Month: June 2021

Lines of Navigation – A History of Portfolio Change

Posted on by The FI Explorer
Map of lines of navigation

No man ever steps into the same river twice.

Heraclitus

The achievement of financial independence is often, correctly, framed as getting a few key principles and habits in place, and then repeating these consistently through time. This history of portfolio change steps beyond this valuable and instructive perspective.

This is because an exclusive focus on consistency of action conceals another fact of the journey – that constant principles and habits do not avoid change through the experience. In fact, change has been a continuous marker through the financial independence journey so far.

As the portfolio and its characteristics change, different experiences, issues and challenges emerge.

This post examines some of the major areas of change. It particularly focuses on changes since the commencement of this record in 2017, which covers the second half of the journey.

While each financial independence journey and portfolio is different, this is intended to highlight a few of the key changes I have experienced in building and managing the portfolio, for any interest and insights it offers others.

History of change in the composition of the portfolio

The most significant change – aside from the growth in the overall portfolio level – has been to the composition of the portfolio. That is, balance of actual investments held in different investment vehicles.

For most of the early part of the journey, the set of Vanguard retail funds (mainly the High Growth, Growth, Balanced funds) formed the core of the portfolio. In 2007, for example, Vanguard retail funds made up no less than 95 per cent of the total portfolio.

As the recorded journey started in January 2017, this legacy was still apparent. At this time Vanguard funds made up around 80 per cent of the portfolio, as can be seen below.

Chart of Composition of Portfolio 2017

Some small gold, Bitcoin, and peer-to-peer lending had been added to the portfolio by 2017. Yet these were minor elements compared to the legacy retail funds that also received regular new investments.

The equivalent chart of the composition of the portfolio today is below.

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Monthly Portfolio Update – May 2021

Posted on by The FI Explorer

Ithaka gave you the marvellous journey.

Without her you wouldn’t have set out.

She has nothing left to give you now.

Constantine P. Cavafy, Ithaka

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

Portfolio goal

My objective is to reach a portfolio of $2,585,000 by 31 July 2022. This would produce a real annual income of about $90,500 (in 2021 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.5 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund$839,560
Vanguard Lifestrategy Growth Fund$45,574
Vanguard Lifestrategy Balanced Fund$82,491
Vanguard Diversified Bonds Fund$100,344
Vanguard Australian Shares ETF (VAS)$321,955
Vanguard International Shares ETF (VGS)$167,542
Betashares Australia 200 ETF (A200)$282,670
Telstra shares (TLS)$1,876
Insurance Australia Group shares (IAG)$6,360
NIB Holdings shares (NHF)$7,548
Gold ETF (GOLD.ASX)$112,037
Secured physical gold$17,913
Plenti (P2P lending)$3,501
Bitcoin$514,720
Raiz app (Aggressive portfolio)$20,647
Spaceship Voyager app (Index portfolio)$3,293
BrickX (P2P rental real estate)$4,546
Total portfolio value$2,532,577
(-$210,597)

Asset allocation

Australian shares38.4%
Global shares22.2%
Emerging market shares1.8%
International small companies2.3%
Total international shares26.3%
Total shares64.7% (-10.3%)
Total property securities0.2% (+0.2%)
Australian bonds3.0%
International bonds6.6%
Total bonds9.6% (-5.4%)
Gold5.1%
Bitcoin20.3%
Gold and alternatives25.5% (+15.5%)

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

Pie Chart Asset Allocation

Comments

The portfolio has fallen by over $210,000 this month, experiencing the first negative result in seven months.

This was caused by the value of Bitcoin holdings falling by over a third on a monthly basis, and even further from their highest levels in mid-April.

This dramatic fall outweighed positive movement in other elements of the portfolio. The result of this is that the portfolio has reduced by 7.7 per cent, and moved to just under the portfolio target objective. Due to the rapid way the target was achieved, this reversal was always a possibility.

Monthly Portfolio Value

Excluding the price volatility of Bitcoin, the rest of the portfolio actually grew by around $51,000. This took the total equity holdings to 84 per cent of the final equity target, up two per cent over the month.

The value of Australian equities grew by around 2.7 per cent, and the value of international shares increased by around 1.7 per cent over the month.

Continue reading “Monthly Portfolio Update – May 2021”