First ever post on progress update! Since I have only kind of get the blog going in 2019, I will kick it off with an update on my progress towards FI in quarter one of this year.
Target Savings Rate: c. 70% of disposable income
Target Increase in Capital: +$18,000
- Expenses are recognised as it is incurred
- Change in capital figure includes disposable income components (i.e. salary, interests, dividends and side incomes) and gain(loss) in capital from investing activities
Savings Rate Update
Good start to 2019 so far! However, I am expecting a pick up in spending in quarter two given a planned trip overseas in May. Flight ticket has been recorded as expense in previous quarter, when booking was made, which should help mitigate noticeable drop in savings rate.
I do not actually run a rigid budget where I allocate a fixed number on the amount of money I can spend. Rather, I track my spending loosely against my targeted savings rate. This degree of flexibility will allow me to validate, over the long term, whether my targeted disposable income based on SWR (Safe Withdrawal Rate) I have in mind, is sustainable to live the lifestyle I wanted to life once I am FIREd.
Net Worth Update
Markets has bounced back strongly in Q1 2019, following global sell-off in risk assets in Q4 2018. The findings of the Royal Commission into the financial sector has been received well the markets which have helped the recovery in bank stocks/debt that I am currently holding in my portfolio. Coupled with numerous stocks paying dividends during the quarter, they have helped the capital grow in a healthy way, exceeding target set. The capital has grown by +$22,368.62 in Q1 2019.
I have been quite satisfied with how everything is going for this quarter. Managed to squeeze solid saving rates throughout the quarter while the equity portfolio has been recovering satisfactorily following a dismal Q4 2018 performance. I realised that I should have deployed more cash early in the quarter given how strong the markets had rallied. Hindsight is always 20-20 thou!
At current valuations, many of the developed markets looked fully valued as plenty of indices are getting closer to their all-time highs. Inverted yield-curve has always been a concern, but given we are living in an era of unprecedented Quantitative Easing, you would start to question the predictive power of the Yield Curve given past recessions predicted by the yield curve was not happening during time of easy/cheap money.
In the meantime, given the correction in the property market, running an overweight position in direct Mortgage Loan, which returns 7%+ p.a. might not be a bad idea in trying to achieve acceptable risk-adjusted returns, with lower property valuation allowing investors to cherry pick loan with reasonable LVR and sound collateral. I think I might write about this in my next post actually! As this is an option that not many people know that existed to retail investors.