But in the life of one man,

Never the same time returns.

T. S. Eliot, Murder in the Cathedral

This is my ninety-fifth 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	$885,724
Vanguard Lifestrategy Growth Fund	$45,255
Vanguard Lifestrategy Balanced Fund	$79,386
Vanguard Diversified Bonds Fund	$90,816
Vanguard Australian Shares ETF (VAS)	$548,092
Vanguard International Shares ETF (VGS)	$758,126
Betashares Australia 200 ETF (A200)	$317,209
Telstra shares (TLS)	$2,036
Insurance Australia Group shares (IAG)	$9,502
NIB Holdings shares (NHF)	$6,932
Gold ETF (GOLD.ASX)	$189,928
Secured physical gold	$29,768
Bitcoin	$1,222,561
Raiz app (Aggressive portfolio)	$24,984
Spaceship Voyager app (Index portfolio)	$4,136
BrickX (P2P rental real estate)	$4,709
Plenti Capital Notes Market Loan	$89,000
Total portfolio value	$4,308,194 (+$226,878)

Asset allocation

Australian shares	29.1%
Global shares	27.2%
Emerging market shares	1.1%
International small companies	1.4%
Total international shares	29.8%
Total shares	58.9% (-21.1%)
Total property securities	0.1% (+0.1%)
Australian bonds	3.7%
International bonds	3.8%
Total bonds	7.5% (+2.5%)
Gold	5.1%
Bitcoin	28.4%
Gold and alternatives	33.5% (+18.5%)

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

Comments

This month the portfolio grew substantially, to achieve its fourth highest monthly expansion. This took the portfolio to a new high of $4.3 million, with an increase of over $226,000.

This has resulted in the largest expansion ever measured in the portfolio over the previous 12 months, with the portfolio growing around $1.3 million during this period.

Australian equities encountered small capital losses this month, of around 2.3 per cent. This was offset by growth of around 4.7 per cent in global equities, leaving the equity component of the portfolio at a new high. Bonds also fell slightly as longer term US bond rates increased, resulting in a fall of around 1.9 per cent.

Bitcoin performed strongly during the month, with price growth of around 18 per cent. This is in part may have been driven by potential positive indications of treatment of tax gains in the US, depending on the election outcome.

This month third quarter distributions were finalised and paid out.

These came in about $2,000 lower than expected, at around $15,600. Around 40 per cent of this has been set aside to meet future portfolio tax liabilities, with the remainder forming contributions to a contingent cash reserve, outside of the listed portfolio.

Trends in average distributions and expenses

This month has seen continuation of the recent trend of a widening gap between total expenses and the moving average of 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 notional monthly allowance for other fixed expenses.

This month average total expenses (red line) continued to rise. These expenses currently are around $7,800 per month.

The three year moving average of distributions (the blue line) has continued it slight recovery in the past month. It has risen, albeit marginally, to around $7,170.

The interaction of these two movements has led to a widening of the deficit between distributions and total expenses – to about $630 per month, compared to a surplus of around $2,000 per month in early 2023.

As noted previously, while paid out distributions may not be meeting current total expenses, when looked in total at over the period since 2013, the sum of all distributions has met over 99 per cent of all credit card expenses in that same period.

Progress

Measure	Progress
Portfolio objective – $2,870,000	150%
Financial portfolio income as % of total average expenses (2013-present) – $88,900	120%
Target equity holding in portfolio – $2,300,000	110%
Financial portfolio income as % of target income – $99,000 pa	108%

Summary

This month has been a strong one of growth in the portfolio, even as some markets paused and considered the impacts of geopolitical events.

The major uncertainty around when the portfolio might be called upon to start providing day-to-day income remains, but the details of that are, properly, not the focus of this record. That future will play out in a way that is only partially within my locus of control. Similarly, asset markets will evolve in a way that is unpredictable.

The continued strong performance of the gold holdings within the portfolio even since last month demonstrates this effect. When investing large amounts in these assets, mostly across 2009 to 2015, my expectations were not that they might, 10 or 15 years later, turn out to be one of the top performers in the portfolio.

Instead, these investments were entered into in expectation that during periods of market pressures and distress, they might have a tendency to partially offset losses in other areas of the portfolio. That is, to act as a kind of imperfect ‘insurance’ like element of the overall portfolio.

The positive performance that has transpired does not fundamentally change my expectations.

To observe that ‘run’ in results and conclude by crude extrapolation that it will continue is exactly the wrong lesson to take from the unexpected results of historical performance. Rather, in my view, the appropriate response is to be sceptical of any deterministic views on what this means, and to ask whether we know as much – as confidently – as we think we do. A possibility is that there is some decisive ‘regime change’ underway that upends traditional patterns of expected and realised asset returns. But that remains, ultimately, unknowable in prospect.

Observing such anomalous outcomes should also be cause to at least consider whether over relevant horizons the future will be different from the past in equity markets also.

There is the possibility that a combination of highly indebted developed country economies, higher geopolitical uncertainty, and persistent inflationary pressures will result in a pattern of realised returns that resemble the decades of the 1960s and 1970s, rather than more recent decades.

It is also true that equity markets can be entirely uncorrelated to macroeconomic or geopolitical risks that investors spend time worrying about, to little end.

At this stage of the journey my view remains that capturing the equity ‘risk premium’ in as continuous and efficient way as possible is the most probable method to protect and potentially expand the real purchasing power of current assets and future income. Yet entire cohorts of unlucky investors, in particular those investing at the commencement of the 1970s, might equally have taken that view, with seeming ample historical justification.

In these circumstances diversification through exposure to different asset classes is one of the few – and limited – defences that investors have.

Diversification allows the chance for unexpected futures to play out, and not result in the automatic ruin that narrow, deterministic, or leveraged ‘bets’ on future states of the world risk.

Yet beyond asset diversification, perhaps what is also needed is a form of intellectual diversification, a willingness to step outside, from time to time, the comfort of ‘known truths’ on expected asset returns and the correlations between markets.

At times like this, the other useful mental tool to apply is to recommit to viewing the portfolio as it is designed: as a whole, at the top line, not merely as the sum of its component parts.

As an example, a relatively small movement in global equity markets would result in a loss of capital equal to the entire sum currently invested in Plenti Capital Notes – a higher risk product exposed to the credit worthiness of the underlying loans with safe return of capital that is not assured. The loss of the entire Plenti investment, as a hypothetical, would, be a loss of $89,000 and the offered interest.

Should one feel inherently feels different about this than a small percentage decline in equity holdings? It would be a learning, a realisation of a known and assumed risk, but ultimately, it would resolve itself a dollar impact on the portfolio in the same way.

If it did, that outcome would also itself, only represent the realisation of one out of a wide set of plausible outcomes. And in judging what one might do in those circumstances and what lessons should be drawn from it for the future, one would also need to recall T. S. Eliot’s warning that in life never the same time returns.

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.