The air is cut away before

And closes from behind

Coleridge, The Rime of the Ancient Mariner, 424-425

This is my sixty-third 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 $2,620,000 through 2022. This should be capable of producing an annual income from total portfolio returns of about $91,600 (in 2022 dollars).

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

A secondary focus through 2022 will be achieving the minimum equity target of $2,100,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$779,608
Vanguard Lifestrategy Growth Fund	$41,861
Vanguard Lifestrategy Balanced Fund	$75,735
Vanguard Diversified Bonds Fund	$95,438
Vanguard Australian Shares ETF (VAS)	$375,102
Vanguard International Shares ETF (VGS)	$285,327
Betashares Australia 200 ETF (A200)	$280,691
Telstra shares (TLS)	$2,110
Insurance Australia Group shares (IAG)	$5,828
NIB Holdings shares (NHF)	$7,836
Gold ETF (GOLD.ASX)	$120,498
Secured physical gold	$19,185
Plenti (P2P lending)	$48
Bitcoin	$588,030
Raiz app (Aggressive portfolio)	$20,107
Spaceship Voyager app (Index portfolio)	$3,323
BrickX (P2P rental real estate)	$5,001
Total portfolio value	$2,705,728 (+$3,920)

Asset allocation

Australian shares	36.9%
Global shares	24.1%
Emerging market shares	1.6%
International small companies	2.0%
Total international shares	27.7%
Total shares	64.6% (-15.4%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.5%
International bonds	5.8%
Total bonds	8.3% (+3.3%)
Gold	5.2%
Bitcoin	21.7%
Gold and alternatives	26.9% (+11.9%)

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

Comments

Global events, and the outbreak of the tragic war in Ukraine, have dominated the news and financial markets this month.

Within this context, movements in the portfolio seem – and indeed are – largely irrelevant.

The principal financial impact of these events has of course been increased volatility across asset prices. Despite this, however, the overall financial independence portfolio remains approximately where it started the month.

The portfolio has increased around $4,000, or 0.1 per cent, breaking the two months of falls since December last year. Once again the portfolio just – however narrowly – sits above the revised portfolio goal of $2.62 million.

The most significant trends within the portfolio were the sharp and continued falls in global equities, with losses of around 5.5 per cent.

These falls were matched, however, with an offsetting rise in the value of Australian shares (2.1 per cent) and gold holdings (4.4 per cent).

Through the month bonds and fixed interest holdings continued their decline, with further losses of nearly 2.0 per cent. This leaves the overall bond portfolio at its lowest dollar level since January 2016, and around 20 per cent below – in nominal dollar terms – the level reached in early 2018.

As this month progessed geopolitical and macro-economic uncertainties built.

The invasion of Ukraine is likely to spark continued instability over coming months as financial sanctions, commodity market impacts and the attempt to remove the Russian central bank from access to capital play out. Remarkably, this conflict has also seen the first example of a nation state under attack reaching out on social media for donations in Bitcoin.

While other conflicts can provide hints of how markets interact with historical events, no analogy or suggested precedent is ever perfectly determinative. My current expectation is for a difficult year for equities, even though this may not be what typically occurs in some arguably similar cases.

What is clear is that the financial impacts of these events will interact with the previous, now mundane seeming, macroeconomic themes for this year – the timing of interest rate normalisation, supply chain issues, the willingness and capacity of monetary policy authorities to respond to emergent inflationary pressures, and debt markets under some strains.

This month the strong falls in global shares has meant the allocation of new investments to Vanguard’s global shares (VGS) exchange fund.

Trends in average distributions and expenses

Average distributions remain well above average total expenses.

On a three-year moving average basis, however, the past month represented a potentially significant inflection point.

Previously, both total and credit card expenses continue to fall, increasingly reflecting the lower patterns of expenditure during phases of lockdowns and other restrictions. As this happened, average distributions continue to rise.

This month this changed, and the lines started to converge slightly.

The blue line of distributions continues to track at around $7,400 per month. The total expenses (red) line, in contrast to its previous trend, rose to around $6,200.

This change is likely the result of two forces.

The first is the rolling through the averaging sample of a set of unusually high distributions over some previous periods. The second is a gradual reawakening of spending levels from period of lockdown, or other restrictions. The longer-term question remains, as they track closer: how will their natural levels resolve themselves?

Progress

Measure	Portfolio	All Assets
Portfolio objective – $2,620,000 (or $91,600 pa)	103%	133%
Total average expenses (2013-present) – $84,500 pa	112%	144%
Target equity holding in portfolio – $2,100,000	83%	N/A

Summary

This month the portfolio total has ended approximately where it began, even while its component parts behaved differently through the shocks and return of risk aversion to some equity markets.

This leaves the distance to travel approximately the same, and even the critical overall asset allocation at around the same levels.

Other financial pieces of the journey continue to move together, however, and surprise.

An example of this was a recent large quarterly pay-as-you-go taxation liability. Past portfolio distributions have triggered this system being put in place, meaning that I need to plan to set aside substantial portions of distributions regularly to meet this cost.

The higher than usual distributions through the 2021-22 financial year has led to a reassessment of the level of these quarterly payments, with the liabilities effectively doubling. Through time, as distributions normalise to closer to the median expected yearly distributions (of around $68,000) the quarterly assessed amounts are likely to also fall.

For the moment, however, this can be taken as a welcome augury of the progress made in portfolio terms. Through time it may mean some adjustment to amounts set aside for tax and cash reserves.

This month financial sites and commentaries are full of studies of the effects of war and crises on securities. An understandable impulse to rush to define and explain.

Yet when uncertainty is high, there must be caution in the face of too ready categorisation. Is the set, the “sample” of crises collected, relevant or representative? And what is the right crisis, the right events, to compare the present to?

Here we find ourselves guessing not only into a fogs of uncertainties, but also into the imponderable depths of how past market participants perceived their own then hidden futures.

And so the metaphorical albatross wheels above, and as we watch, the air is cut away before us, even as it closes darkness in behind us.