The Incompetent Investor

Thursday, May 16, 2019

Chapter 14 - "Portfolio Update - Strewth, put Petrol in a Diesel Vehicle" $120,121 (+$1896)

May 16, 2019
Chapter 14 - "Portfolio Update - Strewth, put Petrol in a Diesel Vehicle" $120,121 (+$1896)
Strewth, it is that time of the month again. The year is going pretty bloody 
fast ay. The New Financial Year is fast approaching!


Work & Life Update – Skip this section if you want the straight up numbers update.
I have had an interesting month. I recently filled up the diesel work vehicle with petrol. My only defence was I have the exact same (Nissan X-Trail) vehicle as the work vehicle (including the grade and colour). My mind was in autopilot that morning, and I made a major stuff up. 

Once I acknowledged the error, I sat in the car and pondered life, during peak hour fuel stops (8:30AM), with a rough looking fella with a beard to his knees parked behind me. In the end, I told the fella that he is going to have to get around me somehow. The fella grunted as if I had ruined his week, given the inconvenience caused on a Monday morning.  I did a quick google to discover I should avoid driving the vehicle at all costs. I ended up putting the vehicle in neutral and attempted to push the car out of the way (as directed by staff at the service station). 

I struggled to push it up a slight incline. Most people watched on as I struggled ha ha. It was a Monday morning, so I do not blame them for not wanting to help. Who could be effed?

I called my boss, and explained the situation, and to my surprise, my boss was quite understanding. Thank goodness, although, it was an embarrassing mistake.

I was in the clear, and yet, 2 weeks later, I took the vehicle through the car wash, and forgot to remove the work magnets. The magnets are currently missing in action. I felt terrible.

On a positive note, my wife and son return to Darwin tomorrow morning at 5AM from their trip in India. I sent my wife over with $1000 spending money. I was a bit worried that it may not go very far, however, the wife was able to spend it on gifts, food, get her teeth repaired and more. It got me thinking, what if we could FIRE in India 3-6 months of the year when that day comes.

Being born and bred in Australia, I believe we live in the best country in the world. However, the cost of living is high depending on where you would like to settle. Therefore, spending some time abroad in a country where healthcare, accommodation and food is affordable relative to Australian dollars; might be a viable option to enjoy a good quality of life. It is just a thought, and something I need not worry about for some years given we are not in a position to FIRE just yet!

Work is fairly tense. I am learning that jobs that depend on collaboration can sometimes hit brick walls if you get no responses via email and so on. In addition, many providers in the human services sector are under resourced and simply do not have enough hours in the day to meet all their demands. Naturally, as a competitive person, I want to succeed in my role, so it can be tough.  It is a fine art balancing how much you follow somebody up; at the risk of being shut out completely (which is particularly relevant in remote areas).

I just keep reminding myself to be grateful that I have a job, and that many people do not have that opportunity. Furthermore, I try to live by the motto ‘just keep showing up every day’.

Shares
Portfolio Value as of 16/5/2019: $75,156 ($-894)
I expect to receive a dividend from ANZ for $435.43 on the 1st of July 2019.
I have made no additional share purchases this month.

Debt
Nissan X-Trail: $6000 (-$2000) – Interest Rate 12% Projected Completion August 2019
Father Phil: $700 (-$100) – Interest Rate 0% Projected Completion December 2019
A payment of $2000 was paid into the vehicle. This amount will likely increase when the wife resumes work (which I suspect will be very shortly).
A further $100 was sent to Father Phil.

Net Worth Update
Total: $120,121 (+$1896)
Break Down
Shares: $75,156 (-$894)
Super: $51,665 (+$665)
Emergency: $0
Debt: -$6,700 (-$2100)
The boost here was due to wiping out the loan vehicle a further $2000.
The Shares have been hit in recent weeks, which wiped out about -$894 from the share portfolio.
In any case, it is nice to see some movement to the upside, even if it is mostly attributed to superannuation and debt reduction.
Note: In case you are unaware, I am including super in my net worth updates moving forward after receiving this feedback from the community.

Summary
That is about it really. Glad we had some upward momentum in terms of the numbers, and the debt continues to reduce quite significantly. We have managed to pay down 40% of the loan.
Hope you are all doing well!
I continue to fight demons around immediate gratification (gaming computer). The theory behind immediate gratification is problematic, and I can truly see how it can suck people in so easily! In hindsight, After Pay & Zip Pay were great bets for those who got on that train early.
Until next-time FAM!
Cheers
The Incompetent Investor  

Disclaimer: I have an extremely poor track record with picking individual shares. I also do not have the ability to digest complex financial reports to make informed decisions around buying into individual shares. Also, the information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should also seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 

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Friday, April 26, 2019

Chapter 13 - “Portfolio Update - Reflection & Including Super” May 2019 Update Net Worth $118,225 (+$54250 - Due to including Superannuation in NW)

April 26, 2019
Chapter 13 - “Portfolio Update - Reflection & Including Super” May 2019 Update Net Worth $118,225 (+$54250 - Due to including Superannuation in NW)
G’day! Firstly, I would like to thank you all for the feedback you provided in my previous blog post. If you want some context, refer to https://www.reddit.com/r/fiaustralia/comments/b9aduq/chapter_12_portfolio_update_family_is_in_darwin/



I received quite a lot of positive feedback as well as constructive criticism. I also received some straight up negative feedback, some even condescending. I am not going to lie; I was awake relatively late that night thinking about it quite a bit.

My wife insisted I go to sleep that night, but to no avail. I was refreshing the blog post for a number of hours. Rather silly in hindsight.

I have realised a couple of things. Firstly, when you are going to display all your cards on the table transparently, it is to be expected to receive some harsh feedback. Although, this feedback can do a number of things. It can inspire you, it can also provide you with an opportunity to self-reflect, and give you the reality check you may actually need and deserve. Furthermore, there may be readers who have walked this path before, or are currently walking it. Therefore, the direct feedback may help others beyond myself. Who knows?

They typically say the best friend is the person who has the sack to tell you something you do not want to hear. If I could just conclude that I realise FI is at the core a numbers game. However, sometimes, and I am sure others can relate, putting family, safety, and even love before numbers is a more fulfilling way to progress towards FI. 

Mathematically, it made no sense for my family to join me in Darwin (we were saving like bosses); and yet, while our Emergency Funds & Net Worth took a hit, I feel happier than I did before. Anyway – moving on, time for an update on my current circumstances & numbers. Before I do that, I am pleased to announce that I recently purchased a $3000 gaming computer...

Just kidding! A reddit poster in my previous post advised me he/she would whack me over the head if I purchased a gaming computer. I laughed when they wrote this, and their comments are ingrained in my mind lol! Thank you for this.

Work Situation


My current contract expires at the end of September 2019. At this stage, I have not been provided confirmation on whether or not the role (which is funded dependent) will continue at this stage. I am not too worried here as I’ve always found work, and I am willing to do anything in the interim should I need to do a role nobody wants to do.

If anybody has any suggestions or feedback here, please do share them. For instance, should I start applying for new roles 3 months out from the end date? 

My wife recently was offered a job just prior to leaving to India. The role is suitable for her circumstances. The role offers 20-25 hours a week, which will work well with her current study commitments (Bachelor of Nursing). The only downside is she will be compensated $25 p/h. The wife intends to graduate in 2.5 Years. I suspect this will help considerably in the rat race.

Shares


Portfolio Value as of 26/4/2019: $76,050

I expect to receive a special dividend payment from MLT for $0.0250 per share on the 30th of April 2019.

Total Dividend: $205.54: Milton 30th of April 2019; Franked $143.88, Franking Credits $61.66.

I have made no additional share purchases this month.



Debt


Nissan X-Trail: $8000 (-$2000) – Interest Rate 12% Project Completion: July 

2019 Father Phil: $800 (-$100) – Interest Rate 0%, Projected Completion: December 2019 

A payment of $2000 was paid into the Vehicle loan. 

The repayment amount will increase upon my wife resuming work upon her return from India. 

A further $100 was sent to Father Phil.

Net Worth Update

$118,225 (+$3250+$51,000 super). 

The boost here is a result of the stock market (nearing 6400 points) and repaying some of the vehicle off. Last time we got close to this high was in 2015 & 2018. 

Otherwise, it dates back all the way to 2007 (which saw almost 6700 points). Interesting times ahead.

Life Update

I have commenced my Masters in Social Work. I also wanted to share with you a good book called “Can't Hurt Me: Master Your Mind and Defy the Odds”. Check out the reviews- https://www.amazon.com/Cant-Hurt-Me-Master-Your-ebook/dp/B07H453KGH. It is awesome. 

I believe this book has direct benefits towards FI. For instance, it could be related to starting a business, studying, saving, getting fit, paying off debt, waking up early, really anything. It truly is an awesome book, and it is unsurprising that it received exceptional reviews.

Super

Combined Super $51,000 

Thank you all. Hope you had an awesome Anzac Day yesterday, followed by a relaxing weekend. For those not FI yet, how good was the Easter break and not having to work? It was refreshing.

Catch you in the next update!




Disclaimer: I have an extremely poor track record with picking individual shares. I also do not have the ability to digest complex financial reports to make informed decisions around buying into individual shares. Also, the information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should also seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 



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Thursday, April 4, 2019

Chapter 12 - “Portfolio Update - Family is in Darwin” April 2019 Update Net Worth $64,000 (-$-12118)

April 04, 2019
Chapter 12 - “Portfolio Update - Family is in Darwin” April 2019 Update Net Worth $64,000 (-$-12118)

G’day all,




I will be covering the following topics in this update. If you want to skip the life story, head down to the Family Networth Update. I've also thrown in some photos of the animals at various points of the journey. 
-          Intro
-          New Car  
-          Life Update
-          New Debts
-          Goals
-          Networth Update
Intro
It has been a number of weeks since I have last posted.

Straight up I will admit that there was a reluctance to post given our recent hit to the family’s net worth.

I feel like the purpose of a FIRE blog is to progressively move forwards. And yet, we have been progressively moving backwards ha ha.

One day though, I will reflect back on this blog, and direct my son to some of my early lessons and mistakes I made. At the end of the day, we are all dealt different hands (jobs, health, career opportunities, life events & more), and thus we should make the best out of the situation in which we live.

I want to share the hard times, the mistakes, and hopefully, EVENTUALLY, the good times when we are in a much better place financially.

I completely appreciate that there are plenty of bloggers who are well on their way to FIRE. I’ve learnt so much from SMA, Firebug, FI Explorer, Flamingo FI to name a few. I take comfort knowing that my strategy aligns with some of other bloggers.  

Where this blog stands out perhaps is that I am not that far along in our journey. For that reason, this blog may resonate with those who are just getting started.

It may also resonate with those well on their way as well as it serves as a reminder that they too had to face challenges during their journey to FI.

2008 Honda Accord Euro Medically Discharged

My beloved hail damaged, dinted machine, sunscreen stained metal finally had its day.

The vehicle that served me so well for so many years decided to throw in the towel as I flew back from Darwin to Melbourne. Just a few days earlier, my wife had the vehicle serviced, had the battery changed, and had new tyres fitted.

Unfortunately, a couple days before departure, the vehicle was regularly overheating.
This was happening very occasionally prior to the recent major service.

We figured after a major service, it would be resolved. Driving through central Australia was probably not a good idea. This region frequently reaches up to 40 degrees.  

All the recent repairs cost the family $1000 (battery, tyres & major service).

I arrived in Melbourne on a Thursday night, and we had to leave on the Monday morning to reach Alice Springs for some meetings I had set up for work.

In other words, we had to keep moving and I was not comfortable driving up to Darwin in the Honda.

People legitimately perish in the outback for various reasons, and the car was adding to my already well-established anxiety. Heck, I cannot even change a tyre. I am useless in that respect. Thank the lord for YouTube tutorials. I did a couple tutorials before we left.

To cut a long story short, I had 2 days (Friday & Saturday) to get a vehicle organised from a dealership. Private sale would take too long, and we did not have sufficient savings to cover the cost of moving and a second hand reliable vehicle.

We head out to our local Nissan dealership up in Ferntree Gully and found a Nissan X-Trail 2009 Ti 4WD for $12,000 with 95,000 KMs. 


We ended up taking it without much deliberation. I was in a tough spot and made an executive decision. I was the perfect target for my fellow Indian salesman.

We also ended up painfully trading the Honda in for $2000, so we effectively made $1000 on the vehicle after the recent repairs and maintenance costs. 

It was an absolute disaster. The dealership got the better end of the stick here. I have no doubt the vehicle will be repaired and sold for $4000-$5000.

We did have a healthy savings balance. Our savings went from a healthy amount, down to almost $0. Last time I checked, I had $120 in our saving account.
Much of the cash was directed towards a bond rental payment (which was quite substantial as I moved into a affluent suburb to ensure my son qualified for the catchment schooling zone), one month rent in advance, removalist costs, and some flights, new passports & visas organised for India (wife’s mum is unwell).
In the end, I had to take out a $10,000 loan on an interest rate of 12% pa through Nissan Finance. I was hoping to get a 4WD for about $8000. Unfortunately, I did not have time to travel dealership to dealership with our departure day nearing.

It was definitely an impulsive buy, and it is what it is now. Thankfully, the car drove to Darwin beautifully. It did not miss a beat.

In case you are wondering, we explored rentals but it was not worth it. We also had two dogs, a cat, and a child to transport to Darwin. They all did awesome by the way.

Summary
-          $10,000 loan
-          Savings wiped out
-          Royal Comission has an impact on my ability to borrow. Lending almost fell through
-          Nissan X Trail 2009; 95,000kms



Life Update
I have started my Masters in Social Work at Monash University in an attempt to one-day move into some roles that suit my personality and skillset.  

My wife has also resumed her study. She is studying nursing part time through Charles Darwin University.

Work is going good; I have a great boss who is flexible around medical and personal appointments. There are definitely some challenges like any job. My role depends a lot on collaboration, without it, some parts of my work fall apart. 

My work is also dependent on funding which means I may be unemployed later in the year.
Wife is currently unemployed and struggling to find work as quick as she would hope. The terrain in Darwin is new to my wife who is usually snapped up in entry-level type roles relatively fast back in Melbourne.

The economy has definitely slowed down in Darwin, which may prove disastrous in terms of timing the reuniting of our family. 

I have spoken to quite a number of locals, and many have stated their mortgage is worth more than their house. I wonder at what point is it worth buying in Darwin?

Once again, it puts my situation into perspective. Here I am worrying about a few consecutive months of progress towards FI.


New Debts
Father Phil aka my dad - $1000
Nissan X-Trail 2009 - $10,000
Total: $11,000

Goals 2019
  • Prioritise the vehicle loan and get it paid down by Dec 2019.  
  • Secure work should current role end in September
  • Revamp Blog site
  • Gaming Computer (I do not NEED it, but I would LIKE it as I spend a lot of time on the computer for pass time).
  • Kick-Start Dog Training Business (Wife had a well-established business in Melbourne with well over 30 5-Star Positive reviews on Facebook). If you are unaware, I had to move to Darwin (a warmer climate) for health reasons.



Net worth Update April 2019  -  $64,000

Unsurprisingly, the net worth took a massive hit this month with our savings going into the relocation costs. 

In addition, the new debts have set us back a bit. I was fixating quite a bit on the decline in progress, but it is done now and we need to keep moving forward.



Disclaimer: I have an extremely poor track record with picking individual shares. I also do not have the ability to digest complex financial reports to make informed decisions around buying into individual shares. Also, the information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should also seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 



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Tuesday, February 19, 2019

Chapter 11 - “Portfolio Update - The Big Move” February 2019 Update Net Worth $76,118 (-$-2109)

February 19, 2019
Chapter 11 - “Portfolio Update - The Big Move” February 2019 Update Net Worth $76,118 (-$-2109)


Welcome to Chapter 10 of the Incompetent attempt to Financial Independence before the age of 85.. ha ha just kidding (sort of). Although, I am battling. It is pretty discouraging seeing the family net worth increase +$907 since my first update in August of 2018. 

What the hell is going on? I suppose again, this is a testament to the fact that it does not always go the way we envision. It should become easier when my family are in Darwin and we are not paying rent in 2 cities. Let's see what happens. 

I reluctantly report that this month is a shocker. The family net worth has gone down $-2109, which potentially may get worse. My wife, son, dogs, and cat are in the process of moving up to Darwin from Melbourne. 

I have got a new house, which required a bond up front, and 4 weeks rent in advance. My wife's mum is also unwell at the moment, so she is heading to India which means 1) she wont be working for an additional 2 months and 2) we had to fork out for tickets and some spending money. 

So, the good news is the family is joining me. The bad news is I am doing the drive from Melbourne to Darwin. I am not a big fan of long drives, and in addition, Wolf Creek has had a long lasting negative influence on my state of mind in respect to driving through the middle of Australia. Also, it pays to be frugal especially given cars are depreciating assets, but strewth, driving the 2008 Honda Accord Euro through Australia has me a bit uneasy. Stay tuned on that front.. 

I will definitely share photos of the trip up to Darwin from Melbourne in my next portfolio update (as long as some axe wielding psychopath does not get me). 

Anyway enough bloody banter, lets get into it. Oh, quite a few readers asked for photos of the family dogs. My dad refers to dogs as 'hounds from hell', so if you have a similar sentiment, apologies in advance for the photo above ha ha. 

Portfolio Update

I have recently added an additional 611 units of Milton for a total of $2,702. I also sold VGAD and VDHG and decided to buy UOS - United Overseas Australia Limited. I purchased 5,374 units for a total of $3,620. I will not be purchasing any additional UOS. The rationale for letting go off VGAD and VDHG is I do not intend to add to them at all. Moving forward, once I hit the $100,000 milestone, I will eventually start purchasing VGS. I am not entirely decided on the overall allocation to VGS as my strategy is mostly income focused. 

Back to UOS. UOS for me is a bit of a speculative play since my underlying philosophy on investing is not to invest in individual shares. Technically I broke my own rule there, but as I have always said, I am not perfect. 

Strong Money Australia did an interview with a young fella who retired at 32. He discussed his interest in UOS. It does not go into great detail. Although, if you are interested feel free to have a read of the interview with the young fella here. I personally was quite comfortable writing this off as my speculative allocation despite its great returns for shareholders. 

I did note some risks with UOS. Initially I thought it was a REIT. However, it is more of a developer in Malaysia. There is risk there alone. In my opinion, it does not have the best shareholder communication which isn't great. The two fellas running the company essentially own most of the company. This is not always a negative aspect, in fact it is awesome when insiders have skin in the game. Nonetheless, perhaps less input from others? 

Finally, there is the risk of property going through a tough time in Malaysia, and also there is political risks. On balance, I do not advocate for personal share holdings, but I made an exception for myself, and I am okay with it not turning out as I hope. 

In summary, to me, this is a speculative play. It is my speculative fix I suppose. 


That is all from me. Hope you fellas and ladies are tracking along well. From time to time, you are going to get these set backs and I've learnt not to fixate on the numbers. There is more to life than getting your numbers up. The numbers will come in time!

PEACE!



Disclaimer: Please do not buy UOS based on my personal interest in it alone. I have an extremely poor track record with picking individual shares. I also do not have the ability to digest complex financial reports to make informed decisions around buying into individual shares. 

Also, the information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should also seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 





 



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Friday, February 8, 2019

Chapter 10 - “How to Deal With Failures"

February 08, 2019
Chapter 10 - “How to Deal With Failures"

Have You Experienced Some Failures In Your Life Too? 

As many of my readers know, I enjoy giving my blog experience a real sense humility. I am not here to paint you a picture of the perfect FIRE blogger who does not make mistakes. I share all my previous, future and current mistakes to motivate others to keep on kicking goals! A lot of the failures below are intertwined with FIRE as you build resilience which makes the progression to FI much easier. 

We have all experienced some set backs in our lives right? Perhaps you have missed a particular promotion at work, or maybe you missed the cut for a particular competitive sports team when you were younger? Maybe you lost a small fortune in speculative investments, or maybe you have had a tough time with some relationships.

Whatever it is, the point is, you're not alone in your failures. In that very moment of hardship, millions if not billions of people around the world are experiencing the same struggles. The trick with failures is to keep showing up everyday and learning from them at the same time. 

Failures 

  • Scored a solid 33 ENTER score in Year 12 in Victoria. 
  • Given an opportunity to be a Trainee Accountant as a young fella - bailed after 18 months. 
  • Commenced a Diploma in Human Resources - did not complete 
  • Attempted to do a Bachelors in Financial Planning via Open Universities on two separate occasions, failed miserably both times. 
  • Medically discharged from the Army with Chronic Nerve Pain with a rather uneventful career. Consequently struggled with mental health ever since. 
  • Attempted to do a Bachelors in Social Work through Open University - Failed miserably and withdrew. 
  • Purchased a Honda Accord Euro for circa $23,000 and we are getting offers for $3500 on the private market due to sunscreen prints / hail damage and a couple of dents. 
  • Invested in a property in India without any real understanding of the yield, potential growth and the company structure that held the underlying assets. 
  • Lost many thousands of dollars gambling on speculative companies that I once thought were 'investments'. 
  • Lost 21% of my wealth via Cryptocurrency.
  • Tattooed my ex girlfriends name in huge bold writing from shoulder to shoulder. Worst part is she didn't have a short name like Kate, or Tash. It was god dam MENGUPHRENUO. She was from Nagaland in India - This ended up being a financial burden in respect to getting laser removal ha ha. Oh and it was bloody painful. I remember trying to be frugal and passing on injections to numb the area, biggest mistake of my life in that moment. 
Quite a few mistakes hey? Thankfully, while it took me a while to catch on to being discipline and focused, I think me and my family are on the track! 

Wins

  • While academically I struggled, I was raised well by my parents to stay out of trouble and remain respectful to others which has kept me on the good side of the law. 
  • Married a beautiful Indian women who is now my wife, Mrs Incompetent Investor. 
  • Did not muck around and had my now son at the age of 23 years old. 
  • Completed an informal expensive degree in Incompetence through the University of Life itself. 
  • Saved some money throughout the years which has allowed me to have a decent little portfolio. My latest portfolio update is here
  • Completed a Certificate III and IV in Community Services via Victoria University. 
  • Stuck with one of the hardest jobs I have experienced (call centre complaints department) post army for 2 years which gave me a stepping stone into my first professional job. 
  • Completed a Bachelor in International Aid & Development / Sustainable Development through Murdoch University - this took 6 years P/T. 
  • Successful in a job up in the Northern Territory within the Human Services sector. 
  • Accepted in Monash University to undertake a Masters in Social Work. 

Learning's 

What have I learnt from these experiences?


 I have found that we need to remind ourselves daily what we are good at and what we have achieved.


For example, I have an A4 paper stuck beside my bedroom door which states what I have achieved and what my goals are over the med-long term. Below is the actual A4 paper that I read each morning before I go to work... 




I encourage you all to just keep showing up every day. If you get knocked down, just get up. When I was playing basketball at Blackburn Vikings at a high level, some of the most gifted athletes were the ones who let their sports go. It was the less talented athletes that actually flourished as they never gave up.  


How does this align with Financial Independence? Well, there are going to be times where your net worth will get smashed for various reasons. It might be due to health reasons, loss of a job, or whatever. Don't let that discourage you, slow and steady, and I promise you, we both will be in a good place in 10 years time! 

Cheers and thank you for reading! 



Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 






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Saturday, February 2, 2019

Chapter 9 - “How Much Cash Should I Hold? - Let's Take a Closer Look"

February 02, 2019
Chapter 9 - “How Much Cash Should I Hold? - Let's Take a Closer Look"

How Much Cash Should I Hold? - Let's Take a Closer Look

G'day All! I apologise I have not been able to post for a while. I've been really busy organising a new home up in Darwin in preparation for my wife and son to join me from Melbourne. 


They are pretty reluctant to leave their world behind in Melbourne, but I am sure once they arrive they will love it up here! 

They will be joining me in March for a brief period, and then they jet off to India for 4 weeks to visit the extended family! 

Consequently, the next month or two isn't going to be too good for the Family Portfolio. Nevertheless, I will share the dents on the portfolio in the coming months! 

Right, How Much Cash Do I Hold? 

At the moment, we have approximately 13% allocated towards cash. According to Morgan Stanley, published by the ABC in 2018, Australians Debt Levels are 189% relative to their income as a national average. To put this into context, USA, Japan and the UK are lower than Australia. 

It is a bit worrying isn't it? To me, as a simpleton, this means many persons throughout Australia do not have hard cold cash on hand to take advantage of market corrections. Even worse, the capacity to deal with interest rate hikes and other emergencies may be lacklustre. 

Personally for me, if there was a significant correction in the stock market, I would have approximately $10,000 to play with. Not a life changing amount. Although, to me, it is not a small amount either. 

I should note that this $10,000 is technically a buffer for emergencies anyhow. Therefore, moving forward, I intend to get the Equity allocation up to 80% and have 20% in Cash. I hope this translates to $80,000 in Equities, and $20,000 in Cash in the not too distant future (by the end of 2019). 

What Sort of Allocation Do Other Notable People Suggest? 

Benjamin Graham is known to advocate for having 25% in Bonds (or other similar safer instruments). Why? He argues that for most people it will give them the confidence and resilience to get through market corrections when stocks are sinking. 

I know what you are thinking, you have balls of steel and you will never sell your stocks! Try loving your shares when they are down 30-40%. 

It is well known within the Financial Independence community that you are generally better off investing a lump sum as opposed to averaging in over time (also referred to as DCA - Dollar Cost Averaging). 

However, I am quite comfortable with a 80/20 allocation split between Equities & Cash. You can do some further reading on DCA vs Lump Sum investing which was conducted by Vanguard here

What Are the Benefits of Having Cash on Hand?

Peter Thornhill whom I am quite fond of thanks to Strong Money Australia has been well known to welcome black swan events. Let's have a look at some of the black swan events and other historical moments prior to the GFC

  • NASDAQ Index fell 78% by October 2002
  • The Fed cut interest rates to 1% to stimulate the economy
  • 1987 Crash - single day fall of 22% 
  • Asian Financial Crisis 
  • European Debt Crisis 
Above are certainly not an exhaustive list of opportunities for investors, although, it resonates with what Peter Thornhill has been known to preach - which is being prepared for these events and cleaning up! 

Peter Thornhill has also explained that humans frequently fail to absorb and apply previous lessons of history, instead as technology advances, there just seems to be an added twist on how disasters occur (Cufflinks, 2019).

In other words, while technology rapidly advances, it creates new problems which can create opportunities. As it is well known,  technology enabled the USA to sell fraudulent mortgages around the world which sparked the GFC - Absolute disaster!

Point is, we all acknowledge that we cannot time the market. However, in my simplistic view, given where we are up to in the economic cycle, I personally am quite comfortable with having a 20% allocation towards cash in preparation for future unforeseen economic opportunities. 

Final Thoughts 

I shit you not, as I was writing this blog entry, my wife called me and asked me, "Danny, do we have RACV insurance for the car in Melbourne?". I responded frustratingly, "no we do not". 

The cover recently lapsed, and unfortunately, right at this moment we do not have cover! I know rookie mistake, but it is what it is. Thankfully it is just around the corner from home. 

Edit: Small victory, turns out it is all okay now, but my underlying point still remains that unforeseen events do happen hence the importance of having cash on hand!  


In summary, I will need to start building up my cash reserves to deal with life events as noted above and general economic opportunities. I would like to hit $80,000 in equities initially and then I will start building up the cash reserves to 20%.  

What are your thoughts on Asset Allocation in respect to Cash? I am interested to learn from others! 

I should point out that asset allocation is very relative to where you are up to in the process of reaching Financial Independence. For example, somebody with a 1 million dollar net worth may have $100,000 in Cash whereas somebody just starting out may only have $10,000 which is why I think discussion around asset allocation is an important one, particularly for those just starting out! 







Disclaimer: The information on this website is general information and should not be taken as financial advise. I am simply documenting my journey and experience. I am also not a licensed Financial Adviser. You should always seek independent legal, financial, taxation and other advise that relates to your unique circumstances. The Incompetent Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. 








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