Month: October 2020

Outward Bound – Trends in Taxable Investment Income

Posted on by The FI Explorer

But who wants to be foretold the weather? It is bad enough when it comes, without our having the misery of knowing about it beforehand.

Jerome K Jerome, Three Men in a Boat (1889)

Tracking taxable investment income produced by the financial independence portfolio provides a useful external benchmark of progress on the journey.

So far, reviewing past dividends and distributions has been the primary way of tracking progress in portfolio income towards the financial independence goal.

Yet having this additional externally validated estimate of what my taxable income would be if I stopped working tomorrow is valuable. It helps illustrate the underlying income generating potential of the portfolio and also allows for broader trends over time to be observed.

Taxable investment income remains stable for now

Taxable investment income for financial year 2019-20 totalled around $42,500. This is a level which is close to the record of the past four years.

Figure 1 below sets out the fuller record over the past decade. It is based on the total of taxable income from the tax assessment categories of partnerships and trusts, foreign source income, franking credits and ‘other income’. That is, it takes in the totals of Items 13, 20 and 24 on the 2020 tax return, whilst not including capital gains.

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Monthly Portfolio Update – September 2020

Posted on by The FI Explorer

When the rest of the world is mad we must imitate them in some measure.

John Martin, 1720

This is my forty-sixth monthly portfolio update. I complete this regular update to check progress against my goal.

Portfolio goal

My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars).

This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund$724,599
Vanguard Lifestrategy Growth Fund$41,459
Vanguard Lifestrategy Balanced Fund$78,259
Vanguard Diversified Bonds Fund$111,658
Vanguard Australian Shares ETF (VAS)$224,190
Vanguard International Shares ETF (VGS)$63,441
Betashares Australia 200 ETF (A200)$228,870
Telstra shares (TLS)$1,481
Insurance Australia Group shares (IAG)$5,549
NIB Holdings shares (NHF)$4,896
Gold ETF (GOLD.ASX)$120,877
Secured physical gold$19,452
Ratesetter (P2P lending)$8,326
Bitcoin$168,470
Raiz app (Aggressive portfolio)$16,979
Spaceship Voyager app (Index portfolio)$2,772
BrickX (P2P rental real estate)$4,459
Total portfolio value$1,825,737
(-$23,159)

Asset allocation

Australian shares41.7%
Global shares22.6%
Emerging market shares2.2%
International small companies2.8%
Total international shares27.6%
Total shares69.4% (-5.6%)
Total property securities0.2% (+0.2%)
Australian bonds4.4%
International bonds9.0%
Total bonds13.4% (-1.6%)
Gold7.7%
Bitcoin9.2%
Gold and alternatives16.9% (+6.9%)

Presented visually, below is a high-level view of the current asset allocation of the portfolio.

Comments

The portfolio has suffered a modest decline over the past month and fallen in value by $23,000. This has broken a five month period of overall recovery and growth, with the portfolio experiencing a contraction of around 1.3 per cent.

These falls have occurred simultaneously across major components of the portfolio, including Australian and international shares, gold and Bitcoin. This is a relatively rare occurrence.

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