Monthly Portfolio Update – February 2020

Posted on March 1, 2020July 14, 2020 by The FI Explorer

No one would have crossed the ocean if he could have gotten off the ship in the storm.

Charles Kettering

This is my thirty-ninth 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 – $772 191
Vanguard Lifestrategy Growth Fund – $44 099
Vanguard Lifestrategy Balanced Fund – $81 139
Vanguard Diversified Bonds Fund – $111 360
Vanguard Australian Shares ETF (VAS) – $174 810
Vanguard International Shares ETF (VGS) – $32 294
Betashares Australia 200 ETF (A200) – $250 949
Telstra shares (TLS) – $1 844
Insurance Australia Group shares (IAG) – $8 083
NIB Holdings shares (NHF) – $5 580
Gold ETF (GOLD.ASX) – $114 375
Secured physical gold – $18 455
Ratesetter (P2P lending) – $13 971
Bitcoin – $149 920
Raiz app (Aggressive portfolio) – $17 424
Spaceship Voyager app (Index portfolio) – $2 446
BrickX (P2P rental real estate) – $4 485

Total portfolio value: $1 803 425 (-$69 900 or -3.7%)

Asset allocation

Australian shares – 42.1% (2.9% under)
Global shares – 22.3%
Emerging markets shares – 2.3%
International small companies – 3.1%
Total international shares – 27.7% (2.3% under)
Total shares – 69.8% (5.2% under)
Total property securities – 0.2% (0.2% over)
Australian bonds – 4.6%
International bonds – 9.7%
Total bonds – 14.3% (0.7% under)
Gold – 7.4%
Bitcoin – 9.7%
Gold and alternatives – 15.7% (5.7% over)

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

Pie Feb 20

Comments

Equity markets fell significantly this month, resulting in a portfolio loss of around $70 000. This is the largest monthly fall across the three years of this record in dollar terms, and the third largest as a proportion of assets.

MPV Feb 20 The falls follow a large increase in the portfolio value last month, and have occurred amidst increasing global impacts and fears from the spread of the Corona virus. The losses are mainly in Australian and global equities and have been concentrated in the last two weeks. Continue reading “Monthly Portfolio Update – February 2020”

Weathering the Storm – Investing through the Global Financial Crisis

Posted on February 15, 2020February 23, 2020 by The FI Explorer

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And once the storm is over, you won’t remember how you made it through, how you managed to survive. You won’t even be sure, whether the storm is really over. But one thing is certain. When you come out of the storm, you won’t be the same person who walked in. That’s what this storm’s all about.

Haruki Murakami, Kafka on the Shore

The Global Financial Crisis was the second significant market event I was conscious of. My investing journey began at the same time as the 2000 ‘Dot com’ bubble. I have few distinct memories of that latter event, though I do recall a work supervisor who had a sizeable investment in an actively managed global technology focused fund, ruefully reflecting on market events.

The Global Financial Crisis was different – it emerged in the early phases of my investment journey, around seven years after I started building an investment portfolio by making regular contributions, and after I had already read a number of investment books and researched some financial market history. Indeed, By mid-2006 I had already set an early FI goal of achieving investment returns equal to average expenditure, with an ambitious deadline of December 2008. This shows how far I was from anticipating the shape of events to come.

This post results from reader questions received about my direct experience with the Global Financial Crisis. It focuses on the period of the crisis and initial recovery, from 2007 through the 2010 and aims to cover:

what investments were made leading up to and through the crisis period
the overall asset allocation of the portfolio through the period
the impact of the crisis of the portfolio – including overall portfolio value and distributions; and
how the experience of the Global Financial Crisis has shaped the rest of the financial independence journey

In short, how – or indeed was – this storm weathered?

Answering that question needs to start at the beginning, however, with a description of the context in which the crisis developed.

Continue reading “Weathering the Storm – Investing through the Global Financial Crisis”

Monthly Portfolio Update – January 2020

Posted on February 1, 2020July 14, 2020 by The FI Explorer

The day advanced as if to light some work of mine

Thoreau, Walden

This is my thirty-eighth 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 – $813 282
Vanguard Lifestrategy Growth Fund – $45 802
Vanguard Lifestrategy Balanced Fund – $83 162
Vanguard Diversified Bonds Fund – $110 472
Vanguard Australian Shares ETF (VAS) – $178 121
Vanguard International Shares ETF (VGS) – $34 965
Betashares Australia 200 ETF (A200) – $272 399
Telstra shares (TLS) – $2 046
Insurance Australia Group shares (IAG) – $8 970
NIB Holdings shares (NHF) – $6 492
Gold ETF (GOLD.ASX) – $106 701
Secured physical gold – $17 252
Ratesetter (P2P lending) – $14 755
Bitcoin – $153 530
Raiz app (Aggressive portfolio) – $18 365
Spaceship Voyager app (Index portfolio) – $2 534
BrickX (P2P rental real estate) – $4 477

Total portfolio value: $1 873 325 (+$94 067)

Asset allocation

Australian shares – 42.8% (2.2% under)
Global shares – 22.6%
Emerging markets shares – 2.4%
International small companies – 3.1%
Total international shares – 28.1% (1.9% under)
Total shares – 70.9% (4.1% under)
Total property securities – 0.2% (0.2% over)
Australian bonds – 4.5%
International bonds – 9.5%
Total bonds – 14.0% (1.0% under)
Gold – 6.6%
Bitcoin – 8.2%
Gold and alternatives – 14.8% (4.8% over)

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

Pie alloc Jan 20

Comments

This month saw exceptional growth in the portfolio, with a net increase of $94 000 after a small fall last month. Monthly prog Jan 20 This is the fastest growth in the past half year. It is also the second largest absolute increase in over three years of measurement.

As the histogram below – which counts the frequency of occurrences in a specified range of monthly value changes (with red denoting losses) – makes clear, this is one of the most positive outcomes in the three year record.

Continue reading “Monthly Portfolio Update – January 2020”

Fair Winds and Following Seas – Income and Capital in Portfolio Distributions

Posted on January 18, 2020February 14, 2021 by The FI Explorer

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It is impossible for a man to learn what he thinks he already knows.
Epictetus

Portfolio distributions that have been tracked in the journey so far have had two important but distinct components: investment income (such as interest or dividends), and realised capital gains.

What ultimately matters for reaching any financial independence target is total returns – which are the sum of capital gains and investment income. These two components, working together, push forward progress on the voyage. Distributions through the journey, however, provide an important and tangible measure of progress.

This longer read post explores through past portfolio data the level and significance of realised capital gains I have received in regular Vanguard retail fund distributions. It also analyses the level of ‘pure’ income – that is, counting only interest and dividends – produced by the FI portfolio and discusses what this means for managing the portfolio in the future.

Analysis of the two distinct components – capital gains and income – of my Vanguard retail fund distributions helps in understanding past and future variations in the level of these distributions, and the sustainable long-term income potential from the portfolio.

How these Vanguard distributions are structured, have behaved, and what they can be expected to do in the future is an important question for my financial independence portfolio – as by value Vanguard funds currently constitute over half its total value.

Continue reading “Fair Winds and Following Seas – Income and Capital in Portfolio Distributions”