Tuesday, August 01, 2017

Financial Review - July, 2017

July was another good month for the portfolio with small gains across the board and favourable FX movements producing a 3.93 percent increase in net assets.

For the year, the portfolio is up 14.00 percent. The adjusted change from when I retired in September 2013 is a 21.14 percent increase. Hong Kong liquidity stands at 28.5 months of estimated outgoings, well down on January's 38.6 months due to new investments + a transfer to New Zealand but ahead of last month's due to high levels of dividends being received.

Here are the details:

1. my Hong Kong equities increased. I purchased some additional shares in GDI (HK:270);

2. my AU/NZ equities rose slightly. I purchased some additional shares in Colonial Motor Company (NZX: CMO);

3.my equity ETFs were up slightly (India, Hong Kong and China) in line with the local markets;

4. my position in silver was stable;

5. all tenants are paying on time and all properties are let;

6. the AUD and NZD were up against the HKD/USD. I made a small additional transfer to New Zealand;

7. my position in bonds remains small. I declined some offers as the spread between yield and cost of funds was too thin.

8. expenses were moderate as we took a short family holiday to Da Nang;

My HK cash position rose slightly during the month due to high level of dividends. I currently hold 28.5 months of expenses in HKD cash or equivalents (down from 38.6 months on 1 January).

I have revamped my spreadsheets to capture all debt (previously some accounts were entered on a net basis). Total household gearing ((debt+accruals)/assets) is 9.06% of total assets. Property prices are as at 1 January, 2017, so this overstates the gearing ratio.

I would like to make some additional investments but am struggling to find good value in the markets I follow. With expectations of further rises in interest rates muted, I remain tempted by the carry trade and would do one or two more should the right offers be available.


Anonymous said...

Hello Investortrainee,

Thank you for documenting your investment strategies and sharing your wealth of experience. Your blog is very insightful to a new learner like myself, and please keep up the good work!

I do have a question, and I would like your opinion on it.

For someone who is looking into investing on his/her first property in Hong Kong, what is your opinion on what to do with money saving for the down payment? Accumulate as cash in a savings account? Investing it in bonds? Investing it low risk ETF like the Tracker Fund of Hong Kong?

I'm researching the strategy of parking my bimonthly savings for the down payment into short/medium term bonds like iBonds. Knowing that my goal is to purchase a property 3-5 years down the line, I think secured bonds is a good way to beat the inflation. My bank offers zero handling fees for custody, interest and redemption. The only foreseeable issue is, the price at which I would be buying into these bonds from the market.

Lastly, what other products are you referring to when you mention "HKD cash or equivalents". Equivalents such as foreign currency? Bonds?

traineeinvestor said...

Thanks for dropping by and for your kind words.

Mandatory disclaimer: I have no professional or other qualifications in the financial industry and am not qualified to give advice in any shape or form.

The safe answer to your question is to work out how much you need and how long it will take to save that amount. With property prices moving around all the time (sometimes by a lot), there will be some guess work involved. Once you have a time period, you could look to invest in the best quality HKD bonds or notes issued by the HKSAR Govt or other very credit-worthy banks or large corporates. Check the credit ratings. Your could also look to put your money in deposits which are covered by the Deposit Guarantee Scheme. Picking terms which match your estimated time horizon will give you slightly higher interest rates than leaving the money on shorter term deposit rates BUT you will miss out on any interest rate increases that happen between now and your maturity date. With this approach, the risk of losing money is low (never zero) but your return is low too.

When I started out I took a much riskier approach and put some my money into the stock market instead of in bank deposits. This gave me a chance of getting a deposit together more quickly than using bank deposits or bonds but came with much greater risk that I could lose money and end up delaying buying a property. It worked at least in part because I was lucky. With the stock markets at quite high levels (some very high), I would have serious reservations about doing this now - the risks are too high at current share price valuations and if I was going to do it, I would be sticking with a low cost index fund like HK Tracker.

"HKD cash or equivalents" are HKD bank deposits, short term bonds and notes and a liquid bond fund.

I hope it works out for you.