Wednesday, January 4, 2017

2016 Financial Independence Goals ($387,831 +$92,295 or +31%)



Financial goals.
- Accumulate at least $24K a year. Stretched target - $50K.  Partially complete. Accumulated approximately $ 38K.
- Portfolio should be able to generate $8,000 a year after taxes in the money of the day.  – Complete.  Without seeing end of the year result from some of the companies received $8 K after taxes.
- Develop additional income source in full, potential reward about $2,000 a year – Not achieved, although some measurable progress made.
- Less than 5% of portfolio in cash by end of the year and $350 K overall net worth in the money of the day – Partially achieved, portfolio $387 K but approximately 11% in cash.

 Blog:
- Regular monthly updates – Not achieved. (Missed September update).
- To cover 6 themes on financial independence -  Portfolio performance, Assets Allocation,  Energy stocks screening and Family budget. Missing one more theme.
- Publish easy tracker for the long-term portfolio performance – Not achieved.
 
Educational:
- Create list of books to read - 12 books are minimum. Not achieved. Read only two, not achieved.
- Read the books.
- Publish the books reviews – Not achieved.
 
Family Budget:
- Stay under $100,000 with the family expenses – Achieved. Spent $84K.
- Accumulate $7,000 towards durable goods replacement over 10 years – Achieved.

Be happy.  Run 1,000 miles during the year. Keep BMI below, target 26.6 (current 27.5)- Partially complete. Ran 1,022 miles but BMI is 27.4.


Real life portfolio performance 2016 and retrospective
Value
Performance indicator
Comments
Absolute return
$, K
%
This is without taking into account accumulated $ 38 K
+54
20
Relative return
S&P 500, %
Portfolio, %
Emerging markets (mainly Russia) rebond and energy sector.
8.5
+20%
Cash accumulated in 2010 money
Planned $, K
Actual $, K
Minimum target was $24K, stretched $50K. Partial completion.
50
38
Personal plan
in 2010 money
Planned $, K
350
Actual $, K
244


I have been on target this year, achieving $387 K or $310 K in 2010 money (this includes cash, all numbers in USD):
Year
2008
2010
2011
2012
2013
2014
2015
2016
2017
Money of the day
actual
153,400
119,800
165,600
226,800
298,400
288,608
295,536
387,831

Target





370,000

350,000
407,000
Inflation %

2
3.5
3
4
4
3
4
4
Cumulative inflation

1.02
1.06
1.09
1.13
1.18
1.21
1.26
1.31
2010 money
153,400
117,451
156,967
209,032
265,244
244,583
244,244
307,000
310,000
  In other words, if in 2010 you would have $ 10,000 and keep it, it worth $7,930 today.

Performance of my investments over the last 5 years (all in €):

2012
2013
2014
2015
2016
Money of the day invested – cumulative
44,460
173,770
189,638
202,593
293,842
Shares value -
44,886
180,827
163,000
155,745
317,163
Inflation adjusted U.S.
45,794
182,108
205,895
225,416
309.839
Inflation adjusted U.K.
45,883
182,202
205,993
227,706
314,475
S&P 500
48,639
217,099
262,768
277,947
383,122






Free cash
94,500
23,454
53,087
92,386
43,000
Dividends received (EUR)


5,719
5,321
8.960
If invested in S&P 500


4,730
5,559
7,279

Real life dividends return in 2016 on various investments (all in €):

Cost year end 2016
Dividends in 2016
Return, %
Vanguard Emerging markets
13,380
310
2.3
Vanguard S&P 500
61,650
998
1.6
Gazprom OAO*
126,900
4,566
3.6
Rosneft*
12,810
298
2.3
iShares EM RMK SOUV BD
20,743
1,101
5.3
iShares EM RMK CORP BD
37,410
1687
4.5
Note: Both Gazprom & Rosneft dividends are already tax deducted.  The companies although benefited from Trump effect and expectation that next year will increase share of net profits directed to dividends (currently ~27%, expected to go up to 50%). If we discount this three factors Gazprom return is 4.8% and Rosneft 3.2%.

Financial independence portfolio performance over last 5 years:



What does my financial independence portfolio performance tell me?
-          If you are aiming for a longer term towards retirement, growth type of a portfolio – you better stick with S&P500 index. Yes, I beat it in 2016 but still way off over the course of 5 years. Dividends wise I received 3% vs. 1,8% from S&p500.
-          My portfolio still overweight with cash (roughly ~15%), with emergency money.
-          I need to stay away from EU indexes and funds – nominally they are raising, but as the West European currencies fall net results is zero or negative. British FTSE 100 went up by 14.2% in 2016 , while GBP lost 17% to USD. Net result? -2.8%.  German DAX went up by 6% in 2016 (including dividends reinvestment), but EUR lost 5% to USD in the same period.

In overall the year was fair – I achieved my short term financial goals (savings, performance, expenses) but not making progress on the long term – reading books, reducing weight and making additional income streams. This is even more important now, when my ability to do savings from reduced salary is not there.


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