There’re only 3 of us working in the office upstairs. We may be the only few most diligent white collars in Auckland New Zealand today – the last working day of 2016. We are gonna have a party in 3 hours, but before we are indulging ourselves I think I’d better write up some reviews about my gains and pains in 2016, so that I can learn and move forward in 2017.
2016 has proved to be a very volatile and unpredictable year. After the 3 major black swan events (namely Brexit, elected Trump, and Italian Referendum) along with hundreds of smallers, many results turned out to be opposite to market predictions or consensus. Many investors or traders have suffered from Brexit and the US election, when these people gambled on the predictions or advice from their advisors; others were well prepared to safe-guard their nest eggs, or/and take advantage of the volatility, and their wealth has increased.
Since 2015 all my FX trades/options are traded in straddles. They show their values during 2016 especially through those black swan events. With a professional mindset and appropriate strategies in place, I’ve made some very handsome profits from FX no matter which direction the market was heading. This is how I define preparation, and preparation beats prediction.
I’ve made some decent profits from Kiwisaver (New Zealand Superannuation) and some managed funds during 2016. Just before the Brexit I closed all New Zealand REITs to Cash fund for Kiwisaver; and closed the REITs to New Zealand Bonds for the managed funds. Although the REITs rebounded immediately after Brexit and hit new highs after the US presidential election, the unit prices now are lower than my exit price. Checking the Bollinger Bands and 20-day EMA, the REITs and NZX both appear approaching the Dec-15/Jan-16 lows. I’ll cling on cash and NZ bonds till the supports are near.
Yes you are right that I “gambled” on Kiwisaver and managed funds, and I made profits largely due to “luck”. That’s right! And that’s why I only contribute the minimum 3% towards Kiwisaver, and only invest very little amount in managed funds. The big pitfall for these paper assets is that they are not covered, and you are not able to protect them when the market plunges. The only way to profit is when the market keeps going up, or you sell faster than others when the price consolidates and starts to fall.
I did not buy any properties in 2016 due to sticky sky-high price. The existing portfolio has performed pretty well during the year – very low vacancy rate, and reasonably low maintenance. The returns or ROEs are slightly above market average because more equity has been tied up but largely offset by much lower interest expenses and higher rental revenues.
The market seems consolidated this month and perhaps next. It’s still uncertain that this slowing down is due to holiday season or due to the new LVR, interest rate expectation, NZ and global economy forecast etc. What is certain is at current price tag I won’t add any new properties to my portfolio due to low returns. I’d rather divert funds to paper assets (FX/Options) to boost ROEs.
2016 has proved to be a year of Black Swans – many things that are predicted to be right turned out to be left. Risk management is important. What’s more important is personal mindset and financial education. Here’re 3 favourite quotes that I wanna share with you:-
“I Always tried to turn every disaster into an opportunity” ~ John D. Rockefeller
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” ~ George Soros
“Preparation beats prediction” ~ Rich Dad