I cannot fix on the hour, or the spot, or the look, or the words, which laid the foundation. It is too long ago. I was in the middle before I knew that I had begun.

Jane Austen, Pride and Prejudice

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

Portfolio goal

My objective is to maintain a portfolio of at least $2,870,000. This should be capable of producing an annual income from total portfolio returns of about $99,000 (in 2024 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.45 per cent.

A secondary focus will be achieving the minimum equity target of $2,300,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$831,824
Vanguard Lifestrategy Growth Fund	$42,936
Vanguard Lifestrategy Balanced Fund	$76,298
Vanguard Diversified Bonds Fund	$88,886
Vanguard Australian Shares ETF (VAS)	$508,369
Vanguard International Shares ETF (VGS)	$699,816
Betashares Australia 200 ETF (A200)	$299,113
Telstra shares (TLS)	$2,036
Insurance Australia Group shares (IAG)	$7,855
NIB Holdings shares (NHF)	$8,784
Gold ETF (GOLD.ASX)	$140,016
Secured physical gold	$22,089
Bitcoin	$1,066,628
Raiz app (Aggressive portfolio)	$22,467
Spaceship Voyager app (Index portfolio)	$3,919
BrickX (P2P rental real estate)	$4,543
Plenti Capital Notes Market Loan	$5,000
Total portfolio value	$3,830,579 (+$396,399)

Asset allocation

Australian shares	30.7%
Global shares	28.5%
Emerging market shares	1.2%
International small companies	1.5%
Total international shares	31.1%
Total shares	61.8% (-18.2%)
Total property securities	0.1% (+0.1%)
Australian bonds	1.9%
International bonds	4.1%
Total bonds	6.0% (+1.0%)
Gold	4.2%
Bitcoin	27.8%
Gold and alternatives	32.1% (+17.1%)

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

Comments

This month there was extremely strong continued forward movement in the financial independence portfolio, with a growth of around 11.5 per cent, or just over $396,000.

This represents the largest monthly expansion in the value of the portfolio on record in percentage terms, and by far the largest absolute dollar value increase.

The past five months have exceeded the sustained growth experienced in the last few months of 2020, and into 2021. The past twelve months have add more than a million dollars to the portfolio.

By contrast, towards the beginning of the journey it took fully ten years – between 2007 to 2017 – to accumulate and grow the portfolio by one million dollars.

A further similar perspective is that the portfolio, without any contributions, grew this month by more than an entire six years of accumulation and growth from mid 2007 to mid 2013.

In this exceptional month, the story of portfolio growth was dominated by a surge in the value of Bitcoin – by approximately 47 per cent.

Global equities continued to deliver growth, with international equities appreciating by 4.0 over the month. Australian shares were comparatively more modest in their overall performance, delivering an increase of around 0.9 per cent.

Bond holdings in the portfolio fell around 0.4 per cent, and once again, small gains in the value of gold holdings (0.7 per cent) offset these losses.

The portfolio continues to sit well above its target, due entirely to the rapid rise in the Bitcoin price.

Removing this for the moment, to look at the more traditionally defined ‘financial asset’ portfolio, reveals a slightly different picture. In this narrower perspective, the more standard financial assets in the portfolio are valued at around $2.76 million, about $105,000 below the overall target.

Moving from accumulation: a temporary bearing, or a new course set?

This month was the first month in around 20 years that I made no deliberate regular investment towards financial independence.

Instead, I set aside some cash for reserves, and towards future major expenses.

Originally, from an impulse or muscle memory, I explored purchasing a further short-term investment in Plenti’s Capital Notes, but it appears there are no new notes on offer at present, and so no opportunity to expand the small exploratory investment made late last year.

The equity component of the portfolio continues to track above its target amount of $2.3 million, though it is possible that the Australian component will fall behind its target allocation of $1.15 million if distributions in the March quarter are significant.

If this happens, I will likely try to reinvest enough to push it back up to its target of $1.15 million, and similarly, if a market fall occurs my current thinking is to draw upon the cash reserves built up from undertaking no further new investments to get the equity portfolio back to target.

This is obviously a question of degree.

If markets were to fall very significantly, as is quite possible, my disposition would be to resume regular reinvestments to secure the original equity portfolio target of $2.3 million, if possible.

Yet, it should be recognised too that this is in some degree a quiet conservative subvariant of, or departure from, the ‘3.45 per cent rule’ I have chosen to adopt.

This is because such rules already account for the risk of temporarily meeting the starting ‘number’ and subsequently experiencing market declines. This is, in fact, part of why the number is so low, or the target is so high, to put it a different way.

Trends in average distributions and expenses

This month the gap between the trailing average of total expenses continued to climb towards average distributions.

The chart below measures distributions against an estimate of total expenses. The total expenses figure is based on actual credit card spending, with the addition of a monthly allowance for other fixed expenses.

As can be seen, average total expenses (red line) continues to rise, as it has since April 2022, now exceeding $7,300 per month.

By contrast, the moving average of distributions (the blue line) continues to fall, a decline that has continued all through 2023, to around $8,000.

The total ‘gap’ between distributions and total expenses is now just $700 per month, compared to around $2,000 per month in early 2023.

Progress

Measure	Progress
Portfolio objective – $2,870,000	133%
Financial portfolio income as % of total average expenses (2013-present) – $88,300	108%
Target equity holding in portfolio – $2,300,000	103%
Financial portfolio income as % of target income – $99,000 pa	96%

Summary

This month saw less attention paid to the portfolio than many months, but resulted in the largest ever increase in its value. The value of the portfolio as a total has increased by around 33 over the past five months alone.

In a sense, this makes it a different type of entity, slightly changed in kind – just as previous large jumps in the size of the portfolio which were ultimately sustained through time did.

Not all of this can be attributed to the compounding impact of equity investments over two decades. Clearly, this month has highlighted that a large part of the portfolio’s recent growth has been driven by an increase in the value of Bitcoin.

This could easily disappear, for example, through the lessening of investor demand as part of reduced inflows in time to Bitcoin ETF products. There is nothing fixed or certain, therefore, about some of the recent ‘headline’ increases in the portfolio.

Sitting behind that, however, there has been sustained increases in the ‘traditional’ financial component of the portfolio in each of the past four months, which itself has increased the value of the portfolio by over $350,000. These gains too could evaporate over time, it is important to remember. Markets do not owe us a smooth journey.

In one respect, time does seem to accelerate in this journey.

Heading towards the end of this month, for the first time a set of dividends and distributions will be received which will not be necessarily reinvested. Depending on the overall reduction in the equity holdings that this causes (a dollar paid out will typically, amidst market noise, reduce the remaining value of equity by an equivalent dollar), the situation may arise where the equity target remains met, and distributions may be exclusively directed towards further building up the target 12 month cash reserve.

Market falls, or large distributions, may mean this circumstance does not arise yet. Still, having been in the mode of accumulation for so long, this feels a novel landscape to even consider encountering.

Psychologically, passing the the equity target last month, and for the moment remaining above it has had more mental impact than passing the portfolio objective as a whole, due to the latter being a function of variations in the price of Bitcoin. Rather, putting in place the target equity ‘bedrock’ of the portfolio has subtly changed my outlook.

As a result of this, day to day work has felt different, and I have found myself approaching it more as a vocation, than a perfunctory obligation.

The fact that my presence in the workplace might quite conceivably not last more than 12 months longer changes the experience. Annual tasks that previously might have stretched out as another obstacle to ‘get through’ are slightly altered, into potentially significant ‘lasts’ to be done well. Inevitably, there is a reflection of the degree to which one’s efforts might have changed some things permanently for the better, as opposed to holding back an adverse tide, or the normal forces of entropy.

There is certainly less pressure, as a result of this, and some aspects of performance probably improve – there is the confidence to undertake tasks the way one’s experience dictates will be most effective, compared to seeking a consensus or an overly cautious ‘permissions-based’ approach.

This change did not arise this month, or last.

It is a process which occurs under the surface, barely discernible in its progress through time. One cannot fix the hour, or the spot – because truly like Jane Austen’s character, I was in the middle of this journey before I knew it had begun.

Disclaimer

The specific portfolio allocation and approach described has been determined solely based on my personal circumstances, objectives, assessments and risk tolerances. It is not personal financial advice, or recommendation to invest in any particular investment product, security or asset, and investors considering these issues should undertake their own detailed research or seek professional advice.