Gold is money. Everything else is credit.
J. P. Morgan
This is my ninety-eighth 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 $3,000,000. This should be capable of producing an annual income from total portfolio returns of about $103,500 (in 2025 dollars).
This portfolio objective is based on an assumed safe withdrawal rate of 3.45 per cent.
A secondary focus will be maintaining the minimum equity target of $2,400,000.
Portfolio summary
| Vanguard Lifestrategy High Growth Fund | $912,391 |
| Vanguard Lifestrategy Growth Fund | $46,447 |
| Vanguard Lifestrategy Balanced Fund | $81,122 |
| Vanguard Diversified Bonds Fund | $92,183 |
| Vanguard Australian Shares ETF (VAS) | $547,767 |
| Vanguard International Shares ETF (VGS) | $814,942 |
| Betashares Australia 200 ETF (A200) | $317,233 |
| Telstra shares (TLS) | $2,201 |
| Insurance Australia Group shares (IAG) | $10,009 |
| NIB Holdings shares (NHF) | $8,034 |
| Gold ETF (GOLD.ASX) | $205,966 |
| Secured physical gold | $32,412 |
| Bitcoin | $1,437,541 |
| Raiz app (Aggressive portfolio) | $26,147 |
| Spaceship Voyager app (Index portfolio) | $4,495 |
| BrickX (P2P rental real estate) | $4,686 |
| Plenti Capital Note and Flex Market | $89,048 |
| Total portfolio value | $4,632,624 (-$489,042) |
Asset allocation
| Australian shares | 27.4% |
| Global shares | 26.8% |
| Emerging market shares | 1.1% |
| International small companies | 1.4% |
| Total international shares | 29.3% |
| Total shares | 56.6% (-23.4%) |
| Total property securities | 0.1% (+0.1%) |
| Australian bonds | 3.5% |
| International bonds | 3.6% |
| Total bonds | 7.1% (+2.1%) |
| Gold | 5.1% |
| Bitcoin | 31.0% |
| Gold and alternatives | 36.2% (+21.2%) |
Presented visually, the pie chart below is a high-level view of the current asset allocation of the portfolio.
Comments
Over the course of this month the portfolio experienced losses of around $490,000, contracting by 9.5 per cent in headline terms.
This movement is the single largest monthly loss ever encountered on the journey. It comes, however, after a period of sustained growth, which expanded the portfolio over $1.2 million over the prior five months.
A major part of the movement this month is attributable to a decline in the price of Bitcoin, which fell approximately 23 per cent from the end of last month.
This is significant in absolute dollar terms, due to past growth the value of the holdings, but quite unremarkable in percentage terms in its record in the portfolio. As an example, monthly losses of the comparable or greater size occur have occurred five times in the past five years.
Equity markets also experienced hesitancy and some pullbacks amidst geopolitical uncertainty, continuing inflation concerns, and market valuations appearing high.
This resulted in falls of around 4 per cent in Australian equities, and slightly smaller losses – of 2.3 per -cent in the value of global equity holdings.
By contrast, and as will be discussed in detail below, gold prices continued to increase, leading to gains of around 2.5 per cent on gold assets.
Through the month, the bond portfolio grew slightly, appreciating 1 per cent.
Gold in the portfolio: All that glitters?
Gold has been part of the financial independence portfolio for around 16 years, since initial purchases of a gold ETF in May 2009, as financial markets staggered and began recovering from the Global Financial Crisis.
In the portfolio it plays the role of a diversified, non-correlated asset, as well as a hedge against disorderly markets, currency devaluations, and geopolitical risks.
The recent market performance of gold has somewhat belied its intended role as a niche, low profile, steady portfolio component with the potential to lightly moderate negative movements in an equity dominated portfolio (pdf).
According to the portfolio plan, no prospect of a real return on gold is assumed, a position informed by the unspectacular returns performance of gold compared to other assets over multi-decade periods.
The intended role of gold in my financial independence portfolio, together with Bitcoin, was briefly reviewed around five years ago here. When that was written, gold represented about 6.4 per cent of the portfolio. It current represents 5.1 per cent.
This update looks more closely at the record of gold in the portfolio, asking the question: what, if anything, does the performance of gold over the past few years say about its role?
Continue reading “Monthly Portfolio Update – February 2025”