Yesterday I added a few more China VTM (HK:893) to the portfolio. The company is selling on a consensus forward PE of less than 5x and offers a trailing dividend yield of above 4%. The company is also operating in an industry which is strategically important to China.
I paid HK$1.54 for the additional shares.
Wednesday, January 04, 2012
Tuesday, January 03, 2012
2012 Moving Forward (provisional)
As with previous years, I will not be making any resolutions for 2012. Instead, I will follow my practice of using the new year as a convenient time to review various objectives, both in terms of either setting new ones or abandoning old ones and assessing progress.
1. retirement: my target retirement date has moved around a lot over the last few years. A year ago, I had intended to retire early this year. While the numbers still make sense, the losses suffered in 2011 on my equity investments have dented my confidence to the point where I would like to continue working for "just one more year". I will not be able to make a definitive decision on this until I come off contract early this year and, if I am offered a new contract, I know what the terms will be. The work/not work decision will affect many of my other objectives for 2012, making this review very much a provisional one (although based on the assumption that I will continue working, although with a cut in income).
2. finances: the main objectives for my finances in 2012 are:
3. home renovation project: whether this gets done in 2012 or 2013 does not matter. However, we have to be ready to do it when one of our larger rentals becomes vacant.
4. writing: a repeat of last year's objective. This year I am setting myself the target of reaching at least 200 pages of material (including what I have written already).
5. health and activities: I will do the HK marathon next month (absent illness or injury) but am undecided about doing the Hong Kong Trailwalker this year. Diet is something of an issue, especially the excessive consumption of sugar.
6. skill set: I made some progress on the tech front in 2011 and would like to do more in 2012. Photography is one area I would like to do better at. I also want to look into self publishing on Kindle or other platforms as an alternative to traditional publishing.
7. preparation for retirement: I am more or less there. The biggest outstanding item is medical insurance - my firm policy can be extended into retirement at the discretion of the insurer and I will not know whether this will happen until I have actually given notice. There are a number of lesser items which can all be done while I am serving out my notice period.
There is nothing else that particularly comes to mind, though this will have to remain provisional until my employment situation is sorted out.
1. retirement: my target retirement date has moved around a lot over the last few years. A year ago, I had intended to retire early this year. While the numbers still make sense, the losses suffered in 2011 on my equity investments have dented my confidence to the point where I would like to continue working for "just one more year". I will not be able to make a definitive decision on this until I come off contract early this year and, if I am offered a new contract, I know what the terms will be. The work/not work decision will affect many of my other objectives for 2012, making this review very much a provisional one (although based on the assumption that I will continue working, although with a cut in income).
2. finances: the main objectives for my finances in 2012 are:
- maintain a healthy savings rate. The actual rate will depend on the new terms, but will likely be well below the rates achieved in the last three years
- end the year with at least 2-3 years worth of expenses in cash/near cash. I currently sit on 35.5 months worth
- look to diversify the portfolio. The loss of the Lyxor ETFs has made this process harder
3. home renovation project: whether this gets done in 2012 or 2013 does not matter. However, we have to be ready to do it when one of our larger rentals becomes vacant.
4. writing: a repeat of last year's objective. This year I am setting myself the target of reaching at least 200 pages of material (including what I have written already).
5. health and activities: I will do the HK marathon next month (absent illness or injury) but am undecided about doing the Hong Kong Trailwalker this year. Diet is something of an issue, especially the excessive consumption of sugar.
6. skill set: I made some progress on the tech front in 2011 and would like to do more in 2012. Photography is one area I would like to do better at. I also want to look into self publishing on Kindle or other platforms as an alternative to traditional publishing.
7. preparation for retirement: I am more or less there. The biggest outstanding item is medical insurance - my firm policy can be extended into retirement at the discretion of the insurer and I will not know whether this will happen until I have actually given notice. There are a number of lesser items which can all be done while I am serving out my notice period.
There is nothing else that particularly comes to mind, though this will have to remain provisional until my employment situation is sorted out.
Review 2011 - a disappointing year
Like the proverbial curate's egg, 2011 was good in parts. Unfortunately, it was also bad in parts. Very bad. In summary, it would have been a good year all round if I had not lost so much money in the equity markets.
Financial matters
In so far as investments were concerned, 2011 provided a painful and expensive lesson in the benefits of diversification, asset allocation, risk management and behavioural investing.
As a summary, equities incurred significant losses as I not only failed to take money off the table at various times but as I continually added to my positions on the basis of value (or, at least, perceived value) while the markets continued to slide downwards. Commodities also produced negative returns, but the amounts involved were much smaller. In contrast, real estate values ended the year at higher valuations than 12 months previously and also produced positive cash flows, bonds produced positive returns and currency movements were favourable as the USD weakened against the AUD, NZD and RMB.
As a snapshot, my personal balance sheet (which records real estate at gross cost) grew by a meagre 5.68% during the year while the household balance sheet (which includes Mrs Traineeinvestor's assets and also marks real estate to current market value) increased by 10.3%. While this is a disappointing result, the fact that we ended 2011 with a higher net worth than we started in rather difficult economic times is a positive.
While I will have to wait a couple of weeks to finalise the spending numbers, the annual savings rate will be above 50% once again. This is in spite of inflationary cost increases - especially in food, transport, holidays and government charges. Higher income and a reduction in some discretionary items helped.
The big issue on the table (in some respects, the only one that matters) is whether or not to retire in 2012. Even though the numbers still add up, the financial set back of 2011has dented my confidence to the point were I am seriously considering working for "just one more year". I will not be making a decision on this until after I come off contract early this year.
Review of 2011 objectives
Going through the items identified in my January 2011 post on moving forward:
1. savings rate: as mentioned above, the savings rate was excellent (above 50%)
2. asset allocation: this was partially achieved as cash/near cash increased to close to three years of living expenses. However, the quest for greater diversification failed and the reduced availability of low cost ETFs will hamper progress on this issue going forward
3. investment focus: this was an abject failure. As far as equities and commodities were concerned, I got it completely wrong and lost a lot of money as a result
4. decision on home mortgage: undecided. If I am working for another year (to be decided in late Jan or Feb), then this decision can be deferred for another year
5. expense management: while it was not possible to avoid the impact of inflation, expenses were reasonably well managed. I underspent on several discretionary items this year
6. get a medical done: not done and no excuse
7. tech skills: getting better but still not my forte. At least I managed to migrate everything onto my new computer without assistance or losing anything
8. home renovation project: postponed for 12-24 months. It's not urgent and can wait. Current thinking is that we will move into one of our rentals for 3-4 months while the project is being done. This will be cheaper than using a serviced apartment
9. sporting activities: I managed to complete both the Hong Kong marathon and the more challenging Hong Kong Trailwalker without injury problems. The pace may be very slow, but I'm happy just to be able to get around and enjoy the experience
10. novel: fail - not really much progress this year
11. diversify social network: fail and I don't feel too bothered by it
Other matters
Apart from the above, I managed to get in a reasonable amount of travel during 2011 and actually managed to use all my holiday allowance. I also managed to do some volunteering work which I found extremely satisfying.
In spite of the financial mess, 2011 was actually quite an enjoyable year.
Financial matters
In so far as investments were concerned, 2011 provided a painful and expensive lesson in the benefits of diversification, asset allocation, risk management and behavioural investing.
As a summary, equities incurred significant losses as I not only failed to take money off the table at various times but as I continually added to my positions on the basis of value (or, at least, perceived value) while the markets continued to slide downwards. Commodities also produced negative returns, but the amounts involved were much smaller. In contrast, real estate values ended the year at higher valuations than 12 months previously and also produced positive cash flows, bonds produced positive returns and currency movements were favourable as the USD weakened against the AUD, NZD and RMB.
As a snapshot, my personal balance sheet (which records real estate at gross cost) grew by a meagre 5.68% during the year while the household balance sheet (which includes Mrs Traineeinvestor's assets and also marks real estate to current market value) increased by 10.3%. While this is a disappointing result, the fact that we ended 2011 with a higher net worth than we started in rather difficult economic times is a positive.
While I will have to wait a couple of weeks to finalise the spending numbers, the annual savings rate will be above 50% once again. This is in spite of inflationary cost increases - especially in food, transport, holidays and government charges. Higher income and a reduction in some discretionary items helped.
The big issue on the table (in some respects, the only one that matters) is whether or not to retire in 2012. Even though the numbers still add up, the financial set back of 2011has dented my confidence to the point were I am seriously considering working for "just one more year". I will not be making a decision on this until after I come off contract early this year.
Review of 2011 objectives
Going through the items identified in my January 2011 post on moving forward:
1. savings rate: as mentioned above, the savings rate was excellent (above 50%)
2. asset allocation: this was partially achieved as cash/near cash increased to close to three years of living expenses. However, the quest for greater diversification failed and the reduced availability of low cost ETFs will hamper progress on this issue going forward
3. investment focus: this was an abject failure. As far as equities and commodities were concerned, I got it completely wrong and lost a lot of money as a result
4. decision on home mortgage: undecided. If I am working for another year (to be decided in late Jan or Feb), then this decision can be deferred for another year
5. expense management: while it was not possible to avoid the impact of inflation, expenses were reasonably well managed. I underspent on several discretionary items this year
6. get a medical done: not done and no excuse
7. tech skills: getting better but still not my forte. At least I managed to migrate everything onto my new computer without assistance or losing anything
8. home renovation project: postponed for 12-24 months. It's not urgent and can wait. Current thinking is that we will move into one of our rentals for 3-4 months while the project is being done. This will be cheaper than using a serviced apartment
9. sporting activities: I managed to complete both the Hong Kong marathon and the more challenging Hong Kong Trailwalker without injury problems. The pace may be very slow, but I'm happy just to be able to get around and enjoy the experience
10. novel: fail - not really much progress this year
11. diversify social network: fail and I don't feel too bothered by it
Other matters
Apart from the above, I managed to get in a reasonable amount of travel during 2011 and actually managed to use all my holiday allowance. I also managed to do some volunteering work which I found extremely satisfying.
In spite of the financial mess, 2011 was actually quite an enjoyable year.
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