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Time brings all things to pass

Aeschylus, The Libation Bearers

This is my fifth portfolio update. I aim to update this monthly to check my progress against my original goals.

Portfolio goal

My current portfolio objective is to reach a portfolio of $1 476 000 by 1 July 2021. My plan is that this should produce a real income of about $58 000. This is based on a real return of 3.92%, or a nominal return of 7.17%.

Portfolio summary

• Vanguard Lifestrategy High Growth – $644 835
• Vanguard Lifestrategy Growth  – $43 390
• Vanguard Lifestrategy Balanced – $77 538
• Vanguard Diversified Bonds – $108 850
• Telstra shares – $5 625
• Insurance Australia Group shares – $15 512
• NIB Holdings – $7 200
• Gold ETF (GOLD.ASX)  – $78 333
• Secured physical gold – $5 198
• Ratesetter (P2P lending) – $55 915
• Bitcoin – $17 433
• Acorns app (Aggressive portfolio) – $5 299
• BrickX (P2P rental real estate) – $2 658

Total value: $1 067 786

Asset allocation

• Australian shares – 30%
• International shares – 21%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 57% (8% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 25% (10% over)
• Cash – 1.7%
• Gold and alternatives – 9.5%

Comments

The overall portfolio is up around $32 000 this month from a combination of new investments and market movements.

The most significant transaction this month has been the closure of my St Andrews Australia Share ‘Top 200’ index fund. This wasn’t by choice, the fund closed and returned investor funds as part of that process. It did mean, however, a stop to paying an investment fee rate of 1.65% per annum, which I was glad about. I had originally intended to use the return of funds to open my explorations of Vanguard ETFs, but this ran into a hitch. The brokerage firm I use requested that I sign a complex warrants disclaimer form, allowing me to trade in this apparently ‘exotic’ product. This didn’t sound right, so I have been doing some further investigations, before I commit any funds.

The early answer seems at this stage to be that the other ETF I own is unusual for not being structured as a warrant, and that this is not an unreasonable requirement. As I did not want the funds to sit outside the market while this question was answered, though, I took a ‘no regrets’ course and invested the $13 000 into the Vanguard High Growth fund that has a marginal annual fee of 0.35%, locking in an annual fee saving of about $170. All going well, I expect to try out a Vanguard ETF with the next available lump sum.

The most satisfying investment activity this month has been taking some of my old games consoles (N64, PS2 & PS3) and games into a second hand dealer, and obtaining cash for them. This has two payoffs, a reduction in clutter around the house, and more cash to invest, via Acorns. Putting these cash amounts into my Acorns portfolio, and seeing the amount invested grow by similar daily savings has been a really motivating way of incentivising finding those little extra steps to save a few additional dollars.  The $5000 or so in that account comes purely through those daily savings actions, taken over around a year.

My gold and bitcoin holdings continue to grow, which reflect the uncertain economic conditions at the moment, and, I assume, some China capital outflow. The top of the Australian property market is being called, rung out, on an almost daily basis. In fact, it received top billing on the day I invested around $250 more through the BrickX platform in a new Darlinghurst property. This makes me very cautious about expanding my BrickX holdings, despite my interest in the platform. I invested to achieve greater diversification within my BrickX portfolio (current fractional interests in 7 properties in Sydney and Melbourne).

Progress

Progress to goal: 72.3%

Summary

Markets continue to be very expensive, making me nervous about deploying new capital. There is more than a hint of the feeling of 2006-07 around, and I find myself thinking about how an Australian financial sector encountering a US or Irish style housing slow down looks like, in housing, equity market and employment terms.

In a way, this blog is a way of indulging these ‘market timing’ prognostications, without letting them influencing my investment decisions. A form of whistling past the graveyard. Podcasts continue to be another really source of motivation and thoughts, recently I have been listening to ChooseFI, who have just done a special on US FI guru J L Collins’ famous ‘Stock Series’. It’s worth a listen, and has me pondering some of the ideas, and unquestioned assumptions underlying that series.