Everything comes gradually and at its appointed hour.

Ovid

This is my nineteenth 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 – $748 238
• Vanguard Lifestrategy Growth  – $43 239
• Vanguard Lifestrategy Balanced – $76 351
• Vanguard Diversified Bonds – $103 147
• Vanguard ETF Australia Shares ETF (VAS) – $78 643
• Betashares Australia 200 ETF (A200) – $16 025
• Telstra shares – $3 492
• Insurance Australia Group shares – $21 308
• NIB Holdings – $6 876
• Gold ETF (GOLD.ASX)  – $77 784
• Secured physical gold – $12 402
• Ratesetter (P2P lending) – $39 873
• Bitcoin – $95 396
• Raiz app (Aggressive portfolio) – $11 585
• Spaceship Voyager app (Index portfolio) – $140
• BrickX (P2P rental real estate) – $4 649

Total value: $ 1 339 148 (+$10 794) 

Asset allocation

• Australian shares –  35%
• International shares – 19%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 59.4% (1.6% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.5% (1.5% over)
• Australian bonds – 9%
• International bonds – 10%
• Total bonds – 18.8% (3.8% over)
• Cash – 1.3%
• Gold – 6.7%
• Bitcoin – 7.1%
• Gold and alternatives – 13.9% (1.1% under)

Comments

This entry, like last year, seems to occur at a strange ‘bridging’ time between effort and demonstrable progress. Past months have seen increases in contributions, and a steady shifting of Ratesetter funds as each loan matures towards Australian equities. Yet this progress will only seem irrevocable later in July when all distributions from Vanguard funds and ETFs are received and totalled, to reach a passive income estimate for this financial year.

So I have busied myself with some financial ‘cleaning up’, moving all of my holdings to a single broker, that I have used for the past few purchases of the Australian Shares ETF A200. A slight complication arising out of this was that I had to reconfirm all my dividend payment instructions through the couple of share registries used, as this information apparently sometimes gets lost in the transferral process.  As a result, in a couple of cases, I will be waiting by my letter box, rather than checking my bank account, for the dividends to arrive. Another ‘cleaning up step’ has been to finally put in claims to an old series of outstanding Medicare rebates that had built up, going back to 2008. This has already added around $300 to my Raiz account which I use to motivate myself to take small ongoing saving steps.

Movement in my portfolio has been limited, and generally in the direction of my target asset allocations. Bitcoin has continued its downward drift, and my recent investment in the A200 ETF has mildly pushed up my Australian shares allocation.

While waiting for distributions I also listened to renowned Nobel Prize winner Robert C Merton discuss his views on retirement planning. The conversation was fascinating, and focused in a way that is relevant for the FI community on the dangers of targeting ‘a number’ as a proxy for the actual objective of a certain income or living standard in retirement. For a slightly different view of similar issues, see this research note (pdf) which points out the potential risks of ‘income’ (including dividend) focused investing, compared to approaches that target a high, and diversified, total market return.

Progress

Progress to:

• objective #1: 90.7% or $136 852 further to reach goal.
• objective #2: 65.6% or $701 852 further to reach goal.

Summary

Looking back a year, at this time I was cautious about further investments in the Australian share market, where now I am adding additional funds every two weeks. My caution remains, but it is instructive that since that time Australian equity markets have advanced healthily and delivered strong dividends.

This is a core part of my reasoning for commencing this record, to understand in retrospect that momentary perceptions can be overtaken by market realities. At this moment, my continuing equity purchases are driven by the need to reach my portfolio objectives without seeking to time the market, so that even as I see a correction as being quite likely over the next year, I am planning to continue in this course.

As distributions are finalised for the past financial year, my focus is on what this will signal about the length and the nature of the journey ahead.