Investing to minimise fees and taxes

Two key elements of my retirement investing strategy are to minimise fees and taxes. This is due to the fact that small changes in annual returns make large differences when compound interest works its magic over many years. Fees and taxes greatly affect those annual returns. For example if I invest a lump sum of £1,000 and achieve an annual investment return of 6% over 30 years I will end up with £5,743. Change that return to 6.5% and I achieve £6,614. So by saving 0.5% annually, which is easily done for most people in my opinion, you can end up with an additional 15% in your pocket. Not bad for taking an active interest in your own investment portfolio and doing a little shopping around and research.

US Consumer Price Index (CPI) Inflation – March 2010 Update

The above chart shows the US Consumer Price Index (CPI-U) to February 2010 courtesy of the US Bureau of Labor Statistics. Year on year US CPI inflation has fallen from 2.6% in January ’10 to 2.1% in February ‘10. Annualising the last 3 months and inflation is running at 0.8% and annualising the last 6 months has inflation at 0.8% also. It looks like the US continues to have their deflation ‘problems’ under control for now.

Buying Gilts, Property, International Equities and UK Equities

As an employee of a company I have the option to contribute to a pension scheme. I have made the choice as part of my retirement investing strategy to contribute to the pension scheme for the reasons laid out here.

Australia, UK and US government bond yields – March update

I continue to monitor the 10 year government bond yields of three countries (Australia, United Kingdom and the United States) to try and understand when interest rates on savings and mortgages may start to rise with my datasets shown in today’s chart.

Australian Stock Market – March 2010 Update

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.