Saturday, April 1, 2023

March 2023 update ($785,271 +$11,513 or %1.5)

↓ Global Small Cap Index is down by $3,646 or -2.5%
↓ Growth fund is down by $961 USD or -1.5%
Total losses: $4,607

↑ Emerging Markets Stock Index Fund is up by $784 or +0.6%
↑ Eurozone Stock Index Fund is up by $1,070 or +0.7%
↑ US 500 Stock Index Fund is up by $10,667 or +3.6%
↑ EUR to USD is up by 1% for my portfolio its $2,541
↑ GBP is up to USD by 1.7% for my portfolio its $1,058

Grand total gains: $16,120 USD

March 2023 Financial Independence update

Twelve months year to date the portfolio is down 6.4% or over $53K.  I expect this trend to remain for the reminder of the year. European currencies are still down to USD.

The Pension and Life savings association stated that for a comfortable retirement in 2023 a single person should have £38,000 while the full state pension is about £11,000 a year. To get that you need to work for 35 years. A qualifying year is when you paid at least £824.20 in National insurance contributions a year.

I was recently pondering is it worth to do these voluntary contributions to get the qualifying years.
-At 5% investment return one will get £74,423 after investing for 35 years.
- At 7% investment return one will get £113,907 after investing for 35 years.
So it be worth doing that as even £113,907 – this will generate about £5,500 a year.

Collapse of Silicon Valley, Signature, First Republic and Credit Suisse banks could be largely attributed to politicking in the west and Switzerland neutral country status loss.

It shouldn’t be a surprise as the banks are highly leveraged institutions – they have a tiny amount of equity to support their balance sheet.  Ratio of shareholder’s equity to funded assets is called gearing (leverage).  Gearing shows the extent to which a firm's operations are funded by lenders versus shareholders.   For the banks its ratio is quite typical around 20 times.   You can look at it this way: if 5% of the loans will go bad than all of the shareholders’ equity is gone.

Average company from S&P500 index has$26 billion in assets and &8.5 of equity. So, they geared only two times.  Its also worth to mention that if a car manufacturer’s asset value will fall – its not among the main risks.

Despite all of that S&P banks return on investment is about 11% for the past years.  You can get more from energy, food, clothing manufacturers.  For banks higher risks does not result in higher returns.

Fun fact:    When China was first start raising serious questions about returning Hong Kong from the British (they were occupying it since 1841 during the opium war with Qing dynasty) in 1980 the foreign mass media started hysteria which impacted the property sector in Hong Kong.  The sector was providing collateral for the bank lending.

There was bank which put out outside window shade (called awning) to keep the sun out.  People by the near by bus stop were using to stay out of a heavy rain ( Average annual amount of rainy days in Hong Kong is 143).  Passersby saw the queue in front the bank as beginning of a bank run, surely enough one soon developed. This is how people were worried about the banks.

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