. do we have a well defined understanding of our purpose in life? Once I get past raising children and feeding the cat, I'm not sure about this one. I have plenty of things to do (current and proposed) but am not sure if they amount to a "purpose"; FAIL

5. I have the 3.5 core pursuits - writing/reading, studying, exercise, family, charity & professional. I am also very goal orientated which helps; PASS

6. home value is miles above the USD300K threshold - which is hardly surprising given Hong Kong property prices; PASS

7. we do have a mortgage and there is about 6.5 years to go on it. Given current interest rates, it makes more sense not to pay it off early (which we could do); PASS

8. we are married; PASS

9. we have two children. I assume this and 8 above are representative of a more generic "family" trait; PASS

10. we have multiple sources of income; PASS

11. we spend much more than 5 hours per year planning for retirement; PASS

12. our spending level is well above the USD53K per annum threshold. See 1 above; PASS

13. we live in a city; PASS

14. we eat fast food occasionally. Hong Kong being Hong Kong, I'm not sure what counts as fast food here but, on the whole, we have pretty average dietary habits; PASS

15. we don't own a car; PASS

16. we tend to shop at middle range stores; PASS

17. we usually take 2-3 vacations a year; PASS

18. both myself and Mrs Traineeinvestor graduated from university. PASS

Of course, all this is based on a survey and is no more than a smorgasbord of average responses. The two most obvious things missing from the list are (1) health and (2) environment - which is very surprising. My own take is that a happy retirement is best founded on:

A. solid family relationships
B. financial security - not necessarily affluence but enough to avoid sleepless nights worrying about putting food on the table in 20-30 years time
C. engagement - just keeping socially, mentally and physically active. Just being curious about things is a good place to be
D. health - something we take for granted until we don't have it

Financial Review - February, 2015

February was another good solid month for my investments.

Net worth increased.  Asian equities appreciated slightly slightly offset be a small fall in commodities and FX movements were slightly favourable. Expenses were high as I expensed half the cost of renovating a flat.

Here are the details:

1. my Hong Kong/China equity portfolio increased . There were no transactions this month;

2. my AU/NZ equities appreciated. There were no transactions this month;

3.my equity ETFs appreciated (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

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

5. all tenants are paying on time. One property is vacant and is currently undergoing renovation;

6. currency movements were positive with gains in the NZD and the AUD being flat;

7. my position in bonds remains small;

8. expenses were high due to expensing half of the renovation costs of a vacant rental flat and university fees being paid;

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

My cash position fell. I currently hold 34.1 months of expenses in HKD cash or equivalents. February is the lowest month of the year as far as cash inflows are concerned.

For February, my net worth increased by 1.21%. The year to date increase is 1.61%.

Financial Review - January, 2015

January was a good solid month for my investments.

Net worth appreciated.  Equities appreciated across the board as did commodities while adverse FX movements materially reduced the local currency gains. Expenses were low.

Here are the details:

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

2. my AU/NZ equities appreciated. There were no transactions this month;

3.my equity ETFs appreciated (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

4. my commodities rose slightly. Silver is my only position;

5. the properties are no longer a full occupancy and all tenants are paying on time. One property became vacant just before Chinese New Year in 2015. The vacant property requires a complete renovation and this will start next week;

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

7. my position in bonds remains small;

8. expenses were low;

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

My cash position increased slightly. I currently hold 35.8 months of expenses in HKD cash or equivalents.

For October, my net worth rose by 0.53%. The year to date increase is 0.53%.

2015 - Moving Forward

So we are into the third week of the New Year before I get around to articulating what I intend or hope to achieve this year.

The financial side is obviously important and it would be a very nice outcome if our assets could continue to generate sufficient returns to pay the household expenses and beat inflation. Given that asset prices are generally high (excepting H shares and commodities), there is a reasonable chance that this will not happen. However, so long as cash flows from rents, dividends and interest more or less meet our expenses we will still be doing okay and we still have two part time incomes as back up and the comfort of knowing that all our outstanding P+I mortgages are slowly being amortized away.

On the non-financial side, I have given myself four main objectives:

1. in 2014 my fitness was impacted by a nagging injury (plantar fasciitis) and another health issue. I am really hoping that those issues are now behind me and I can get back to the kind of level where I can sign up for the HK marathon in 2016;

2. finish the novel I am writing (including all editing). I had hoped/intended to finish it last year but for one reason or another, I got a lot done but fell six or seven chapters short of finishing a rough first draft;

3. finish the MFA. It's been a lot of fun and a very rewarding start to my retirement and I will miss the interactions with the faculty and other students, but it will be good to finish it and move on to the next project;

4. continue spending time on volunteer activities - I've enjoyed all of them so far and get a bit of a buzz about "giving back" so I'll continue with all of them.

Financial Review 2014

A little late, but here is the financial report for 2014.

In short from a financial year it was a year that I could live with but still remained disappointing.

Annual return on my net assets without property adjustments: 3.41%
Annual return on combined household net assets with property adjustments: 7.6%

The actual returns would be a bit higher as the above numbers include (i) income from our part time jobs and (ii) all our household expenditure during the year. Since our returns were higher than expenses + inflation, this is acceptable

The two factors which were most significant to portfolio performance in 2014 were:

1. what I didn't have - almost no exposure to the well performing US and European markets

2. currencies - with considerable exposure to the AUD and NZD which declined against the HKD

There is a lesson in diversification there.

2014 - review of objectives

In January 2014 I set myself a list of objectives for the year.

Unfortunately, 2014 was a rather disappointing year in most respects, due in part to circumstances beyond my control and in part to my own actions (or inactions). Here are the lacklustre details:

1. financially 2014 was a very average year - total return on my portfolio was enough to cover living expenses and more or less match inflation. The biggest drag on performance was the weakness in the AUD and, to a lesser extent, the NZD. On the positive side (i) I didn't do anything really stupid with my finances and (ii) expenses were reasonably well controlled;

2. fitness was a big fat negative - the "minor" foot injury of early January turned into a case of plantar fasciitis that took several months to remedy after I rather stupidly tried to keep running on it;

3. the degree has been a lot of fun - I am on track to complete the degree requirements by mid-2015. While I am a long way from being one of the better students in my intake, I have enjoyed studying an unfamiliar area, rewiring my ageing brain and getting to know a lot of interesting and new people. One of my tasks for 2015 is to line up my next project;

4. I failed to complete a first draft of my novel by year end - close but no cigar. In part because of time spent on the degree and in part because of an unexpected distraction which chewed up a lot of time in October - December (and which is still on going). The good news is that it is sufficiently advanced that a final version including editing will be completed by the end of 2015;

5. the miscellaneous housekeeping was a bottomless pit of tasks that resembled a hydra - overtime I completed one job, two others would raise their ugly heads. Currently outstanding: three lots of completely unnecessary window inspections, one application to boarding school, one passport renewal, one lost tax return to replace, follow up questions for my complaint to the Data Privacy Commissioner against a cold calling real estate agent who refuses to delete my personal data or to stop calling me, figure out Apple's useless Time Capsule being a few among the many items in the "to do" pile.

Hopefully 2015 will be a better, more productive and distraction free year.

Financial Review - December, 2014

December was a poor month for my investments.

Net worth declined.  Asian equities fell slightly, Australian/New Zealand equities appreciated slightly as did commodities and FX movements were unfavourable. Expenses were moderate.

Here are the details:

1. my Hong Kong/China equity portfolio fell with declines in my two biggest investments (China Gas and Hutchison) dragging down the portfolio . There were no transactions this month;

2. my AU/NZ equities appreciated. I added more shares in New Zealand Refining to the portfolio;

3.my equity ETFs were mixed (India, Vietnam, Hong Kong and China) in line with the local markets. There were no new purchases;

4. my commodities rose slightly. 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. I received a big bill for an overseas property (water pipe into the property needs to be dug up and replaced);

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 34.9 months of expenses in HKD cash or equivalents.

For October, my net worth fell by 1.0%. The year to date increase is 3.41%.

I will do a year end report in the next few weeks. I have over provided for tax which would lift the number very slightly but otherwise, it would appear that in my first full year of retirement, the portfolio has more or less generated sufficient returns to meet our living expenses and to match inflation. The biggest single contributor to the poor performance was the decline in the AUD and NZD against the HKD - if my currency of account had been the NZD our household net worth (which includes Mrs Traineeinvestor's assets and property market to market so not a perfect comparison) would have appreciated more than 20%.