Monthly Portfolio Update – September 2021

Posted on October 1, 2021March 24, 2022 by The FI Explorer

…it is sweet to see the sea from the land when you don’t have to sail any longer
Archippus

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

Portfolio goal

My objective is to reach a portfolio of $2,585,000 by 31 July 2022. This would produce a real annual income of about $90,500 (in 2021 dollars).

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

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$807,844
Vanguard Lifestrategy Growth Fund	$43,486
Vanguard Lifestrategy Balanced Fund	$78,870
Vanguard Diversified Bonds Fund	$99,943
Vanguard Australian Shares ETF (VAS)	$363,435
Vanguard International Shares ETF (VGS)	$233,181
Betashares Australia 200 ETF (A200)	$291,171
Telstra shares (TLS)	$2,094
Insurance Australia Group shares (IAG)	$6,233
NIB Holdings shares (NHF)	$8,364
Gold ETF (GOLD.ASX)	$108,834
Secured physical gold	$17,413
Plenti (P2P lending)	$1,145
Bitcoin	$669,910
Raiz app (Aggressive portfolio)	$20,705
Spaceship Voyager app (Index portfolio)	$3,442
BrickX (P2P rental real estate)	$5,033
Total portfolio value	$2,760,803 (-$84,855)

Asset allocation

*Australian shares*	*36.6%*
Global shares	22.2%
Emerging market shares	1.6%
International small companies	2.0%
Total international shares	25.8%
Total shares	62.4% (-12.6%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.6%
International bonds	5.9%
Total bonds	8.5% (-6.5%)
Gold	4.6%
Bitcoin	24.3%
Gold and alternatives	28.8% (+18.8%)

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

Comments

The portfolio fell in value by around $85,000 this month, declining by just over 3.0 per cent.

Despite this, the portfolio remains for the moment above the formal portfolio goal, as it has since May. Taking a slightly longer view, the portfolio is still over 50 per cent larger today, than a year ago.

The declines this month were broad-based and across almost all of the portfolio.

The value of Bitcoin fell by around 9 per cent, while remaining firmly higher than at the start of the year.

Australian equities have fallen around 2 per cent, and international equities also fell by 1.8 per cent. Partly as a result, the overall equity portfolio has declined by nearly $20,000. This leaves the equity portfolio at around 89 per cent of the amount targeted in the plan.

Amidst some evidence of rising long-term bond rates, the value of gold holdings also fell by 3.3 per cent.

Finally, adding to the negative picture, the value of fixed interest holdings in the Vanguard Diversified Bonds fund fell by 1.3 per cent. Consequently they are now at their lowest dollar level since the last major investments in that fund were made in 2014.

Line of Position – Superannuation and the Financial Independence Portfolio

Posted on September 14, 2021September 14, 2021 by The FI Explorer

A ship should not ride on a single anchor, nor life on a single hope.
Epictetus, Golden Sayings, Fragment xvi

Setting out: looking beyond the horizon

In sea navigation, lines of position allow the fixing of the true position of a ship by helping to account for drift from wind or currents.

Each month this record regularly assesses the position reached with a relatively narrow focus on changes and trends affecting the financial independence portfolio. This is consistent with the intention of documenting a journey towards financial independence, and retirement well before the traditional age.

The primary focus on financial independence has meant that until the beginning of 2019, I did not regularly record the impact of superannuation on the achievement of the portfolio’s objectives.

From that time, I recorded a simple ‘All Assets’ measure of progress, which effectively counted the impact of superannuation on the measures. Typically, super has recently represented around 30 per cent of additional ‘buffer’ on progress against the goals set.

In this longer post, the aim is to look beyond the FI portfolio which is reported on, and provide more detail on what the whole financial asset picture looks like – taking into account both superannuation and the FI portfolio.

Measuring the changing position across the journey so far

The goal and plan has always been to target financial independence through my private investment portfolio alone, with superannuation perhaps providing an additional margin of safety.

Reflecting this, superannuation – the approximate Australian equivalent to 401K accounts in the US – has been a quietly evolving part of this financial journey in the background, since the earliest phases.

Over time, I have generally sought to contribute beyond the minimum guarantee amounts, making voluntary contributions with the approximate target of reaching an average 15 per cent of earnings in overall contributions.

This has resulted in a steady growth in the superannuation across time, as can be seen in Figure 1 below.

Clearly evident above are the impact of some market declines – in the second half of 2018, and the most recent March 2020 market falls. Yet also as apparent is the overall trend of steadily compounding returns across time.

Monthly Portfolio Update – August 2021

Posted on September 1, 2021March 24, 2022 by The FI Explorer

Nothing is so simple that at first sight it is not rather difficult to believe.
Lucretius

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

Portfolio goal

My objective is to reach a portfolio of $2,585,000 by 31 July 2022. This would produce a real annual income of about $90,500 (in 2021 dollars).

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

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$827,990
Vanguard Lifestrategy Growth Fund	$44,452
Vanguard Lifestrategy Balanced Fund	$80,423
Vanguard Diversified Bonds Fund	$101,260
Vanguard Australian Shares ETF (VAS)	$360,383
Vanguard International Shares ETF (VGS)	$227,040
Betashares Australia 200 ETF (A200)	$297,832
Telstra shares (TLS)	$2,046
Insurance Australia Group shares (IAG)	$6,639
NIB Holdings shares (NHF)	$8,124
Gold ETF (GOLD.ASX)	$112,377
Secured physical gold	$17,967
Plenti (P2P lending)	$1,479
Bitcoin	$727,780
Raiz app (Aggressive portfolio)	$21,380
Spaceship Voyager app (Index portfolio)	$3,502
BrickX (P2P rental real estate)	$4,982
Total portfolio value	$2,845,658 (+$162,232)

Asset allocation

*Australian shares*	*35.9%*
Global shares	21.7%
Emerging market shares	1.6%
International small companies	2.0%
Total international shares	25.3%
Total shares	61.2% (-13.8%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.6%
International bonds	5.8%
Total bonds	8.5% (-6.5%)
Gold	4.6%
Bitcoin	25.6%
Gold and alternatives	30.2% (+20.2%)

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

Comments

This month the financial independence portfolio has surged to its highest level on the journey, growing 5.7 per cent or $162,000.

This results in the portfolio reaching $2.84 million, overtaking short-lived peaks in March and April.

This is nearly double the growth of the last month, and clearly came from two main sources.

First, the value of Bitcoin holdings increased by around 14 per cent, or nearly $100,000. The second area of expansion was equities, where international shares grew by 3.6 per cent. Similarly, Australian equities increased in value by around 2.5 per cent, or around $23,000.

In contrast to this, both gold and bond holdings were largely stable.

Strong equity markets have also taken the equity component of the portfolio to its highest ever level, meaning that total equity holdings are at 90 per cent of the intended target allocation (estimated as $1.9 million, or around 75 per cent of the total portfolio goal).

Applying my longer-term asset allocation glide-path towards an equal balance between global and Australian shares, this month new investments have been exclusively directed to the Vanguard global shares (VGS) fund.

Monthly Portfolio Update – July 2021

Posted on August 1, 2021March 24, 2022 by The FI Explorer

Till noon we quietly sailed on,
Yet never a breeze did breathe:
Slowly and smoothly went the ship,
Moved onward from beneath.
Samuel Taylor Coleridge, The Rime of the Ancient Mariner, Part V

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

Portfolio goal

My objective is to reach a portfolio of $2,585,000 by 31 July 2022. This would produce a real annual income of about $90,500 (in 2021 dollars).

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

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$810,231
Vanguard Lifestrategy Growth Fund	$43,713
Vanguard Lifestrategy Balanced Fund	$79,464
Vanguard Diversified Bonds Fund	$101,270
Vanguard Australian Shares ETF (VAS)	$351,101
Vanguard International Shares ETF (VGS)	$200,090
Betashares Australia 200 ETF (A200)	$290,938
Telstra shares (TLS)	$2,014
Insurance Australia Group shares (IAG)	$6,144
NIB Holdings shares (NHF)	$8,568
Gold ETF (GOLD.ASX)	$112,261
Secured physical gold	$17,980
Plenti (P2P lending)	$1,918
Bitcoin	$628,750
Raiz app (Aggressive portfolio)	$21,014
Spaceship Voyager app (Index portfolio)	$3,412
BrickX (P2P rental real estate)	$4,558
Total portfolio value	$2,683,426 (+$87,183)

Asset allocation

Australian shares	37.2%
Global shares	21.7%
Emerging market shares	1.7%
International small companies	2.1%
Total international shares	25.4%
Total shares	62.6% (-12.4%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.8%
International bonds	6.1%
Total bonds	8.9% (-6.1%)
Gold	4.9%
Bitcoin	23.4%
Gold and alternatives	28.3% (+18.3%)

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

Comments

The financial independence portfolio has grown by just over $87,000 since the last monthly update, or around 3.2 per cent.

This means that it continues to sit notionally above the portfolio goal, and expand, tracking towards its previous highs.

Yet this month has some peculiarities that affect the interpretation of these results.

The portfolio distributions received from the second quarter have led to a notional decrease in the level of equity holdings, because these have not immediately been reinvested.

In reality, around $52,000 of these distributions are aside in cash. They have yet to be put back into the portfolio, and are not recorded in the portfolio report.

Rather, these will continue to be placed into equity exchange traded funds (ETFs) on a fortnightly basis through to December, balanced between Vanguard’s Australian shares (VAS) and international shares funds (VGS).

This process will represent a significant underlying current pulling the portfolio in a positive direction over the next five months. For the current month, however, it means that the headline monthly portfolio movement is somewhat artificially lowered, and the absolute value of the equity portfolio is actually temporarily lower than a month ago.

With these caveats, there was price growth of 2.5 per cent in the international shares holdings, and Australian equities also increased in price by just less than 1.0 per cent. As a result, total equities holdings now sit at around 87 per cent of the intended target allocation (of $1.9 million, or around 75 per cent of the total portfolio goal).

Gold increased in value by around 5.3 per cent as global interest rates recommenced a downward movement, and bonds also increased in total value, despite their second quarter distributions.

The single largest positive contributor to the portfolio movement was once again Bitcoin, where holdings grew in value by over 17 per cent or $90,000.