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.

Outward Bound – Trends in Taxable Investment Income

Posted on October 18, 2020October 18, 2020 by The FI Explorer

But who wants to be foretold the weather? It is bad enough when it comes, without our having the misery of knowing about it beforehand.
_{Jerome K Jerome, Three Men in a Boat (1889)}

Tracking taxable investment income produced by the financial independence portfolio provides a useful external benchmark of progress on the journey.

So far, reviewing past dividends and distributions has been the primary way of tracking progress in portfolio income towards the financial independence goal.

Yet having this additional externally validated estimate of what my taxable income would be if I stopped working tomorrow is valuable. It helps illustrate the underlying income generating potential of the portfolio and also allows for broader trends over time to be observed.

Taxable investment income remains stable for now

Taxable investment income for financial year 2019-20 totalled around $42,500. This is a level which is close to the record of the past four years.

Figure 1 below sets out the fuller record over the past decade. It is based on the total of taxable income from the tax assessment categories of partnerships and trusts, foreign source income, franking credits and ‘other income’. That is, it takes in the totals of Items 13, 20 and 24 on the 2020 tax return, whilst not including capital gains.

Monthly Portfolio Update – September 2020

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

When the rest of the world is mad we must imitate them in some measure.
John Martin, 1720

This is my forty-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 $2 180 000 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	$724,599
Vanguard Lifestrategy Growth Fund	$41,459
Vanguard Lifestrategy Balanced Fund	$78,259
Vanguard Diversified Bonds Fund	$111,658
Vanguard Australian Shares ETF (VAS)	$224,190
Vanguard International Shares ETF (VGS)	$63,441
Betashares Australia 200 ETF (A200)	$228,870
Telstra shares (TLS)	$1,481
Insurance Australia Group shares (IAG)	$5,549
NIB Holdings shares (NHF)	$4,896
Gold ETF (GOLD.ASX)	$120,877
Secured physical gold	$19,452
Ratesetter (P2P lending)	$8,326
Bitcoin	$168,470
Raiz app (Aggressive portfolio)	$16,979
Spaceship Voyager app (Index portfolio)	$2,772
BrickX (P2P rental real estate)	$4,459
Total portfolio value	$1,825,737 (-$23,159)

Asset allocation

Australian shares	41.7%
Global shares	22.6%
Emerging market shares	2.2%
International small companies	2.8%
Total international shares	27.6%
Total shares	69.4% (-5.6%)
Total property securities	0.2% (+0.2%)
Australian bonds	4.4%
International bonds	9.0%
Total bonds	13.4% (-1.6%)
Gold	7.7%
Bitcoin	9.2%
Gold and alternatives	16.9% (+6.9%)

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

Comments

The portfolio has suffered a modest decline over the past month and fallen in value by $23,000. This has broken a five month period of overall recovery and growth, with the portfolio experiencing a contraction of around 1.3 per cent.

These falls have occurred simultaneously across major components of the portfolio, including Australian and international shares, gold and Bitcoin. This is a relatively rare occurrence.

Monthly Portfolio Update – August 2020

Posted on September 1, 2020August 31, 2020 by The FI Explorer

Midway along the journey of our life
I woke to find myself in a dark wood,
for I had wandered off from the straight path.

Dante, The Divine Comedy: Inferno, Canto I

This is my forty-fifth portfolio update. I complete this update monthly to check my 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	$733 769
Vanguard Lifestrategy Growth Fund	$41 794
Vanguard Lifestrategy Balanced Fund	$78 533
Vanguard Diversified Bonds Fund	$110 771
Vanguard Australian Shares ETF (VAS)	$216 758
Vanguard International Shares ETF (VGS)	$64 542
Betashares Australia 200 ETF (A200)	$237 138
Telstra shares (TLS)	$1 540
Insurance Australia Group shares (IAG)	$6 043
NIB Holdings shares (NHF)	$5 532
Gold ETF (GOLD.ASX)	$121 976
Secured physical gold	$19 535
Ratesetter (P2P lending)	$8 998
Bitcoin	$177 310
Raiz app (Aggressive portfolio)	$17 421
Spaceship Voyager app (Index portfolio)	$2 759
BrickX (P2P rental real estate)	$4 477
Total portfolio value	$1 848 896 (+$48 777 or 2.7%)

Asset allocation

Australian shares	41.5%
Global shares	22.6%
Emerging market shares	2.2%
International small companies	2.8%
Total international shares	27.6%
Total shares	69.2% (5.8% under)
Total property securities	0.2% (0.2% over)
Australian bonds	4.4%
International bonds	8.9%
Total bonds	13.3% (1.7% under)
Gold	7.7%
Bitcoin	9.6%
Gold and alternatives	17.2% (7.2% over)

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

Aug 20 - Pie

Comments

The portfolio has increased in value for the fifth consecutive month, and is starting to approach the monthly value last reached in January.

The portfolio has grown over $48 000, or 2.7 per cent this month, reflecting the strong market recovery since late March

Aug 20 - Progress

The growth in the portfolio was broadly-based across global and Australian equities, with an increase of around 3.8 per cent. Following strong previous rises, gold holdings decreased by around 2.2 per cent, while Bitcoin continued to increase in value (by 2.5 per cent).

Combined, the value of gold and Bitcoin holdings remain at a new peak, while total equity holdings are still below their late January peak to the tune of around $50 000. The fixed income holdings of the portfolio continue to fall below the target allocation.

Aug 20 - 12 mnth Progress

The expanding value of gold and Bitcoin holdings since January last year have actually had the practical effect of driving new investments into equities, since effectively for each dollar of appreciation, for example, my target allocation to equities rises by seven dollars.

New investments this month have been in the Vanguard international shares exchange-traded fund (VGS) and the Australian shares equivalent (VAS). These have been directed to bring my actual asset allocation more closely in line with the target split between Australian and global shares set out in the portfolio plan.

As the exchange traded funds such as VGS, VAS and Betashares A200 now make up nearly 30 per cent of the overall portfolio, the quarterly payments they provide have increased in magnitude and importance. Early in the journey, third quarter distributions were essentially immaterial events.

Using the same ‘median per unit’ forecast approach as recently used for half yearly forecasts would suggest a third quarter payout due at the end of September of around $6000. Due to significant announced dividend reductions across this year I am, however, currently assuming this is likely to be significantly lower, and perhaps in the vicinity of $4000 or less. Continue reading “Monthly Portfolio Update – August 2020”