Standing to Port – Year in Review and Monthly Portfolio Update – December 2020

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

In order to arrive at what you do not know
You must go by a way which is the way of ignorance.
T. S. Eliot, Four Quartets – East Coker

Year in Review

The year past has been extraordinary in so many ways, entirely separate from the progress to the goal of financial independence.

Part of the structure of the year has been seeing elements of this new reality bleed into markets and economic developments, affecting the portfolio in profound ways.

At the the broadest level, the year saw the passing of my portfolio objective, in a rapid unexpected way in December. In fact, as can be seen below, this year saw the crossing of the last two outstanding portfolio measures.

Progress against FI measures through 2020

Measure	Portfolio	All Assets
Portfolio objective – $2,180,000 (or $87,000 pa)	82%→104%	112%→136%
Credit card purchases – $71,000 pa	100%→127%	136%→166%
Total expenses – $89,000 pa	80%→102%	109%→133%

On an ‘All Assets’ basis – taking into account superannuation assets – the year saw further progress, to be well above the minimum levels required to sustain the portfolio income objective.

Course of the voyage

The progress of the year was steeped in volatility. This year saw the largest ever fall in the value of the portfolio, and also two of the largest ever monthly gains.

This volatility is clearly evidenced in the variations in the total end of month portfolio values in the chart below.

Overall the portfolio increased by over $500,000 through the full year. This is the largest rise in the value of the portfolio over a single year on record.

Quite simply, it has moved the portfolio to a different magnitude and scale of operation. The chart below of the overall value of the portfolio on a calendar year basis illustrates this alteration starkly.

It cannot be escaped that the largest single contributor to the increase over this year was a surge in the price of Bitcoin, leading to over $300,000 of the gains.

Equity markets, however, also pushed forward in the second half of the year, and the equity portfolio finished around $175,000 higher than the beginning of the year. The gold component of the portfolio also ended the year higher.

As the set out in the In Way of Harbour post two weeks ago, combined this progress resulted in the passing of the portfolio objective in mid-December.

In Way of Harbour – An End of the Journey?

Posted on December 20, 2020March 29, 2021 by The FI Explorer

Profits on the exchange are the treasures of goblins. At one time they may be carbuncle stones, then coals, then diamonds, then flint-stones, then morning dew, then tears.
Confusion de confusions, Joseph de la Vega (1688)

Around 1500 days ago this journey began with the objective of determining if it was possible for me to achieve the goal of financial independence.

Over time the precise objectives and targets have evolved, but this post is written to mark and record the – perhaps temporary – meeting of the portfolio goal of $2.18 million this week.

Consistent with much of the journey so far – it was unpredicted and happened in an unexpected way.

A recent surge in the value of Bitcoin, together with some equity market gains, has currently pushed the overall portfolio to just above the its target level. As Aussie HiFIRE remarked, this has resulted in the achievement of a novel kind of ‘BitFIRE’. This does not exactly sit comfortably within the mainstream vision of financial independence pathways. It is certainly not the way I would have ever contemplated reaching the end objective.

Tempting the fates

As someone with a classical history background just writing this post, in fact marking this occasion in any way, appears to be an open invitation for an urgent house call from Nemesis – the balancer of life, and punisher of hubris.

A sudden downward gust, an eddy in markets, or a repetition of previous long retreats from highs would be enough to make this a temporary aberration. Another year, or more, could easily stretch out before the portfolio objective is reached again in this kind of scenario. To be clear and precise, it is my current expectation that something like that scenario will occur.

Yet it is also a stubborn fact that previous milestones, once passed, have generally stayed passed from the momentum of the journey. Part of the purpose of this record is to set out my contemporaneous thoughts and perspectives on each part of the journey as it is being made, rather than withholding to appear falsely wise after the event about the course of progress. A time capsule, rather than a finished product.

Monthly Portfolio Update – November 2020

Posted on December 1, 2020March 24, 2022 by The FI Explorer

Footfalls echo in the memory
Down the passage which we did not take
Towards the door we never opened
T. S. Eliot, Four Quartets – Burnt Norton

This is my forty-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 $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars).

This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$787,739
Vanguard Lifestrategy Growth Fund	$44,262
Vanguard Lifestrategy Balanced Fund	$82,197
Vanguard Diversified Bonds Fund	$109,841
Vanguard Australian Shares ETF (VAS)	$262,908
Vanguard International Shares ETF (VGS)	$88,620
Betashares Australia 200 ETF (A200)	$255,235
Telstra shares (TLS)	$1,636
Insurance Australia Group shares (IAG)	$6,525
NIB Holdings shares (NHF)	$6,168
Gold ETF (GOLD.ASX)	$108,902
Secured physical gold	$17,569
Ratesetter (P2P lending)	$6,712
Bitcoin	$281,180
Raiz app (Aggressive portfolio)	$18,793
Spaceship Voyager app (Index portfolio)	$3,061
BrickX (P2P rental real estate)	$4,454
Total portfolio value	$2,085,802 (+$186,847)

Asset allocation

Australian shares	41.0%
Global shares	22.4%
Emerging market shares	2.1%
International small companies	2.7%
Total international shares	27.2%
Total shares	68.2% (-6.8%)
Total property securities	0.2% (+0.2%)
Australian bonds	3.9%
International bonds	8.2%
Total bonds	12.0% (-3.0%)
Gold	6.1%
Bitcoin	13.5%
Gold and alternatives	19.5% (+9.5%)

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

Comments

This month has seen the largest ever monthly increase in total portfolio in this four year record.

The overall portfolio has increased by over $186,000, pushing past the previous portfolio values achieved at the end of January. As a result, the portfolio has grown 9.8 per cent in total from the previous month, to reach over two million dollars for the first time.

The major contributor to the overall growth in the portfolio has been rapid rises in equity markets in the lead up to, and following, the US Presidential election.

There has also been a 29 per cent increase in the price of Bitcoin which has attracted further significant media and commentary.

The fixed interest components of the portfolio have remained stable, while the value of gold holdings has fallen around 10 per cent as other markets moved upwards.

Monthly Portfolio Update – October 2020

Posted on November 1, 2020March 24, 2022 by The FI Explorer

Sometimes, I feel the past and the future pressing so hard on either side that there’s no room for the present at all.
Evelyn Waugh, Brideshead Revisited

This is my forty-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 $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars).

This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$728,112
Vanguard Lifestrategy Growth Fund	$41,606
Vanguard Lifestrategy Balanced Fund	$78,564
Vanguard Diversified Bonds Fund	$109,495
Vanguard Australian Shares ETF (VAS)	$231,548
Vanguard International Shares ETF (VGS)	$75,298
Betashares Australia 200 ETF (A200)	$231,199
Telstra shares (TLS)	$1,428
Insurance Australia Group shares (IAG)	$6,043
NIB Holdings shares (NHF)	$4,992
Gold ETF (GOLD.ASX)	$121,009
Secured physical gold	$19,482
Ratesetter (P2P lending)	$7,363
Bitcoin	$218,040
Raiz app (Aggressive portfolio)	$17,488
Spaceship Voyager app (Index portfolio)	$2,841
BrickX (P2P rental real estate)	$4,447
Total portfolio value	$1,898,955 (+$73,218)

Asset allocation

Australian shares	40.8%
Global shares	22.4%
Emerging market shares	2.1%
International small companies	2.7%
Total international shares	27.3%
Total shares	68.1% (-6.9%)
Total property securities	0.2% (+0.2%)
Australian bonds	4.1%
International bonds	8.6%
Total bonds	12.8% (-2.2%)
Gold	7.4%
Bitcoin	11.5%
Gold and alternatives	18.9% (+8.9%)

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

Comments

This month the portfolio expanded by around $73,000, continuing the strong overall pattern of recovery since March. This has resulted in portfolio growth of 4 per cent, which has taken the value of the portfolio to a new monthly high.

The portfolio was affected by small price falls across global shares, a modest increase in Australian share values, with limited movement in gold and bond holdings.

This means that the majority of gains in the portfolio have been from an appreciation in the price of Bitcoin, which in fact made up more than 90 per cent of the total monthly gains. This appears to be based on some early steps by Paypal to increase use of Bitcoin, and some recent corporate decisions by a US technology firm to seek to employ it as a corporate treasury store of value.