To him who is in fear, everything rustles

Sophocles

This is my sixth 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 – $653 150
• Vanguard Lifestrategy Growth  – $43 561
• Vanguard Lifestrategy Balanced – $77 698
• Vanguard Diversified Bonds – $109 821
• Telstra shares – $5 878
• Insurance Australia Group shares – $15 987
• NIB Holdings – $6 168
• Gold ETF (GOLD.ASX)  – $78 732
• Secured physical gold – $5 584
• Ratesetter (P2P lending) – $56 303
• Bitcoin – $30 409
• Acorns app (Aggressive portfolio) – $5 778
• BrickX (P2P rental real estate) – $3 205

Total value: $1 092 274

Asset allocation

• Australian shares – 30%
• International shares – 21%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.5% (3.5% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 24.3% (4.3% over)
• Cash – 1.7%
• Gold and alternatives – 10.5% (0.5% over)

Comments

The overall portfolio is up around $24 000 this month from a combination of new investments and market movements.

The largest market movement has been a near doubling of the value of my Bitcoin holdings. I hold 9.75 Bitcoins, purchased after listening to an Econtalk podcast with one of the founders of Xapo (a Bitcoin wallet and vault provider). The question posed by the guest was whether it might be wise to simply purchase a few Bitcoin ‘in case’ the model became widely adopted.

Being interested, I did so at an average cost of around USD$430, as much to understand the concept as to seek to profit. Bitcoin is volatile, and I hesitated before even considering it as part of my portfolio. I consider it a highly speculative holding, with enough similar characteristics to gold holdings that I consider the holdings together. Its trajectory over the last few weeks has been astounding, but already a significant reversal appears to be underway.  As a result of the run up, however, my gold and alternatives portfolio is slightly above its intended allocation.

Whilst mentioning asset allocation, I have for this monthly update standardised my asset allocation figures above, correcting an error which had crept into previous updates. My current year share allocation is 60%, with a 20% allocation to bonds. Over the next few years based on my investment policy I intend to glide this allocation up to 65% and down to 15% respectively. My previous reports did not reflect this year by year ‘sliding’ allocation change, but rather the end point, making my equity position look more under allocation than was actually the case.

Over the past month I have also marginally increased my allocation to the Brickx real estate platform, taking up an offer to subscribe into ‘bricks’ of a new Surry Hills unit property. The property is a $1.4 million unit, with a rental yield of 1.75%. This does not feel like a bargain. This investment is made as media reports continue to call the top of the Sydney and Melbourne property market.

My reasoning for the investment is to seek to diversify my holdings of real property across a greater number of investments, and secondarily, as a contrarian hedge on a wide set of market commentators being incorrect about the top of the market. Having said all that, it’s far more likely they are right, and my preference would be to invest in this new fractional form of ownership as the bubble deflated.

Progress

Progress to goal: 74.0% (+7.0% ahead of target)

Summary

As each month goes by, seeing small and steady progress to my target goal, I continue to think about the end point, and trying to imagine what it will feel like having met that goal. Inevitably, doubts surface. Do I need to reassess the goal? Would the income of that target goal be sufficient for what I would want to do? I need to do some thinking about what an ideal post work life would be, how my days and weeks would be structured. In part, my natural instinct is to defer, shy away from such hard thinking, I think at base because I have difficulty accepting I am actually this close to such an outcome.

This is all reinforced by a sense of unreality of markets today, exemplified by what has happened to the small Bitcoin holding in the portfolio. The Australian share market is not as overvalued as US markets, and therefore less risky, but this does not feel like the optimum time to be, as I am, shovelling large amounts of cash into equities. Nonetheless it is what my plan suggests, and so far, at least, I am gritting my teeth and keeping on course.