December Index Fund Performance

A quick follow up post to my original on My Experiences with the Concept of Dollar Cost Averaging and my current continual investment in the Vanguard Australian Shares Index Fund.

This month in December the fund had improved performance compared to the month of November.

A nice rally to end of the year as shown in the graph above and slowly starting to creep up to the starting balance of 2015. Essentially saying the ASX 300 went no where but with dividends I've still managed a decent rate of return for an investment that I'm only sitting back and providing automated payments. With the rate of return now climbing to below 10% for the first time, perhaps the dollar average investment approach one is starting to pay off. I'll be interested to see what happens over the next year in 2016 and if the "end of the GFC" for the US market has any affect on the performance of this investment. The rate hike occurred on the 17th of December and as shown below there was a substantial reaction from the market.

I'll continue to update this on a monthly period to see whether the whole concept of investing into an index fund long term at regular intervals works.

Pareto Observaton of Stock Market

A great quote from the book The 80/20 Principle by Richard Koch.

There is rhythm of sentiment which we can observe in ethics, in religion and in politics as waves resembling the business cycle...

Whereas during the upward trend every argument produced in order to demonstrate that an enterprise will produce money received with favour; whereas such an argument will be absolutely rejected during the downward trend.. A man who during the downward trend refuses to underwrite certain stocks believes himself to be guided exclusively by reason and does knot that, unconsciously, he yields to the thousand small impressions which he receives from the daily economic news. When, later, during the upward trend, he will underwrite those same stocks, or similar shares offering no better chance of success, he will again think that he is following only the dictates of reason and will remain unaware of the fact that his transition from distrust to trust depends on sentiments generated by the atmosphere around him..

It is well known at the Stock Exchange that the public at large buys only in a rising market and sells in a declining market. The finances who, because of their greater practice in this business, use their reason to a greater extend, although they sometimes allow themselves to be swayed by sentiment, do the opposite, and this is the main source of their gains. During a boom period any mediocre argument to the effect that this boom must continue has a great persuasive power and if you tried to tell man that, after all, prices cannot continue to go up indefinitely, be sure would not listens to you.

80/20 Principle

Currently I am reading a book about the 80/20 Principle and it's application in a business and financial sense but it makes me wonder how it would be applicable for weight loss and general fitness.

I am someone who has planned my meals Monday to Thursday with Friday being a bit loose as I usually go out for lunch at work and then from there on things start to slip on weekends. Unfortunately this probably does more damage than I am able to recover during the week Monday to Friday. The 80/20 principle states that 20% of your effort has 80% of the effect, this case the "20%" of the weekend has the effect of 80% of my diet as usually the calorie intake and output is much higher than what I'm able to achieve during the week. This essentially means we shouldn't be worrying so much during the week, the fact we are at work we are able to easily perform routine health and fitness activities and it's during the weekend that we should be focussing 80% of your effort.

During our health and fitness adventures we should celebrate those moments we are achieved something remarkable such as achieving your first 5km in 10 years or reaching a goal weight you had not been at for many years. Instead of focussing on the average achievements we are able to gain a lot more from celebrating the bigger achievements which took more effort but had a bigger net positive result.

A successful fitness plan is a simple fitness plan where individuals are able to take short cuts to achieve more with less effort. A simple "short cut" could be planning your meals for the weekend rather than thinking on the fly. By having a fitness plan we are able to exercise control over our lives with the least possible effort because the planning of our weeks allows us to act with minimal thought.

By focussing on weekends primarily we are able to strive for excellence in the time that counts most, spending more time worrying about the weekday health and fitness won't result in anywhere near the same positive results for you.

We should look for help as much as possible, by out sourcing certain tasks such as exercise (personal training) or food (youfoodz/light n easy) we are able to remove further stress from our lives in not having to think about those certain elements in our health and fitness plan.

More importantly, our health and fitness plans should have things that we enjoy. There is no point eating stacks of fish if you don't like fish.

Finally we must enjoy the journey. We must calm down, work in an efficient manner (what's the point of exercising every day?!) and set a limited number of valuable goals where the 80/20 principle will work for us. An example of a very simple goal could be, on weekends I will only have one bad meal on Saturday. By focussing on the areas where we slip up most we are able to negate the most damaging aspects of our lives. Health and fitness shouldn't be a chore, it's something fun and it's only when one has fun is where they will see their results compound. Treating it as a chore will get you no where as you will constantly find ways to have a negative perspective on your journey.

27 Main Causes of Failure

Another ripper from Think and Grow Rich by Napoleon Hill. How many of these causes of failures are holding you back in whatever your goals are?

1. Unfavourable and hereditary background
2. Lack of well defined purpose in life - Something I struggle with myself on occasions but having since started writing this blog and setting myself central definite life goals I've been able to live with a greater purpose and desire.
3. Lack of ambition to aim above mediocrity - Why live a life striving for something more? Go and get what you want and live those dreams.
4. Insufficient Education - I don't see this as not having an opportunity of attending tertiary education but rather not being able to apply what you have learnt to achieve what you want.
5. Lack of self discipline - Relates strongly to self control and practicing positive habits that influence your ability to achieve your goals. Once something is a habit, it's second nature and a breeze to do.
6. Ill Health - Look after your body, eat healthy, exercise sufficiently and get lots of rest. Don't force yourself through something when the body isn't ready.
7. Unfavourable Environmental Influences During Childhood
8. Procrastination - Firstly, time will never be perfect. The best time to start something was yesterday, the second best time to start something is now and the worse time is in the future. The first step to success is starting, make it a habit.
9. Lack of Persistence - The next biggest thing is once someone has started to keep on going to the end. If what you are doing is the right thing, the results will come no matter what. No need to worry about the little details in between, focus on the big picture.
10. Negative personality - Screw the haters, honestly.
11. Lack of controlled sexual urge - Sex drive is the most powerful emotion, it leads to results.
12. Uncontrolled desire for "Something for Nothing" - I hate fad diets, they seem to promote this "something of nothing" mentality of having this magic pill/diet/whatever and you'll suddenly drop 10kg in a week.
13. Lack of well-defined power of decision - This links back to lack of persistence and procrastination. Stick to your decision and trust you instincts.
14. Over Caution - Similar to Lack of well defined power of decision, trust your instincts. You have to take a risk and chance sometimes in life to get what you desire.
15. Superstition and prejudice - Start every day with a clear mind, be open to everyones opinions and don't let the haters get to you.
16. Wrong Selection of a vocation - I like many of my mates have hit a rut in our career where we believe we are in the wrong job. Find your passion and live it, I'm still searching..
17. Lack of concentration of effort - Pick your definite goals and give them your all. Trying to tackle too much at once can lead to poor performance.
18. The Habit of Indiscriminate Spending - Don't fear poverty, don't feel the need to better your neighbour, work colleague, family or friend by purchasing the best of everything.
19. Lack of Enthusiasm - Hard to be passionate about something without enthusiasm, it simply lacks substance.
20. Intolerance - Have an open mind.
21. Intemperance - Eat clean, train hard and let your body rest. The rest will fall into place.
22. Inability to cooperate with others - The key in life is successful relationships and networking. Don't burn those bridges you worked so hard to create!
23. Possession of power not acquired through self-effort - Quick riches are more dangerous than poverty. Understand how you have come into this possession of power and treat it with respect.
24. Intentional Dishonesty - It will catch up to you one day, always will.
25. Egotism and Vanity - Relates to Inability to Cooperate with others, don't let your ego get in the way of a successful relationship.
26. Guessing instead of thinking - Do your homework, trust your judgement and make sure it makes sense.
27. Lack of capital.

I personally have a lot of these to work on, but for me it has been an interesting read to try and link these failures to what is happening in my life and any obvious fixes I can implement to avoid future failures.

CoreLogic RP Data Brisbane Real Estate Market Analysis

CoreLogic RP Data
I've just started collecting data from CoreLogic RP Data for analysis of the Brisbane real estate market. At the moment the data available is very limited but I will aim to update it monthly when data is available.

As shown median property prices so far this year haven't changed much with units slightly losing value of late. 

A bit of a wild ride for houses capital gains, especially in the past 12 months. Firstly, the red line for the past five years clearly shows a recovery from the 2011 floods, especially since June 2015. However over the 10 year period, house prices have remained steady if not have decreased slightly in value over the year. Finally, the 12 month period demonstrates a bit of of a down period in gains during the mid year and a nice recovery through to August before levelling out. With all this talk of Brisbane becoming the next property hot spot, it will be interesting to see how true some real estate commentators are with that prediction.

Units in Brisbane are steadily growing at around 3-4% over the ten year period, however over the past five years and 12 months things have taken turn with periods of negative growth but overall units would have been well of regardless of the negative capital gains.

Dwellings have performed similar to houses, a drop in growth around May but have steadily picked up since and over the ten year period have maintained around 3-4% growth.

For more of this information, check out the Your Property Success Toolbox by Jane Slack-Smith.

Monday Motivation

State of Mind

If you think you are beaten, you are,

If you think you dare not, you don't

If you like to win, but you think you can't,

It is almost certain you won't.

If you think you'll lose, you're lost

For out of the world we find,

Success begins with a person's will -

It's all in the state of mind.

If you think you are outclassed, you are,

You've got to think high to rise.

You've got to be sure of yourself before

You can ever win a prize.

Life's battles don't always go

To the stronger or faster man

But soon or late the one who wins

Is the who thinks he can.

By Napeleon Hill

Taking a stand "Think Big"

I've recently finished the book Take a Financial Leap by Pete Wargent which was a fantastic read and one I highly recommend to anyone wishing to start taking positive steps in their life to financial freedom and also just altering their mindset to becoming successfully financially. I have read Pete's previous two books and it was good to brush on some of the concepts again and review my investment plans and reassess my life goals.

In Chapter 7 the books discusses creating big goals and I've decided to complete the exercise and post it up publicly so I can be constantly reminded of what I am aiming to achieve in life.

Personal Development Goals

1. Develop the following character traits - open, honest, friendly, happy, extraverted, confident, successful, respected;
2. Be a loving, carrying husband and a father who will never let his youth escape him;
3. Cement important relationship and isolate myself from any negative relationships;
4. Achieve financial freedom by 40;
5. Learn to build a business in my passion;
6. Become aware of the Brisbane real estate market;
7. Blog 3-5 times weekly on health and fitness, Brisbane real estate and my own investing journey; and
8. Weight lift 3-4 times a week, ride 1-2 times a week and be in great shape;

Career, Business and Financial Goals

1. Continue to invest every month into index fund and LIC. Increase investment amount every pay rise (minimum 10%) and diversify portfolio every five years;
2. Improvement money management skills;
3. Own an investment portfolio with a net asset worth of $1,000,000 by 40 through real estate, index funds and LIC's;
4. Become a Lead Structural Engineer with a diverse range of experience in commercial, industrial and infrastructure; and
5. Find a passion project for part time income that can slowly replace engineering salary.

Adventures, experiences, travel and toys goals

1. Holiday in Africa and South America;
2. Ride in New Zealand (Queenstown and Rotorua);
3. Go to a soccer world cup;
4. Own a BMW M3 and Range Rover Sport for Em; and
5. Build family home in St Lucia.

Charitable and contribution goals

1. Donate to Lifeline charity;
2. Complete a charity bike ride; and
3. Find a charity and volunteer once a year to help.

I'll assess these goals every year and provide progress where possible so I can see if I'm at all making it anywhere in life...

The Power of Desire

I am currently reading the book Think and Grow Rich by Napoleon Hill which thus far has been a very interesting read regarding the mindset of those who become wealthy but I also believe many of the principles that I've read in the book can applied to ones health and fitness.

For instance one the chapter talks about desire and how important it is for those wishing to accomplish specific goals in life to maintain a high standard of desire. The method applies to becoming rich however I have altered it to show how it can be applied for health and fitness and is now something I wish to use going forward in a subconscious manner.

1. Fix in your mind the exact weight and lifestyle you desire. It is not sufficient merely to say, "I want to be skinny." Be definite as to the amount.
2. Determine exactly what you intend to give in return for the body you desire.
3. Establish a definite date when you intend to possess the body you desire.
4. Create a finite plan for carrying out your desire, and begin at once, whether you are ready or not, to put this plan into action.
5. Write out a clear, concise statement of the body weight you intend to reach. Name the time limit for its acquisition. State what you intend to give in return for the body, and describe clearly the plan through which you intend to reach it.
6. Read your written statement aloud, twice daily, once before retiring at night, and once before rising in the morning. As you read, see and feel and believe yourself in your new body and lifestyle.

The problem with the health and fitness industry these days is everything is has become far too complicated with too many fad products and effective marketing confusing the masses of population to take shortcuts and forget about the basics of being a health and active person. Whilst people argue over calorie counting and macro nutrients and so on, the simple truth is the person will not succeed if their mindset is not in the right space. Using the method above is step towards reaching your goal, by reminding yourself twice daily you can hope to turn basic diet controls such as calorie awareness and portion control into habits done purely based on your subconscious.

Listed Investment Company Dollar Cost Averaging Investing Approach

Today I looked at appropriate methods on Dollar Cost Averaging Investing on Listed Investment Companies (LICs) and limiting the impact of brokerage and ensuring I can achieve regular payment intervals.

I reviewed five LICs and compared their performance with a trial investment strategy which I hope to implement in the near future:

	1 Year	2 years	3 Year	5 Year	10 Year	15 Years	30 years
BKI	7.3		20.5	15.7	11.8
AFI	0		15.2	9.5	8.4
ARG	6.6		15.5	9.8	7
MLT	3.2		18.9	12.1	8	11.1
WHF	21.17	19.42	23.05				12.28

Plotting a very simplistic approach to the strategy I assumed that for the first five years I'd aim to save $50 a week, $100 a week for the next five years and then $150 a week from there after up to 40 years. I assumed an initial deposit of $2000 and the graph below does not consider brokerage costs and assumes that the amount deposited goes straight into the investment. The results were as follows:

Obviously this best case scenario as the investment is far from accurate but does show the intensity of compounding effects over the long term.

This lead to my original thought, how does one use an LIC investment product with a Dollar Cost Averaging investment approach.

I came across a method conceptualised by a user named Codebeard at the Stackexchange.com forums who was able to provide a formula for the optimum investment time given the investment amount, deposit intervals, annual interest on bank account, expected annual growth of stock and brokerage per trade. The formula then gives you a number of deposit intervals to save prior to investing. 

Information of the approach can be found here.

The plan from here is to invest in BKI and AFI LIC shares at $50 a week initially storing money in my Netbank saving account with a low interest rate of 2.5% and an annual growth of the stock as shown above gives me a time period of 16 weeks for my deposit amounts. I have also chosen these two LICs as they performed the best when the market was in downturn and as shown in the graph above they have performed very reasonably.

The process is now under way and I'll aim to update at the 16 week mark the purchase cost of the investment and provide updates from there on when I either invest in the shares or dividends and reinvested.

My Experiences Concept of Dollar Cost Average Investing

One of the investment concepts I've been partaking in is the Dollar Cost Averaging Investing concept. The concept works great for someone who is after an automated and emotionless strategy. By buying into an investment product such as LIC or a managed fund with regular payments at regular intervals the investor is able to smooth out the anticipated market fluctuations over time. The investment strategy is one for the long term and with the use of automated payments can be an effective investment strategy with no great deal of thought required by the investor.

I have been using this strategy with the Vanguard Index Australian Shares Fund and below is a summary of its performance to date:

Initial Investment - $5000 @ $1.9023 per unit (10/12/2012)

Total Investment Deposits - $3401.72

Total Reinvestment Deposits - $518.71

Total Investment Payments - $8533.83

Actual Investment Value - $8476.04

Rate of Return - 0.67%

Not quite the result I was after but with franking credits my tax returns have been assisted with this fund in increasing my tax return. Also with over $500 worth of reinvestments into the fund, the rate of return calculated just with my money invested is 5.75%. All in all, a bit of a disappointing result so far but I'll stay the course given what the ASX300 index performance is like:

I'll continue to blog my portfolio performance at the end of month to track its progress. My next blog post will focus on a concept of Dollar Cost Averaging through buying shares at the optimum intervals.