My Retirement Investing Today Current Low Charge Portfolio – July 2010

I first started taking my retirement investing asset strategy seriously in 2007 when I became disillusioned with the financial sector and decided to go it alone. While I made a start in 2007 the majority of the time was spent reading about personal finance and it wasn’t until 2008 that I really started to formulate the strategy that you see today. The strategy could be called extreme. I aim to save on average 60% of my after tax earnings and pension salary sacrifices. Following this strategy has me currently forecasting retirement in 6 years. This monthly entry calls me to account and forces me to assess if I am still on track and to determine if all the effort is worth it or whether I would be better off with a simple bond/equity asset allocation that is rebalanced yearly. What I call the Benchmark.

A History of Severe Real S&P 500 Stock Bear Markets – June 2010 Update

I first started posting today’s charts back in January 2010. I ended that post with “My question is once the governments of the world are forced to stop stimulating the economies through borrowing (for example a bond market strike) or quantitative easing (for example excessive inflation) could we yet see that real -60% bear? History suggests there is still plenty of time for it to occur.” Well that day could be now be upon us. We know that many countries out there are today all but ‘bankrupt’ or in the very least are now talking about and implementing austerity measures. So that writes off stimulation via borrowing at least for the moment. I assume that some countries out there would have another go at borrowing if they really needed to although it would be interesting to see what sort of treatment the bond markets would give them this time around?

US (S&P 500) stock market including the cyclically adjusted price earnings ratio (PE10 or CAPE) – June 2010 Update

To try and squeeze some more performance out of a retirement investing strategy that is heavily focused on buy & hold and asset allocation I am using a Cyclically Adjusted Price / Average 10 Year Earnings (PE10 or CAPE) ratio for the S&P 500 to value the US (specifically the S&P 500) stock market. The method used is that developed by Yale Professor Robert Shiller however I also incorporate earnings estimates up to the PE10 month of interest. Background information here.

Buying Australian Equity Index Tracker (ASX200)

As I’m sure everyone knows the Australian Stock has seen some falls of recent weeks. Using my monthly data set it’s down 13% from the monthly peak of 4876 in March 2010. Of course it’s still well above the monthly low of 3345 in February 2009 by some 27%. These falls have meant that my target asset allocation of ASX200 equities within my Low Charge Portfolio has risen to 20.9% and my actual has fallen to 17.0%. If you’re not sure about how I built my asset allocation and particularly how I use tactical allocations then please read here and here.

Australian (ASX 200) stock market including the cyclically adjusted price earnings ratio (PE10 or CAPE) – June 2010 Update

To try continue to try and squeeze some more performance out of a retirement investing strategy that is heavily focused on asset allocation I am using a cyclically adjusted PE ratio (known as the PE10 or CAPE) for the ASX 200 to attempt to value the Australian Stock Market. The method used is based on that developed by Yale Professor Robert Shiller for the S&P 500. I will call it the ASX 200 PE10 and it is the ratio of Real (ie after inflation) Monthly Prices and the 10 Year Real (ie after inflation) Average Earnings. For my Australian Equities I will use a nominal ASX 200 PE10 value of 16 to equate to when I hold 21% Australian Equities. On a linear scale I will target 30% less stocks when the ASX 200 PE10 = 26 and will own 30% more stocks when the ASX 200 PE10 = 6.