A lot of thought provoking insight, particularly from fiveoclockshadow - thanks.
To people's questions:
> What makes up your $1.2mm in net worth?
Lots of detail and history here:
https://www.networthiq.com/people/bigchrisb/2013/11In summary: $1.1M of Australian stocks, REITS and international stocks split between my retirement accounts, a company account and my own name, and $600k in an unlisted company. Plus rats and mice (first home saver account, cash, car) less $575k of margin and business loans.
> Margin and risk?
I've always been a bit of a calculated risk taker, all the way from a kid playing monopoly. While I've had my share of issues (including margin calls in the past), investment debt has been good to me on balance. I've kept a log of my net benefit/loss from investment debt, and at the moment I'm about $620k ahead than if I had had not used debt for investment.
> Scenarios?
Job loss: Likelihood - low. I'm an owner of my employer. If this happened, I'd sell stock and zero out the margin loans & business loan. Would nominally leave me with no debt. I'd be reliant on selling some stock to live off to support my living costs, say $2k/month while I hunted for a new
Market crash: Likelihood - medium. A 37% crash in shares would wipe out my margin portfolio. It would also wipe down the shares in my investment company to about 87k. If I'm still employed, I can prop this up somewhat by my income. If I lost my job at the same time, I'd be in a bit of trouble - I'd need to sell stock from the company to clear the company loan, leaving me with about $20k of stock to get through until I find a new job (10 months). More than that and I'd be in dire straights, breaking into retirement funds, or drastic action like moving back in with parents.
Company collapse: Likelihood - low/medium. At the moment we are in a fairly stable position - it would take 6 months of zero revenue to bankrupt the company. We have enough work on current contracts to pay expenses for another 6-9 months. i.e. it would take zero new revenue for 1 year plus, or a catastrophic un-insured event to cause this. In this event, I'd be in the same basket as job loss above, but with some potentially greater liabilities.
Insurances:
I've got health insurance, and a TPD/life insurance policy through my super. I also have high deductible insurance for my car. I don't see any point in life insurance, as I don't have any dependents.
Credit balances:
I've had much higher available balances in the past, but just don't see the merit in them at the moment. I have two no-fee cards that I use for transaction convenience, but if I need access to more cash, I use the margin loan as a line of credit.
I think much of my current state of mind comes down to being somewhat uncomfortable with the amount of leverage I've got, but not wanting to sponsor the ATO with capital gains taxes by selling assets to clear it :S