2016 Year End Report

I’m a little late on this, but here’s a peak into how things went last year.

I love to check in on progress periodically. I don’t obsess about it, but its a nice reminder of how things are chugging along in the background.

You can measure performance in a variety of ways. For me, income tends to be the preferred metric, however I’d be remiss if I said I never took a look at how asset values are tracking.

Dividend Income

This still remains the bedrock of our financial foundation. Dividend income was pretty solid last year. We derived approximately USD$26,000 in dividends last year. Much of this (about 60%) was dividends sourced from my Australian portfolio, while approximately $2,500 came from US holdings, with a very satisfying $8,000 in dividends from tax sheltered S&P 500 holdings (socked away and reinvested in retirement accounts).

Overall, my plan for dividend income continues on schedule. While I have shifted focus to more growth oriented assets, the dividend income continues to steadily accumulate over time.

Rental Income

Our condo rental continues to provide a very nice rental stream. We derived roughly $20,500. The best thing about this was, at least to date, this has been truly passive income. There have been few if any disruptions in earning this income. The rental checks continue to come in like clockwork month after month.

No significant apartment issues, have cropped up as yet, and we still continue to retain the same tenants (who have just informed of their intention to renew). This overall positive experience has influenced us to look to add another rental unit, and we are in the process of prospecting some locations with a view to purchase within the next year.

Options Income

While I wrote many options in 2016, much of the income will be booked in 2017, given the length of the option period. I realized approximately $400 in options premiums in 2016. Given some accumulated short term capital losses during the GFC, this income is all tax free for the moment. Given the amount of accumulated short term capital losses, this looks to be the case for the foreseeable future. I reasonably expect that I could derive close to $5,000 in options income in 2017.

Retirement Accounts

The growth in these accounts was on fire in 2016. Given our assets are invested in S&P 500 proxy funds, we saw substantial capital growth in these accounts in 2016. In fact, the value of these holdings will likely become our single biggest asset (excluding primary residence, which I don’t factor in) in 2017, passing the value of our Australian stock holdings.

That’s a good sign, because it means my plans for asset diversification are working. I’m shifting more assets away from AUD dependent holdings to more USD denominated assets. More work still remains to be done on emerging market holdings, and increasing the overall weight of these holdings relative to our overall asset allocation.

Asset appreciation

While I don’t explicitly track this, asset appreciation was pretty solid in 2016. With the S&P 500 up double digits, I expect that we added possibly a hundred thousand dollars in asset value appreciation over 2016. I don’t expect these gains to be permanently retained, but it was a fairly pleasing performance in 2016 as far as asset growth. Again, obsessing too much over these measures can give you a misplaced sense of confidence, because over exuberance can be promptly corrected when asset values readjust.

2017 Outlook

Risk assets are at all time highs globally. I don’t really see any pockets of value, possiby apart from certain emerging markets. Stocks are at al time highs, making me very nervous. Property values are also at all time highs, leaving few if any bargains. Yet there doesn’t appear to be any clouds in sight to derail the party. Corporate earnings show steady progress, possible tax reform could drive earnings higher still.

But much of this seems to be priced into stock markets. I expect to purchase the least amount of stock holdings in 2017 that I have for the last 8 years. I expect I will be more aggressive on my options strategy over 2017 and on the lookout for possible bargains should they emerge.

While I’m hard pressed to see stocks driving markedly higher, I don’t see many catalysts for a dramatic crash either. That should continue to make writing options a viable strategy in a fairly static market, albeit one that is prone to volatility spikes.







  1. Hi – Any update on your thoughts about WTC’s recent Q?

  2. WTC had a great quarter on all fronts. Strong revenue growth and good improvements in profitability. I believe its a well positioned business for the long term and well positioned to profit from key themes of improved international trade, irrespective of short term protectionism concerns.

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