Portfolio Income Update – Half Year to June 30, 2020

Posted on July 5, 2020March 24, 2022 by The FI Explorer

Screenshot_20200703-230904_Photos

Here, where the world is quiet;
Here, where all trouble seems
Dead winds’ and spent waves’ riot
In doubtful dreams of dreams;
I watch the green field growing

Swinburne, The Garden of Proserpine

Twice a year I prepare a summary of total income from my portfolio. This is my eighth portfolio income update since starting this record. As part of the transparency and accountability of this journey, I regularly report this income.

My portfolio goal is to build up a portfolio capable of providing a passive income of around $87 000 by July 2021 (Portfolio Objective).

Portfolio income summary

Vanguard Lifestrategy High Growth – $33 314
Vanguard Lifestrategy Growth – $2 074
Vanguard Lifestrategy Balanced – $2 621
Vanguard Diversified Bonds – $1 077
Vanguard ETF Australian Shares ETF (VAS) – $2 109
Vanguard ETF International Shares ETF (VGS) – $511
Betashares Australia 200 ETF (A200) – $2 325
Telstra shares – $43
Insurance Australia Group shares – $127
NIB shares – $120
Ratesetter (P2P lending) – $724
Raiz app (Aggressive portfolio) – $83
Spaceship Voyager app (Index portfolio) – $0
BrickX (P2P rental real estate) – $35

Total portfolio income in half-year to June 30, 2020: $45 162

The chart below sets out the distributions or income received on a half-yearly basis from the portfolio over the past four years.

HY Port Dist2 - Jul 20

The following pie chart is a breakdown of the percentage contribution of each investment in the portfolio to the total half-yearly income.

Pie HY Dist Jul 20

Comments

The total of half-year distributions from the portfolio was $45 162, or the equivalent of around $7 500 per month over the past six months.

This result is the third highest half-year distribution on record, breaking a two year downtrend of lower June figures. These half-year portfolio distributions are substantially larger than June last year, and around double that of June distributions of four years ago.

Continue reading “Portfolio Income Update – Half Year to June 30, 2020”

Monthly Portfolio Update – June 2020

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

We would rather be ruined than changed.

W H Auden, The Age of Anxiety

This is my forty-third 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 – $726 306
Vanguard Lifestrategy Growth Fund – $42 118
Vanguard Lifestrategy Balanced Fund – $78 730
Vanguard Diversified Bonds Fund – $111 691
Vanguard Australian Shares ETF (VAS) – $201 745
Vanguard International Shares ETF (VGS) – $39 357
Betashares Australia 200 ETF (A200) – $231 269
Telstra shares (TLS) – $1 668
Insurance Australia Group shares (IAG) – $7 310
NIB Holdings shares (NHF) – $5 532
Gold ETF (GOLD.ASX) – $117 757
Secured physical gold – $18 913
Ratesetter (P2P lending) – $10 479
Bitcoin – $148 990
Raiz app (Aggressive portfolio) – $16 841
Spaceship Voyager app (Index portfolio) – $2 553
BrickX (P2P rental real estate) – $4 484

Total portfolio value: $1 765 743 (+$8 485 or 0.5%)

Asset allocation

Australian shares – 42.2% (2.8% under)
Global shares – 22.0%
Emerging markets shares – 2.3%
International small companies – 3.0%
Total international shares – 27.3% (2.7% under)
Total shares – 69.5% (5.5% under)
Total property securities – 0.3% (0.3% over)
Australian bonds – 4.7%
International bonds – 9.4%
Total bonds – 14.0% (1.0% under)
Gold – 7.7%
Bitcoin – 8.4%
Gold and alternatives – 16.2% (6.2% over)

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

Jun 20 - Pie

Comments

The overall portfolio increased slightly over the month. This has continued to move the portfolio beyond the lows seen in late March.

The modest portfolio growth of $8 000, or 0.5 per cent, maintains its value at around that achieved at the beginning of the year.

Progress - Jun20

The limited growth this month largely reflects an increase in the value of my current equity holdings, in VAS and A200 and the Vanguard retail funds. This has outweighed a small decline in the value of Bitcoin and global shares. The value of the bond holdings also increased modestly, pushing them to their highest value since around early 2017.

There still appears to be an air of unreality around recent asset price increases and the broader economic context. Britain’s Bank of England has on some indicators shown that the aftermath of the pandemic and lockdown represent the most challenging financial crisis in around 300 years. What is clear is that investor perceptions and fear around the coronavirus pandemic are a substantial ongoing force driving volatility in equity markets (pdf).

A somewhat optimistic view is provided here that the recovery could look more like the recovery from a natural disaster, rather than a traditional recession. Yet there are few certainties on offer. Negative oil prices, and effective offers by US equity investors to bail out Hertz creditors at no cost appear to be signs of a financial system under significant strains.

As this Reserve Bank article highlights, while some Australian households are well-placed to weather the storm ahead, the timing and severity of what lays ahead is an important unknown that will itself feed into changes in household wealth from here.

Jun 20 - Monthy Chgn

Investments this month have been exclusively in the Australian shares exchange-traded fund (VAS). This has been to bring my actual asset allocation more closely in line with the target split between Australian and global shares.

Continue reading “Monthly Portfolio Update – June 2020”

Peril of Waters – Mapping the Equity Portfolio

Posted on June 16, 2020June 16, 2020 by The FI Explorer

Ships are but boards, sailors but men.

There be land-rats and water-rats, water

thieves and land thieves, I mean pirates,

and then there is the peril of waters, winds and rocks.

Shakespeare, The Merchant of Venice

Equities have historically been the most reliable and effective wealth-generating asset class, and provide the main impetus – or centre of effort – for my current journey to financial independence.

The success of this journey relies heavily on equities continuing to provide, over the years and decades ahead, consistently high market returns on a risk-adjusted basis.

The financial independence portfolio is built on a passive index approach to Australian and global equities. This means investments in equity market index funds automatically occur in proportion to the market capitalisation of each company, sector and market.

Until recently, this led to benign neglect in the details of just what structurally made up the equity component of my portfolio. This neglect can no longer be justified – especially as the equities investments continue to make up around 70 per cent of the overall portfolio.

The exploration of the bond portfolio late last year has provided both an impetus and a model to better understand both the individual components and overall shape of the equity portfolio.

This longer read article explores the make up of Australian and global equities within the financial independence portfolio. It looks beneath the individual investment vehicles and analyses exactly how and where it is currently invested.

Here, in the equities area, the goal is to simply observe, rather than to identify areas for changes for future investment. In short, to understand broadly where the dollars in the equity portfolio are actually invested.

Continue reading “Peril of Waters – Mapping the Equity Portfolio”

Monthly Portfolio Update – May 2020

Posted on June 1, 2020May 31, 2020 by The FI Explorer

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth

Robert Frost, The Road Not Taken

This is my forty-second 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 – $727 917
Vanguard Lifestrategy Growth Fund – $42 128
Vanguard Lifestrategy Balanced Fund – $78 569
Vanguard Diversified Bonds Fund – $110 009
Vanguard Australian Shares ETF (VAS) – $187 003
Vanguard International Shares ETF (VGS) – $39 987
Betashares Australia 200 ETF (A200) – $225 540
Telstra shares (TLS) – $1 726
Insurance Australia Group shares (IAG) – $7 741
NIB Holdings shares (NHF) – $5 652
Gold ETF (GOLD.ASX) – $117 714
Secured physical gold – $18 982
Ratesetter (P2P lending) – $11 395
Bitcoin – $159 470
Raiz app (Aggressive portfolio) – $16 357
Spaceship Voyager app (Index portfolio) – $2 492
BrickX (P2P rental real estate) – $4 477

Total portfolio value: $1 757 159 (+$62 325 or 3.7%)

Asset allocation

Australian shares – 41.4% (3.6% under)
Global shares – 22.2%
Emerging markets shares – 2.3%
International small companies – 3.0%
Total international shares – 27.4% (2.6% under)
Total shares – 68.8% (6.2% under)
Total property securities – 0.3% (0.3% over)
Australian bonds – 4.4%
International bonds – 9.7%
Total bonds – 14.1% (0.9% under)
Gold – 7.8%
Bitcoin – 9.1%
Gold and alternatives – 16.9% (6.9% over)

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

May 20 Pie

Comments

This month featured a further recovery in the overall portfolio, continuing to effectively reduce the size of the large losses across the first quarter.

The portfolio has increased by around $62 000, leading to a portfolio growth of 3.7 per cent. This means that around half of the large recent falls have been made up, and the portfolio sits around levels last reached in October of last year.

May 20 - Mnthly Progress

Leading the portfolio growth has been increases in Australian shares – particularly those held through the Betashares A200 and Vanguard VAS exchange traded funds, with both gaining over four per cent. Most other holdings remained steady, or fell slightly.

Markets appear to be almost entirely disconnected from the daily announcements of the sharp effects of the global coronavirus pandemic and the resulting restrictions. Bond and equity markets seem to have different and competing expectations for the future, and equity markets – at best – are apparently intent on looking through the immediate recovery phase to a new period of strong expansion.

May 20 - Mnthly Chng

On some metrics, both major global and Australian equity markets can be viewed as quite expensive, especially as reduced dividends announced have largely yet to be delivered. Yet if historically low bond yields are considered, it can be argued that some heightening compared to historical equity market valuations may be sustainable.

Reflecting this moment of markets holding their breath before one of two possible futures plays out, gold and Bitcoin remain elevated, and consequently above their target weightings.

Continue reading “Monthly Portfolio Update – May 2020”