Lines of Navigation – A History of Portfolio Change

Posted on June 14, 2021March 24, 2022 by The FI Explorer

No man ever steps into the same river twice.
Heraclitus

The achievement of financial independence is often, correctly, framed as getting a few key principles and habits in place, and then repeating these consistently through time. This history of portfolio change steps beyond this valuable and instructive perspective.

This is because an exclusive focus on consistency of action conceals another fact of the journey – that constant principles and habits do not avoid change through the experience. In fact, change has been a continuous marker through the financial independence journey so far.

As the portfolio and its characteristics change, different experiences, issues and challenges emerge.

This post examines some of the major areas of change. It particularly focuses on changes since the commencement of this record in 2017, which covers the second half of the journey.

While each financial independence journey and portfolio is different, this is intended to highlight a few of the key changes I have experienced in building and managing the portfolio, for any interest and insights it offers others.

History of change in the composition of the portfolio

The most significant change – aside from the growth in the overall portfolio level – has been to the composition of the portfolio. That is, balance of actual investments held in different investment vehicles.

For most of the early part of the journey, the set of Vanguard retail funds (mainly the High Growth, Growth, Balanced funds) formed the core of the portfolio. In 2007, for example, Vanguard retail funds made up no less than 95 per cent of the total portfolio.

As the recorded journey started in January 2017, this legacy was still apparent. At this time Vanguard funds made up around 80 per cent of the portfolio, as can be seen below.

Some small gold, Bitcoin, and peer-to-peer lending had been added to the portfolio by 2017. Yet these were minor elements compared to the legacy retail funds that also received regular new investments.

The equivalent chart of the composition of the portfolio today is below.

Monthly Portfolio Update – May 2021

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

Ithaka gave you the marvellous journey.
Without her you wouldn’t have set out.
She has nothing left to give you now.
Constantine P. Cavafy, Ithaka

This is my fifty-fourth 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	$839,560
Vanguard Lifestrategy Growth Fund	$45,574
Vanguard Lifestrategy Balanced Fund	$82,491
Vanguard Diversified Bonds Fund	$100,344
Vanguard Australian Shares ETF (VAS)	$321,955
Vanguard International Shares ETF (VGS)	$167,542
Betashares Australia 200 ETF (A200)	$282,670
Telstra shares (TLS)	$1,876
Insurance Australia Group shares (IAG)	$6,360
NIB Holdings shares (NHF)	$7,548
Gold ETF (GOLD.ASX)	$112,037
Secured physical gold	$17,913
Plenti (P2P lending)	$3,501
Bitcoin	$514,720
Raiz app (Aggressive portfolio)	$20,647
Spaceship Voyager app (Index portfolio)	$3,293
BrickX (P2P rental real estate)	$4,546
Total portfolio value	$2,532,577 (-$210,597)

Asset allocation

Australian shares	38.4%
Global shares	22.2%
Emerging market shares	1.8%
International small companies	2.3%
Total international shares	26.3%
Total shares	64.7% (-10.3%)
Total property securities	0.2% (+0.2%)
Australian bonds	3.0%
International bonds	6.6%
Total bonds	9.6% (-5.4%)
Gold	5.1%
Bitcoin	20.3%
Gold and alternatives	25.5% (+15.5%)

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

Comments

The portfolio has fallen by over $210,000 this month, experiencing the first negative result in seven months.

This was caused by the value of Bitcoin holdings falling by over a third on a monthly basis, and even further from their highest levels in mid-April.

This dramatic fall outweighed positive movement in other elements of the portfolio. The result of this is that the portfolio has reduced by 7.7 per cent, and moved to just under the portfolio target objective. Due to the rapid way the target was achieved, this reversal was always a possibility.

Excluding the price volatility of Bitcoin, the rest of the portfolio actually grew by around $51,000. This took the total equity holdings to 84 per cent of the final equity target, up two per cent over the month.

The value of Australian equities grew by around 2.7 per cent, and the value of international shares increased by around 1.7 per cent over the month.

Monthly Portfolio Update – April 2021

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

So we beat on, boats against the current, borne back ceaselessly into the past.
F. Scott Fitzgerald, The Great Gatsby

This is my fifty-third 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	$829,649
Vanguard Lifestrategy Growth Fund	$45,135
Vanguard Lifestrategy Balanced Fund	$81,870
Vanguard Diversified Bonds Fund	$100,139
Vanguard Australian Shares ETF (VAS)	$307,826
Vanguard International Shares ETF (VGS)	$158,831
Betashares Australia 200 ETF (A200)	$275,311
Telstra shares (TLS)	$1,801
Insurance Australia Group shares (IAG)	$6,208
NIB Holdings shares (NHF)	$7,392
Gold ETF (GOLD.ASX)	$103,197
Secured physical gold	$16,581
Plenti (P2P lending)	$4,411
Bitcoin	$776,690
Raiz app (Aggressive portfolio)	$20,326
Spaceship Voyager app (Index portfolio)	$3,267
BrickX (P2P rental real estate)	$4,540
Total portfolio value	$2,743,174 (+$2,449)

Asset allocation

Australian shares	34.5%
Global shares	20.0%
Emerging market shares	1.7%
International small companies	2.1%
Total international shares	23.8%
Total shares	58.3% (-16.7%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.8%
International bonds	6.1%
Total bonds	8.9% (-6.1%)
Gold	4.4%
Bitcoin	28.3%
Gold and alternatives	32.7% (+22.7%)

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

Comments

After the most sustained, as well as the largest, expansion in its history the portfolio has recorded a small increase over the last month.

The muted final outcome was the result of a significant correction in the price of Bitcoin, which has fallen substantially since the middle of the month, after it briefly reached all time heights.

Overall the portfolio advanced just over $2,000, despite a fall of around $70,000 in the value of Bitcoin holdings. Just as last month where the contingent nature of the achievement was discussed, this leaves the total portfolio slightly above the portfolio goal.

The slight growth in the portfolio was largely due to other portfolio assets moving in the other direction, off-setting the substantial Bitcoin reductions.

Australian equities grew by around 2.0 per cent, and the value of international shares also advanced around 2.7 per cent over the month. Gold reversed its three consecutive months of decline with around a 2.8 per cent gain.

Monthly Portfolio Update – March 2021

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

The Athenians preserved the boat—a thirty-oared ship—on which Theseus sailed with his companions and came back safely until the time of Demetrius of Phalerus, changing out the older wood and replacing it with strong, new parts until the ship became a famous example to philosophers of the problem of growth. Some say that it remained the same ship, others claim it did not.
Plutarch, Life of Theseus, XXIII.i

This is my fifty-second 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	$798,662
Vanguard Lifestrategy Growth Fund	$43,783
Vanguard Lifestrategy Balanced Fund	$80,032
Vanguard Diversified Bonds Fund	$104,634
Vanguard Australian Shares ETF (VAS)	$301,213
Vanguard International Shares ETF (VGS)	$131,409
Betashares Australia 200 ETF (A200)	$270,303
Telstra shares (TLS)	$1,812
Insurance Australia Group shares (IAG)	$5,929
NIB Holdings shares (NHF)	$6,276
Gold ETF (GOLD.ASX)	$100,378
Secured physical gold	$16,153
Plenti (P2P lending)	$4,565
Bitcoin	$848,070
Raiz app (Aggressive portfolio)	$19,793
Spaceship Voyager app (Index portfolio)	$3,180
BrickX (P2P rental real estate)	$4,533
Total portfolio value	$2,740,725 (+$251,033)

Asset allocation

Australian shares	33.6%
Global shares	18.5%
Emerging market shares	1.6%
International small companies	2.0%
Total international shares	22.1%
Total shares	55.7% (-19.3%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.8%
International bonds	6.1%
Total bonds	8.9% (-6.1%)
Gold	4.3%
Bitcoin	30.9%
Gold and alternatives	35.2% (+25.2%)

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

Comments

This month has seen a continued appreciation of Bitcoin dominating virtually all other portfolio developments, a trend that has been firmly in place since October of last year.

The value of Bitcoin holdings rising by $197,000 has pushed the portfolio above the financial independence target goal set three just months ago. In short, this has delivered an outcome in March that was intended to be only reached at the end July of next year. So the portfolio goal has been passed. Yet the gain underpinning this achievement is contingent and highly provisional.

Bitcoin’s value in the portfolio rose by another 30 per cent across the month, being the major contributor to the overall portfolio growing by $251,000. This is both the largest ever monthly change, and growth, of the entire journey.

The performance of other assets was modest in scale by comparison. Equities moved ahead this month, with global shares (5.8 per cent) performing slightly better than Australian equities (3.2 per cent). Both gold and bonds slightly decreased in value.