Month in Review - October 2019

 

This is the first in a series of monthly review type articles, the plan for these really is to give a bit of a mindset indication of where we were at the time as well as have a retrospective look at the decisions, investments, and other choices we made over the course of the month. We picked October 2019 as it really was the first time that we considered the need to move away from a purely cash saving position. It also means that as of today (February 2021) we have a good back catalogue of information to review and unpack.

Speaking honestly, I don't think we're going to know everything we want to record, track and report on right from the beginning but in the interest of getting some actual useful content and analysis up and out there let's just crack into it. If we do need to go back and make some changes, or document some other information that we may find to be useful we can always do that but for now this really is just a brain dump of the information that we believe to be reasonably important within the month.

 

End of Month Portfolio Position Summary

The graphic below aims to give some easy to digest info about where our portfolio sits at the end of the month.

October 2019 Portfolio Position

 

Background

So it's October 2019 we have submitted our permanent residency application for Australia earlier in the year and we are in a bit of a holding pattern for an update on when this is likely to be granted. The tough part of this is that you really can't get any definitive information from any source, you are forced to simply sit in your own bubble and hope you are the next in line. The waiting times and processing times, which are reported on the Australian government website keep moving away from us quicker that we are moving towards them. It all feels a little hopeless to us at this stage.

It is worth noting that there are some great communities out there that really gave us some hope and clarity that we weren't alone. For those of you that are in a similar situation now or in the future if you're reading this have a look at ImmiTracker this was an invaluable resource to be able to see when progress was being made on Visa grants. It covers all Australian and Canadian visas, and there may now be others on there too.

Anyway, back to us, we know our longer term plans are to try and buy a house in Australia but while we're still foreign residents on a working visa we just can't afford the ~8% stamp duty that is imposed on non-resident property purchases.

We've been squirrelling away cash into savings accounts but the interest rates on those savings are rapidly diminishing also. At this point in time we are very close to having a full 10% house deposit saved as well as the costs of the ~4% stamp duty. Personally we believe that we're in a reasonably steady and secure position.

Since we really don’t know how much longer our PR is going to take and given the value of savings we have sitting as cash and earning less than 2% per year, we kind of decided we needed to take a bit of a look at what level of return we can achieve elsewhere in the market. At this point in time we're definitely very risk averse since we are saving for a house and we want to retain nearly immediate access to our cash savings at all times.

We started to do a little bit of research but didn’t exactly find many resources that adequately covered our position, so we ended up piecing the picture together from various sources of information.

Given we were saving for a house, we currently have bank accounts with multiple institutions as we were chasing the best savings interest rates while trying to maintain balances below any bank specific thresholds. At this time we have transaction accounts with Commonwealth Bank, Citi Bank, ING Direct, and ANZ. We also have savings accounts with ING Direct and RAMS.

Given the number of bank accounts we held, naturally advertisements for share investment platforms and other financial services are a regular sight in our social media feeds and online advertisements. This seemed like as good a time as any to learn a bit more on that front so I started to do a bit of research on what this could look like in our case and it became immediately obvious that there was a high level of variation available in all the platforms out there, in terms of services offered and cost associated with these services.

As I mentioned before we're reasonably risk averse at this point in time meaning our investment values are on the smaller side,  so getting hit with expensive brokerage fees is really something we want to try and avoid. we were planning to invest in parcels of about $500 at a time given that aligned with our salary earnings and the amount of discretionary income we have leftover at different stages in the month. The immediate issue that presented itself was to invest $500 in any of the mainstream platforms would often incur something like a $10 to $20 brokerage fee and this just felt too high especially when starting out.

When we came to Australia initially, all of our banking was with Commonwealth Bank so we have Netbank accounts, we have Commbank apps on our phone and we are pretty well embedded in the Commonwealth Bank infrastructure, and we have become aware that they've recently released a new app called Commsec Pocket.

I will give a more in depth review on exactly what this product looks like in a later article but for now we will just summarise that it definitely presented the lowest level of risk in terms of getting your investment back out of the market and the cheapest fees overall. Investments up to $1000 only cost  $2.00 in brokerage fees.

On a $500 investment this is only 0.4% which was reasonable and if you pushed it up to the full $1000 investment at a time this would only be a 0.2% brokerage cost.

So initial research done we decided to commence investing into the Commsec pocket infrastructure in October. Given we were a slow cab off the ranks we decided to invest essentially four months’ worth of our proposed investments at once. You'll remember that we were planning to invest $500 per month so this means that we invested $2000 this time.

The pocket platform allows the purchases of ETF's which by their own establishment are already diversified but we decided we would invest $500 into each of four different ETF's. We were still very much learning at this point in time so just seemed like a reasonable approach which allowed us to dip our toe into a number of different areas without being fully exposed to any one area at one time.

So at the end of the month our position can be summarised as holding a house deposit and stamp duty costs in a number of cash savings accounts and having approximately $2000 worth of ETF's sitting in Commsec pocket 

Some lessons learned in the month, in no particular order

• Uncertainty is hard to deal with at the best of times
• Brokerage costs can be prohibitive for smaller investments
• There is a lot of intrinsic personal risk when you move from a fully cash position into an investment position in other riskier investment and this can be hard to come to terms with
• There's a lot of comfort in having your money invested in a brand that you're familiar with and have had a good bit of exposure to even if sometimes this may be at the cost of higher fees
• Doing your own research is incredibly important but do it with a goal or a reason in mind