Because things are the way they are, they will not stay the way they are.
Berthold Brecht
Twice a year I prepare a summary of total income from my portfolio. This is my tenth portfolio income update since starting this record. As part of the transparency and accountability of this journey, I regularly report this income.
My goal is to build up a portfolio capable of providing a passive income of around $90,500 by July 2022 (Portfolio Goal).
Portfolio income summary
Investment
Amount
Vanguard Lifestrategy High Growth (retail fund)
$66,713
Vanguard Lifestrategy Growth (retail fund)
$3,627
Vanguard Lifestrategy Balanced (retail fund)
$5,758
Vanguard Diversified Bonds (retail fund)
$5,909
Vanguard Australian Shares ETF (VAS)
$4,645
Vanguard International Shares ETF (VGS)
$2,024
Betashares Australia 200 ETF (A200)
$3,394
Telstra shares (TLS.ASX)
$43
Insurance Australia Group shares (IAG.ASX)
$89
NIB Holding shares (NHF.ASX)
$120
Plenti/Ratesetter (P2P lending) (estimated)
$150
Raiz app (Aggressive portfolio)
$210
Spaceship Voyager app (Index portfolio)
$0
BrickX (P2P rental real estate)
$42
Total Portfolio Income – Half-Year to June 30, 2021
$92,724
The chart below sets out the income or distributions received on a half-yearly basis from the financial independence portfolio over the past five and a half years.
Presented visually, the chart below is a high-level view of the current asset allocation of the portfolio.
Comments
The portfolio has gained around $63,000 over this past month. This has meant a partial recovery from the steep falls experienced last month.
All elements of the portfolio contributed to this return to growth, except for a small fall in the value of gold holdings.
Over the month the portfolio has increased by a total of 2.5 per cent. This growth means that the portfolio is once again operating just above the final portfolio goal, following it first reaching that level in late December 2020, and spending some time above it through the early part of this year.
Once again the equity component of the portfolio grew this month, increasing by around $60,000. This pushed forward the equity portfolio to two significant milestones.
First, the Australian equity portfolio has broken the $1,000,000 mark. By way of comparison, Australian equities represented $280,000 at the beginning of this record in early 2017.
Second, the total equity portfolio – including global equities – has now reached $1.7 million, or 88 per cent of the intended target allocation (of $1.9 million, or around 75 per cent of the total portfolio goal).
The value of Australian equities grew by around 2.0 per cent, and the value of international shares increased by around 4.3 per cent over the month.
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.
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.
