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Thread: Mordko Money Diaries

  1. #41
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    Quote Originally Posted by mordko View Post
    - Right now I have $2.5 million altogether. You can do the math. Whatever isn't in shares is cash and fixed income. This is anything but "100% shares". Once the commuted value of my DB pension is transferred into my disposal, I will allocate 20 pc to bonds. I will also allocate more funds to stocks. At the moment my effective FI component is higher than my actual target.

    - I don't know which companies I "don't care for". I bought the world. Diversification is a free lunch which I am happy to consume. Yes, with proper research and education it may be possible to beat the market. I don't have the time or the need.
    +1, makes sense to me.


  2. #42
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    April 1st - $2,508K total, of which $1,088K is in stocks and the rest is split between HISA (earmarked for house) and the commuted value of my DB pension.

    The stock is invested in a worldwide CouchPotato as follows:

    US - 35%, Canada - 30%, Developed outside N America - 20% (about half in the UK), EM - 15%.

    Money-weighted returns on stocks, March 31 2017:

    1 month 1.4%
    3 months 5.2%
    6 months 9.7%
    YTD 5.1%
    1 year 19.2%
    Since 2002 9.2%

    Money-weighted return is significantly higher than time-weighted because the portfolio is dominated by the money placed in the portfolio in January and I was lucky with the timing. The returns are kinda meaningless for the same reason; the monitoring period is too short.

    In March the Developed and EM investments have done real well while Canada and US didn't do very much one way or another.

    The house purchase will be closed in June. Also, 57% of the commuted value of the DB pension will be received and invested in April. The whole thing is in a flux; but by the time its all sorted I plan to have:

    - $1M in a house/farm. The farm should be generating >$30K income, at least that's the plan.

    - For the liquid investments, target allocations will be as follows:

    a) 80% - stocks; 20% - fixed income (including HISA).

    b) Stocks will be split 35%/30%/20%/15% - US/Canada/Developed/EM.

    c) FI will include $50K in HISA and the rest in bonds with the focus on Canada/government.

    I also plan to borrow, maybe $100K or so. All of it will be invested in the farming business.
    Last edited by mordko; 2017-04-01 at 08:39 AM.

  3. #43
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    Looks like a good and sensible plan. We are in about the same place but have significantly less in real estate (about 15%) and a lot more in FI(about 40%) . That FI allocation is due to my DW and her need to sleep at night. Happy wife, etc..

    I also haven't been quite as ruthless as you in getting my allocations to exactly where I want them but that is mainly because I am an inveterate deal hunter and I haven't seen any deals in the market since Brexit.

    We have no particular allocation to EM. I was burnt by EM in the late 90s and I still can't get it out of my head that that market segment is anything other than a value trap. Given the amount of money we have in multinationals as well (via US and Int'l etfs) I consider that enough exposure to EM. Also, I recall reading once that the majority of lasting profits made in emerging markets are made by multinationals anyway.

    How much of that liquid portfolio do you have in registered accounts ? That obviously can make a helluva difference going forward. At this point we can only shelter about 20% of our liquid portfolio in registered accounts. Both a good problem (because of the portfolio size) but also a bad problem considering ongoing taxation and it's effects on growth and on current cash flow.
    "That's what I do, I drink and I know things" - Tyrion Lannister

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  5. #44
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    Right now I have 40% non-reg and 60% reg, but the ratio will swap once the commuted value of my pension is moved into a LIRA account.

    EMs do go up and down but avoiding them altogether is - in my opinion - wrong. A bit like technology; pulling out isn't the right answer to getting burnt. It is entirely plausible that companies with headquarters in China will benefit and American multinationals lose out from the current protectionist policies. If not... Well, that's what diversification is all about.

    Yes, I try to be fully invested as far as the spare cash is concerned rather than wait for the deals. Will we lose out? Quite possible. Or maybe not. Guess the idea is to have it all on an autopilot.

    My DW prefers not to look at what's going on - much as I tried to have her involved... She can't handle the "down" phases. Which leaves the decision-making part to me alone. Anyway, even 40% FI is low when one is nearing the end of his career - at least thats what the experts say. Guess I am thinking of using a "two pots" type approach once I get to the withdrawal phase in about 7 years time. You kinda need a set amount in fixed assets to last ~5 years or so with the hope that markets will - eventually - recover.

    My real estate is only partially home and partially and income-generating farm. So... your asset allocation might not be all that different in that respect.

    When are you planning to move to the withdrawal phase?

  6. #45
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    Quote Originally Posted by mordko View Post
    EMs do go up and down but avoiding them altogether is - in my opinion - wrong. A bit like technology; pulling out isn't the right answer to getting burnt. It is entirely plausible that companies with headquarters in China will benefit and American multinationals lose out from the current protectionist policies. If not... Well, that's what diversification is all about.
    We can peaceably disagree on EM. I fully embrace diversification but that also doesn't mean putting money into every niche market (IMHO). For me EM is a niche. And yes, we can't pick geographic winners. That is why my US and Int'l ETFs of choice are so broad (VTI and VXUS). If EM picks up, the resulting broad market shifts will bring me along for the ride with their tens of thousands of holdings. I am just not skewing the results by overweighting EM. Mind you, I do skew my results by not fully embracing index investing (I hold a lot of CDN divvy stocks)

    Quote Originally Posted by mordko View Post
    Yes, I try to be fully invested as far as the spare cash is concerned rather than wait for the deals. Will we lose out? Quite possible. Or maybe not. Guess the idea is to have it all on an autopilot.
    This is the correct attitude to have and I believe you are at less risk of missing out than I am. My approach is not correct. However, I recognize that trait in myself and deal with it accordingly. I guess what I am saying is we can make small (recoverable) investing mistakes in life and still be moving forward.

    Quote Originally Posted by mordko View Post
    Anyway, even 40% FI is low when one is nearing the end of his career - at least thats what the experts say. Guess I am thinking of using a "two pots" type approach once I get to the withdrawal phase in about 7 years time. You kinda need a set amount in fixed assets to last ~5 years or so with the hope that markets will - eventually - recover.
    Well, I think once you are dealing in portfolios the size of yours and mine, you also have to look at the numbers of absolute dollars involved and not just percentages. 40% may be a low percentage number but in dollar amounts it is overkill (based on our spending) and would probably see us through 12 or 15 years at least of downturns. I am sacrificing growth for comfort. Because it is probably growth and associated risk I don't need. We are also following a simplified "bucket" based approach to early retirement by spending down the FI first and letting equities grow.

    Quote Originally Posted by mordko View Post
    When are you planning to move to the withdrawal phase?
    Good question. I think probably in the next few years. I want to shut the company down (it is a service company and not really sellable) and move out of the city back to the countryside. There are complicating factors with my business partner (and his timing for closure) and with my wifes health. Still, good problems to have.
    "That's what I do, I drink and I know things" - Tyrion Lannister

  7. #46
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    May 1st - $2,496K total, of which about $1M is in stocks and the rest is split between HISA (earmarked for house) and the commuted value of my DB pension. This does not count the value of a DB pension (relatively small, in sterling) and non-cash assets.

    The stock is invested in a worldwide CouchPotato as follows:

    US - 35%, Canada - 30%, Developed outside N America - 20% (about half in the UK), EM - 15%, except that new money is being invested and allocations are out of wack.

    Money-weighted returns on stocks, April 30 2017:

    1 month 3.4%
    3 months 8.3%
    6 months 13.1%
    YTD 8.65%
    1 year 24.8%
    Since 2002 9.65%

    Money-weighted return is noticeably higher than time-weighted because the portfolio is dominated by the money placed in the portfolio in January and I was lucky with the timing. The returns are kinda meaningless for the same reason; the monitoring period is too short.

    In April the Developed and EM investments have done really well while Canada didn't do very much one way or another. The return was also "helped" by a falling Canadian dollar. British pound in particular has risen vs CAD by 7.25% so far this year.

    Total net worth dropped by about $10K because we bought a new pick-up truck for the farm. Most of the cost was offset against our investment gains for April but not all. And it will be partially offset against future taxes. Also, the commuted value of my pension was paid up, partially. $150K of it was paid in cash, but the Feds got hold of 30% ($50K) which also hurt the total. I'll do my best to claw back as much as possible, or at least not to add to what's already been nicked from the pension fund by the Feds.
    Last edited by mordko; 2017-05-01 at 07:38 AM.

  8. #47
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    Mordko, I really enjoy reading about your progress. Sorry to hear about the tax hit you took.
    Wishing you lots of success!

  9. #48
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    It looks like things are really cooking for you Mordko.

    Great returns! I have been on both sides of the money-weighted vs. time weighted returns, sometimes investing then watching markets drop or drift sideways for a year, or like last year investing and watching markets go way up, despite Brexit and things that go Trump in the night. You are right that it is mostly luck, except for those fortunate few that can reliably time the market.

    Do you mind saying what you use to calculate the returns?

    Also caution regarding the withholding tax on the commuted value, 30% is just the standard withholding amount. The lump sum could easily kick you up into Justin's new screw-the-rich top marginal tax bracket.
    Eschew obfuscation. Espouse elucidation

  10. #49
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    Quote Originally Posted by Dilbert View Post
    Mordko, I really enjoy reading about your progress. Sorry to hear about the tax hit you took.
    Wishing you lots of success!
    @Dilbert - many thanks! Appreciate your comments.

  11. #50
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    Quote Originally Posted by GreatLaker View Post
    It looks like things are really cooking for you Mordko.

    Great returns! I have been on both sides of the money-weighted vs. time weighted returns, sometimes investing then watching markets drop or drift sideways for a year, or like last year investing and watching markets go way up, despite Brexit and things that go Trump in the night. You are right that it is mostly luck, except for those fortunate few that can reliably time the market.

    Do you mind saying what you use to calculate the returns?

    Also caution regarding the withholding tax on the commuted value, 30% is just the standard withholding amount. The lump sum could easily kick you up into Justin's new screw-the-rich top marginal tax bracket.
    - Yes; and it's probably too early for me to claim that my timing has been lucky. A disappointment in Trump's taxplans followed by a major drop in the next couple of years could turn the tables within a month.

    - I have a large Google docs spreadsheet which reads and records the values of various ETFs and accounts which we hold. Also sends me an email when dividends are paid in and when rebalancing is required. Inflows and outflows of cash have to be put in manually. Then XiRR is used to calculate money-weighted returns. Time-weighted returns are calculated using the code from Boggleheads' wiki.

    - Yes, absolutely, most of the pension lump sum would normally be taxed at the brand-new "screw the rich" 53% tax rate. I am putting quite a bit of thought into planning avoidance. For example I changed jobs and moved more than 40km closer to my new office location. Also sold/bought the house. All associated expenses are deductable (guessing ~$70k). I am also about to discover my newly established farming business making a major loss in 2017.

    Kinda sad that the system is designed to ensure that effort goes into tax planning rather than production.

    Last edited by mordko; 2017-05-01 at 10:56 AM.

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