Bonds have played a limited role in the financial independence portfolio so far. Hollowing the examination of the equity portfolio last month, however, it seemed fitting to complete the picture with a detailed look at the development of, and trends in, the bond and fixed interest holdings.
The last detailed examination of the fixed interest and bond components of the portfolio was undertaken in October 2019. This found that the bond portfolio was reasonably well-diversified, broadly index-aligned, and doing its job of providing ballast against equity volatility — even if it had largely arisen in conditions of ‘benign neglect’.
More than six years have passed since that examination. In the intervening period, global bond markets have experienced some of the most dramatic conditions in recent decades. These include the pandemic-era collapse of yields to historic lows, a sharp rate-hiking cycle from 2022 that delivered real capital losses to bond holders worldwide, and a gradual recovery since. The four decade secular bull market in bonds that seemed at risk of ending in 2019 did, in a sense, end — quite violently.
Along the way, some of the key assumptions underpinning the rationale for holding bonds have been tested in ways not seen for a generation.
Recapping the structure and history of the fixed interest and bond portfolio
When the bond portfolio was last examined in detail in October 2019, total bond and fixed interest holdings stood at around $257,000, representing just under 15 per cent of the overall portfolio.
That figure had itself slightly declined from a peak of around $260,000 reached in January 2018.
The chart below tells the fuller story across nearly two decades looking at all fixed interest holdings (e.g. bond holdings and Plenti peer to peer and capital note investments).
Every man takes the limits of his own field of vision for the limits of the world.
Arthur Schopenhauer
This is my one hundred and eleventh monthly portfolio update. I complete this regular update to check progress against my goal.
Portfolio goal
My objective is to maintain a portfolio of at least $3,250,000. This should be capable of producing an annual income from total portfolio returns of about $112,000 (in 2026 dollars).
A secondary focus will be maintaining the minimum equity target of $2,600,000.
Portfolio summary
Vanguard Lifestrategy High Growth Fund
$995,439
Vanguard Lifestrategy Growth Fund
$50,114
Vanguard Lifestrategy Balanced Fund
$86,371
Vanguard Diversified Bonds Fund
$95,318
Vanguard Australian Shares ETF (VAS)
$699,678
Vanguard International Shares ETF (VGS)
$986,477
Betashares Australia 200 ETF (A200)
$358,037
Gold ETF (GOLD.ASX)
$324,307
Bitcoin
$1,024,255
Plenti Capital Notes
$84,000
Financial portfolio value (excluding Bitcoin)
$3,679,741 (+$47,657)
Total portfolio value
$4,703,996 (-$268,350)
Asset allocation
Australian shares
30.8%
Global shares
30.6%
Emerging market shares
1.2%
International small companies
1.3%
Total international shares
33.1%
Total shares
63.9%(-16.1%)
Australian bonds
2.8%
International bonds
3.8%
Total bonds
6.6%(+1.6%)
Gold
6.9%
Bitcoin
21.8%
Gold and alternatives
28.7%(+13.7%)
Presented visually, the pie chart below is a high-level view of the current asset allocation of the full portfolio.
Comments
This month the portfolio suffered a loss of $268,000 or around 5.4 per cent.
As a single month headline result, this is the eighth largest fall in portfolio ever experienced. It is also the fourth sequential monthly loss, an event which has not occurred in the history of portfolio previously.
The loss reflected continued declines in the price of Bitcoin, of around 24 per cent over the month.
Despite this, however, the smaller underlying portfolio of traditional financial assets continued to expand, hitting the highest value ever recorded ($3.67 million). By contrast, it has grown each of the past three months.
The chart below sets out the performance of both the full and ‘financial assets only’ portfolios since the commencement of the journey.
Through the month, geopolitical uncertainty continues to be heightened, with possible future military conflicts in the Persian gulf.
Australian economic developments have been dominated by a re-emergence of persistent inflationary forces, resulting in a tightening of interest rates. This occurred against a positive reporting season, which appeared to support stronger Australian equities performance (or 3.8 per cent) compared to a slight capital loss in the global equities holdings (1.1 per cent).
Gold holdings fell by around 2.0 per cent from the highs experienced at the end of the last month.
The month as previously small additional new investments were made in global equities (through the Vanguard exchange traded fund VGS), in accordance with the decision to regularly reinvest excess distributions and cash holdings.
Rose of the winds: reviewing trends and developments in the equity portfolio
Five and a half years ago, I provided a systematic analysis of the equity component of the financial independence portfolio. At that time, equities totalled $1.2 million. Today, they stand at approximately $3.0 million.
With this milestone, it seemed an opportune moment in the waning of the summer months to revisit the original mapping exercise – and the shorter snapshot in August 2022 – to see how the territory may have shifted using the compass provided by the passive indexing approach employed.
Equity holdings in the financial independence portfolio
Equities remain, as they have been since the inception, the driving force of the financial independence journey.
At the time of the first detailed review of in mid-2020, the equity portfolio stood at $1.2 million. By August 2022, that figure had grown to $1.7 million—around a 41 per cent increase.
The chart below highlights the progress of the equity portfolio in nominal value terms over the past nine years.
A person often meets his destiny on the road he took to avoid it.
Jean de la Fontaine
This is my one hundred and tenth monthly portfolio update. I complete this regular update to check progress against my goal.
Portfolio goal
My objective is to maintain a portfolio of at least $3,250,000. This should be capable of producing an annual income from total portfolio returns of about $112,000 (in 2026 dollars).
A secondary focus will be maintaining the minimum equity target of $2,600,000.
Portfolio summary
Vanguard Lifestrategy High Growth Fund
$984,041
Vanguard Lifestrategy Growth Fund
$49,548
Vanguard Lifestrategy Balanced Fund
$85,395
Vanguard Diversified Bonds Fund
$94,309
Vanguard Australian Shares ETF (VAS)
$673,809
Vanguard International Shares ETF (VGS)
$986,442
Betashares Australia 200 ETF (A200)
$343,574
Gold ETF (GOLD.ASX)
$330,966
Bitcoin
$1,340,262
Plenti Capital Notes
$84,000
Financial portfolio value (excluding Bitcoin)
$3,632,084 (+$38,077)
Total portfolio value
$4,972,346 (-$88,331)
Asset allocation
Australian shares
28.4%
Global shares
28.8%
Emerging market shares
1.1%
International small companies
1.4%
Total international shares
31.3%
Total shares
59.7%(-20.3%)
Australian bonds
3.2%
International bonds
3.5%
Total bonds
6.7%(+1.7%)
Gold
6.7%
Bitcoin
27.0%
Gold and alternatives
33.6%(+18.6%)
Presented visually, the pie chart below is a high-level view of the current asset allocation of the full portfolio.
Comments
This month the portfolio fell by around $88,000, or 1.7 per cent.
This reflected significant declines in the price of Bitcoin (of nearly 9 per cent), against an unsteady period for most equity-based assets. There was relatively high volatility through the month under a variety of geopolitical strains.
The financial portfolio sits at the highest ever level, of $3.6 million, despite the overall ‘headline’ portfolio value being below the absolute levels of a year ago.
The chart below sets out the performance of both the full and ‘financial assets only’ portfolios since the commencement of the journey.
Across the month, geopolitical instability has driven market nervousness, and the rise in bond yields in Japan continues to signal an important regime shift in the deepest elements of the global financial architecture.
Yields on government debt are rising across Western economies, even as inflation is relatively contained in many jurisdictions. The fundamental price of ‘risk-free’ assets is changing, at a rather unanticipated pace, bringing with it question of ‘financial dominance’ and central bank independence. Developments in commodity markets and strategic metals, such as silver, were also in focus.
Australian equities benefited from some of these developments, rising around 1 per cent through this month. International equities fell modestly, by around 3 per cent, as US markets in particular reacted to the changing global trade and debt market conditions. Despite this, US market valuations, on this view, appear to remain relatively anchored when earnings growth and cash yield considerations are taken into account.
Gold has increased by an extraordinary 14 per cent over the month, exceeding the gains by Australian and international equities over the past twelve months.
Increasingly private investors, and central banks alike are rediscovering – at least temporarily – some of the hedging properties of gold. Over the past year, gold holdings have returned above 66 per cent. This has pushed the allocation to gold to the highest level in about 5 years, and in nominal dollar terms, means movements from here exert a far stronger impact than previously.
By contrast, Bitcoin has fallen by 28 per cent over the past year, and as mentioned fell sharply this month.
This month saw portfolio distributions received, of around $16,000, from the last quarter of 2025. These have been added to a cash fund that is proportionally reinvested through this year, with a portion also being set aside to meet expected tax liabilities.
Wings of time: portfolio compounding theory meets real-world data
Part of the function of this record has been to ‘test’ the theory of reaching financial independence in the real world, as opposed to the cells of an Excel spreadsheet, with their neat eliding of reality.
Tracking expenses and the portfolio’s safe withdrawal income is one dimension of this. Another is examining whether what is often called the ‘miracle of compounding’ occurs in quite the same manner as often presented in materials on financial independence or wealth-building more generally.
Recently, algorithms assisting, I have been interested to see a lot of Youtube financial independence themed content in my feed about various defining acceleration points, or milestones in the journey.
Typically, these relate to concepts like the portfolio assuming its own gradual momentum or central role in wealth generation, compared to new investments. That is, one’s portfolio ‘working harder’ than one’s own contributions.
Twice a year I prepare a summary of total income from my financial independence portfolio. This is my nineteenth portfolio income update since starting this record. As part of the transparency and accountability of this journey, I regularly report this income.
As discussed in my recent post, my primary goal is to maintain a portfolio of at least $3,250,000 which is capable of providing a passive income of around $112,000 (in 2026 dollars).
Portfolio income summary
Investment
Amount
Vanguard Lifestrategy High Growth (retail fund)
$9,366
Vanguard Lifestrategy Growth (retail fund)
$417
Vanguard Lifestrategy Balanced (retail fund)
$792
Vanguard Diversified Bonds (retail fund)
$668
Vanguard Australian Shares ETF (VAS)
$11,750
Vanguard International Shares ETF (VGS)
$5,387
Betashares Australia 200 ETF (A200)
$6,223
Plenti Capital Notes
$3,790
Total Portfolio Income – Half-Year to December 31, 2025
$37,922
The chart below sets out the distributions received on a half-yearly basis from the financial independence portfolio over the past eight years.
