Be content to seem what you really are.

Marcus Aurelius

This is my sixteenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December  2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $693 605
• Vanguard Lifestrategy Growth  – $41 574
• Vanguard Lifestrategy Balanced – $74 220
• Vanguard Diversified Bonds – $103 193
• Vanguard ETF Australia Shares (VAS) – $74 236
• Telstra shares – $4 279
• Insurance Australia Group shares – $18 910
• NIB Holdings – $7 824
• Gold ETF (GOLD.ASX)  – $80 389
• Secured physical gold – $11 612
• Ratesetter (P2P lending) – $45 954
• Bitcoin – $114 730
• Acorns app (Aggressive portfolio) – $9 953
• BrickX (P2P rental real estate) – $4 384

Total value: $1 284 863 (-$54 561)

Asset allocation

• Australian shares –  33 %
• International shares – 19%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.6% (4.4% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.3% (1.3% over)
• Australian bonds – 10%
• International bonds – 10%
• Total bonds – 19.6% (0.6% over)
• Cash – 1.4%
• Gold – 7.2%
• Bitcoin – 8.9%
• Gold and alternatives – 16.1% (1.1% over)

Comments

This post is a few days later that usual as I have been holidaying overseas as the new month rolled over, making the update a bit more challenging to achieve with overseas data limits to contend with.

This last four months has been a challenging one, with declines in the overall portfolio, taking it ‘back’ to levels in November. Nearly all of this represents growth, and then sharp decline, in the value of my errant Bitcoin holdings, with some falls in equity markets also. I have concentrated on placing new capital into equity markets, and seeking to move my actual asset allocation closer to my target allocation over time.

Most of my financial moves this month have been incremental changes to how I fund longer-term irregular expenses. Around two years ago I moved to a system of regular deductions into higher interest allocated Ubank sub-accounts to set aside cash for car replacement, major insurance and holiday expenses. The system has worked well, but I had not revised its assumptions and structure materially after setting it up. By making a more realistic assumption on car replacement (every 8 years rather than five), and by taking into account my growing passive income and counting it as part replacement for a conservative emergency account, I have been able to free up some more cashflow (more than $8000 per annum) for regular investment.

The only substantial moves in the portfolio have been continued falls in Bitcoin, reducing its potential to add to future portfolio volatility (in a glass half full view), some falls in equity valuations, and some advance in the value of gold securities. I am looking through most of these changes and increasingly focused on what the end of first quarter dividends payments and distributions will bring, and the reinvestment opportunities that represents.

Progress

Progress to:

• objective #1: 87.1% or $191 137 further to reach goal.
• objective #2: 63.0% or $756 137 further to reach goal.

Summary

With time away from ordinary work this month, it has at times felt like a small trial of a future potential lifestyle, a weighing of one option for years ahead. Watching a portfolio shrink even as new investments are added is difficult, but I seek to recall that I have been investing in markets that are volatile steadily over around 20 years. This has caught upswings, periods of flatness, and the Global Financial Crisis. The next signal of progress will be my March quarter passive income, rather than abstracts updrafts or downdrafts in my portfolio.