When we no longer know what to do,
we have come to our real work and when
we no longer know which way to go,
we have begun our real journey.
Wendell Berry
This is my ninety-sixth 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 | $910,869 |
| Vanguard Lifestrategy Growth Fund | $46,326 |
| Vanguard Lifestrategy Balanced Fund | $80,874 |
| Vanguard Diversified Bonds Fund | $91,446 |
| Vanguard Australian Shares ETF (VAS) | $566,130 |
| Vanguard International Shares ETF (VGS) | $787,977 |
| Betashares Australia 200 ETF (A200) | $328,086 |
| Telstra shares (TLS) | $2,100 |
| Insurance Australia Group shares (IAG) | $10,756 |
| NIB Holdings shares (NHF) | $6,816 |
| Gold ETF (GOLD.ASX) | $181,423 |
| Secured physical gold | $28,784 |
| Bitcoin | $1,650,745 |
| Raiz app (Aggressive portfolio) | $25,318 |
| Spaceship Voyager app (Index portfolio) | $4,275 |
| BrickX (P2P rental real estate) | $4,711 |
| Plenti Capital Notes Market Loan | $89,000 |
| Total portfolio value | $4,815,636 (+$507,442) |
Asset allocation
| Australian shares | 26.9% |
| Global shares | 25.2% |
| Emerging market shares | 1.0% |
| International small companies | 1.3% |
| Total international shares | 27.6% |
| Total shares | 54.4% (-25.6%) |
| Total property securities | 0.1% (+0.1%) |
| Australian bonds | 3.4% |
| International bonds | 3.4% |
| Total bonds | 6.8% (+1.8%) |
| Gold | 4.4% |
| Bitcoin | 34.3% |
| Gold and alternatives | 38.6% (+23.6%) |
Presented visually, the pie chart below is a high-level view of the current asset allocation of the portfolio.
Comments
This month the portfolio has seen outsized growth, of $507,000 or 11.8 per cent, due to substantial increases in the price of Bitcoin. This is the largest monthly growth in both absolute terms and in percentage terms since the record of this journey began at the close of 2016.
Even in the relatively earlier phases of the journey, where regular contributions were being added to a smaller absolute portfolio, it was unusual for the portfolio to shift in percentage terms by as much as experienced this month.
An expansion of this kind can easily be reversed in the future, as the past volatility of Bitcoin attests. For the moment, however, it has catapulted the total portfolio to an unanticipated level, at least temporarily changing its nature. Over the past year, for example, the portfolio has grown by over 50 per cent.
Looking only at the traditional financial assets, the monthly expansion in this value is significant, but not unprecedented across the journey, with these appreciating around $80,000 in net terms.
Australian equity holdings returned around 3.7 per cent over the month, with international equites returning around 4.0 per cent. Bond holdings also increased in value by around 1.3 per cent.
By contrast the value of gold securities fell by around 4.3 per cent, retreating from previous gains.
Bitcoin grew in value by around 35 per cent, building on already strong gains since August. This means that Bitcoin is at the highest proportion of the portfolio it has ever attained, representing over a third of portfolio assets and the single largest asset class.
The graph below provides a simple visualisation of the relative performance of the full portfolio, including Bitcoin, and the more steady underlying performance of the traditional financial elements of the portfolio.
This shows that the portfolio is in the second major phase of Bitcoin materially adding to the overall portfolio level, with the first taking place across 2021 to early 2022.
Trends in average distributions and expenses
This month the gap that has emerged since June between total expenses and the moving average of distributions continued to increase.
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 notional monthly allowance for other fixed expenses.
This month average total expenses (red line) continued to rise. These expenses currently are around $7,900 per month.
The three year moving average of distributions (the blue line) has continued its slight recovery in the past month, to reach around $7,200.
This leaves the deficit between expenses and average distributions at around $700.
Progress
| Measure | Progress |
| Portfolio objective – $2,870,000 | 168% |
| Financial portfolio income as % of total average expenses (2013-present) – $88,900 | 123% |
| Target equity holding in portfolio – $2,300,000 | 114% |
| Financial portfolio income as % of target income – $99,000 pa | 110% |
Summary
This month saw a decisive step taken on the FI journey, completely outside of the portfolio – with discussions with my employer around stepping back into a specialised part-time role which I have been given the freedom to design.
This involved discussions with senior management and Board, and has resulted in my preferred outcome of the devolving of broader management responsibilities, while continuing to have the autonomy to work on projects of greater intellectual interest, and core financial value to the organisation.
So over the next couple of months I will be finalising the shape of this new reality, and moving into it.
Going into the discussions knowing that my best alternative to an agreed outcome was simply my walking away radically reduced the anxiety that might be expected to surround this decision. Instead, this perspective ensured my primary focus in raising, explaining, and talking about my decision was on ensuring the reasons for the decision were clear, and not able to be misinterpreted.
An original purpose of this record was to test the idea that financial independence could be achieved in practice – without some invisible trick, or neglected factor, actually rendering it impossible however near it may appear to draw.
This month is a definitive marker on that journey, and partial proof that it can be.
Perhaps the full proof will be offered after I step away from this more limited role, which notionally runs on a year or two, with potential extensions.
So my plan from here is to experiment with a cut down essentially part-time specialist role, and see how I use the extra 2-3 days a week that it should free up, before stepping back entirely when it feels like the right time. All of this is hostage to the arrangements actually working in practice, and it would be foolish to be confident about any human-made plan.
From here, the map gets fainter, even as unprecedented things happen in the background to the portfolio. It will rise and fall.
What seems more important at this stage is the passing of this marker, and the beginning of another sort of journey. One also into the unknown, in a more uncertain direction, with no sure guarantee of success. One not so reliant on the certainties of mathematics, but perhaps with hidden compounding elements all the same.
Note for readers
Over the last few months, there has been a noticeable degradation in the useability of my standard blogging interface. As an alternative, and because I am not interested in becoming a coder, plug-in or website management expert, I have created a rough and ready backup Substack and imported past posts. The formatting of past posts may not be as tidy as here, but should the blog ever seem to ‘disappear’ or cease, it will likely just be a signal that I have switched entirely to Substack and started posting there.
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.
dude, i appreciated your “words of wisdom” this month – thank you
Thank you spiderman! With power comes responsibility…. 😉
How are you working through the dilemma of increasing risk in your portfolio? As Bitcoin grows it is increasing risk as a more volatile asset. The more and faster it grows the more that risk increases.
Adding to portfolio can no longer act as a rebalancing tool, literally a drop in the ocean now (great problem to have).
You set up % split targets for the portfolio allocation but they are way out now – do they need to be revised? If you still believe they are right then you should rebalancewhenbthis far out? but you then face tax implications…
If you don’t rebalance, then are you just accepting an expected pull back in Bitcoin to do the rebalancing? But then you losing even more than you would have through tax…
Of course I understand that if you don’t know what to do then doing nothing is probably best.
Thanks for reading, and good question Adam.
There’s probably a few lenses I apply to this. One is that I have never viewed Bitcoin as an ordinary component of the portfolio, to be trimmed and bought to maintain the asset allocation. The cost, tax, and liquidity needs of that approach are problematic.
This is even more true due to its volatility in its early year. Note, however, that Bitcoin’s overall volatility as an ‘asset class’ has generally been declining as its value has increased. There is some good work on that from Fidelity at the fingertips of any Googler.
There is definitely something in what you say that the choice to not sell is partly because there is a good chance future price falls could reduce the argument for rebalancing.
The other observation I would make is that volatility is a slightly different concept when the traditional assets of the portfolio have already met the portfolio target set. In this case, volatility, gains and losses around this base simply has less impact on my ability to execute my goals.
This is probably linked as well to my own view of Bitcoin, which is in part as a probabilistic ‘option’ on a future state of the world that is more disordered than I might otherwise expect. In that case, the volatility is likely upwards. If that state does not play out, I am content with the rest of the portfolio hopefully performing to historical norms.
I discuss this same issue in the February 2021 portfolio report, where I mused about a potential ‘reverse’ dollar cost average approach, diversifying across time in that case. That entry also lays out some stark potential foregone gains and early exit scenarios that would have accompanied seemingly conventional asset allocation ‘rules’ being applied.
At its heart, to me, Bitcoin has been an interesting and lucky experiment.
This is a great example of the benefit of bitcoin to a portfolio and the wisdom of the hodl strategy.
Thanks for reading Hodl – when I began this journey I expected this record to be largely a story of different equity funds and strategies tried and refined. When I acquired Bitcoin it was equivalent to a 0.5 per cent allocation, just a learning experiment which might or might not work out, with low regrets.
Congratulations on taking what is, while low-risk from a financial point of view, still a huge step towards change! The opportunity to design that change is powerful. Sharing my own experience, I actually felt a bit lost for the first few months of part-time work, and questioned whether I’d made the right choice. I just kept feeling like I should be at work, which was, quite frankly, a shock. I like my job but I’m certainly not over-invested. Thankfully that feeling passed and I’d really struggle to go back to full-time. Life really can move at a slower pace and be enjoyable. Looking forward to hearing how it works for you.
Thanks Mrs ETT for the all the loyal support, inspiration and friendship along the journey!
That’s excellent wisdom to bear in mind around your first few months. I am anticipating something a little similar, and in a way, have felt it a little over the last few months as I sensed this moment was coming. Will keep you updated!
Great update as usual. Always fascinating to see your progress. That’s great that you are looking to wind down. You have more than enough acquired to live life on your own terms should that be what you want. The numbers are numbers, what purpose would they have if they do not inspire you to explore a road less traveled and life the life you want if money was not a motivator.
Thanks so much for stopping by, reading and commenting!
Yes, precisely, the numbers are abstract unless they lead us to make different choices.
Thanks again for following along!