Be content to seem what you really are.

Marcus Aurelius

This is my sixteenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December  2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $693 605
• Vanguard Lifestrategy Growth  – $41 574
• Vanguard Lifestrategy Balanced – $74 220
• Vanguard Diversified Bonds – $103 193
• Vanguard ETF Australia Shares (VAS) – $74 236
• Telstra shares – $4 279
• Insurance Australia Group shares – $18 910
• NIB Holdings – $7 824
• Gold ETF (GOLD.ASX)  – $80 389
• Secured physical gold – $11 612
• Ratesetter (P2P lending) – $45 954
• Bitcoin – $114 730
• Acorns app (Aggressive portfolio) – $9 953
• BrickX (P2P rental real estate) – $4 384

Total value: $1 284 863 (-$54 561)

Asset allocation

• Australian shares –  33 %
• International shares – 19%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.6% (4.4% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.3% (1.3% over)
• Australian bonds – 10%
• International bonds – 10%
• Total bonds – 19.6% (0.6% over)
• Cash – 1.4%
• Gold – 7.2%
• Bitcoin – 8.9%
• Gold and alternatives – 16.1% (1.1% over)

Comments

This post is a few days later that usual as I have been holidaying overseas as the new month rolled over, making the update a bit more challenging to achieve with overseas data limits to contend with.

This last four months has been a challenging one, with declines in the overall portfolio, taking it ‘back’ to levels in November. Nearly all of this represents growth, and then sharp decline, in the value of my errant Bitcoin holdings, with some falls in equity markets also. I have concentrated on placing new capital into equity markets, and seeking to move my actual asset allocation closer to my target allocation over time.

Most of my financial moves this month have been incremental changes to how I fund longer-term irregular expenses. Around two years ago I moved to a system of regular deductions into higher interest allocated Ubank sub-accounts to set aside cash for car replacement, major insurance and holiday expenses. The system has worked well, but I had not revised its assumptions and structure materially after setting it up. By making a more realistic assumption on car replacement (every 8 years rather than five), and by taking into account my growing passive income and counting it as part replacement for a conservative emergency account, I have been able to free up some more cashflow (more than $8000 per annum) for regular investment.

The only substantial moves in the portfolio have been continued falls in Bitcoin, reducing its potential to add to future portfolio volatility (in a glass half full view), some falls in equity valuations, and some advance in the value of gold securities. I am looking through most of these changes and increasingly focused on what the end of first quarter dividends payments and distributions will bring, and the reinvestment opportunities that represents.

Progress

Progress to:

• objective #1: 87.1% or $191 137 further to reach goal.
• objective #2: 63.0% or $756 137 further to reach goal.

Summary

With time away from ordinary work this month, it has at times felt like a small trial of a future potential lifestyle, a weighing of one option for years ahead. Watching a portfolio shrink even as new investments are added is difficult, but I seek to recall that I have been investing in markets that are volatile steadily over around 20 years. This has caught upswings, periods of flatness, and the Global Financial Crisis. The next signal of progress will be my March quarter passive income, rather than abstracts updrafts or downdrafts in my portfolio.

The pursuit, even of the best things, ought to be calm and tranquil.

Cicero

This is my fifteenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December 2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $704 616
• Vanguard Lifestrategy Growth  – $42 310
• Vanguard Lifestrategy Balanced – $74 994
• Vanguard Diversified Bonds – $102 353
• Vanguard ETF Australia Shares (VAS) – $76 562
• Telstra shares – $4 652
• Insurance Australia Group shares – $20 358
• NIB Holdings – $8 436
• Gold ETF (GOLD.ASX)  – $77 905
• Secured physical gold – $10 684
• Ratesetter (P2P lending) – $48 179
• Bitcoin – $154 110
• Acorns app (Aggressive portfolio) – $9 895
• BrickX (P2P rental real estate) – $4 370

Total value: $1 339 424 (+$23 490)

Asset allocation

• Australian shares –  32 %
• International shares – 18%
• Emerging markets shares – 2%
• International small companies – 3%
• Total shares – 55.4% (5.6% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.2% (1.2% over)
• Australian bonds – 10%
• International bonds – 9%
• Total bonds – 19.6% (0.6% over)
• Cash – 1.3%
• Gold – 6.6%
• Bitcoin – 11.5%
• Gold and alternatives – 18.1% (3.1% over)

Comments

This month my attention has been focused on the small and welcome breakout of media exposure to the Australian FI movement, including Pat the Shuffler’s ABC piece, Aussie Firebug’s followup interview, and a broader piece in Fairfax on the movement as a whole.

Another activity carried over from last month has been continuing to optimise my insurance coverage. Previously, I had faithfully paid my home contents insurance each year, resolving to test the market next year, when I had more time. Over an hour or so one weekend recently, this finally happened. Four or five quotes later, I had a offer that saved around $180 per year, for the same coverage from a major reputable insurer. Most surprising was the reaction when I phoned my current provider, and asked them to consider the competing offers, and whether they wanted to adjust their quote. They offered a nominal discount, but indicated they could and would not match even the average of other offers. So from this month, I have switched providers and invested the difference in Acorns.

Bitcoin’s recovery from it’s falls earlier this year was the most dominant element of portfolio performance this month. A slow withdrawal from both Ratesetter and a drawdown of surplus funds in my emergency fund are providing a good cashflow to consider future quarterly investments in shares, in which I am still underweight. Other parts of the portfolio have not moved significantly.  Gold securities have risen, and most share markets have partially or fully recovered from the recent sharp falls, and much heralded return to volatility

Progress

Progress to:

• objective #1: 90.5% or $136 575 further to reach goal.
• objective #2: 65.6% or $701 575 further to reach goal.

Summary

This month has felt like a calm and steady accumulation of assets, even as market, portfolio volatility has fallen away. The growth in the overall portfolio is starting to be a increasing factor in thoughts about how I spend my time in the future, at the moment providing a cushion against uncertainty. Slowly, I am beginning to have more deliberate thoughts about how I value my time, what tradeoffs I am prepared to make for how long, and what ‘next’ could possibly look like.

My course is set for an uncharted sea

Dante

This is my fourteen portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December  2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $697 911
• Vanguard Lifestrategy Growth  – $42 305
• Vanguard Lifestrategy Balanced – $76 331
• Vanguard Diversified Bonds – $102 436
• Vanguard ETF Australia Shares (VAS) – $75 754
• Telstra shares – $4 892
• Insurance Australia Group shares – $17 998
• NIB Holdings – $8 022
• Gold ETF (GOLD.ASX)  – $76 331
• Secured physical gold – $9 907
• Ratesetter (P2P lending) – $51 663
• Bitcoin – $140 010
• Acorns app (Aggressive portfolio) – $9 417
• BrickX (P2P rental real estate) – $4 288

Total value: $1 315 934  (-$43 754)

Asset allocation

• Australian shares –  32 %
• International shares – 18%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 55.7% (5.3% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.2% (1.2% over)
• Australian bonds – 10%
• International bonds – 9%
• Total bonds – 19.6% (0.6% over)
• Cash – 1.3%
• Gold – 6.6%
• Bitcoin – 10.6%
• Gold and alternatives – 17.2% (2.2% over)

Comments

This month my overall portfolio has fallen with the dramatic reversal of previous gains in the price of Bitcoin. This has been the first genuine fall in my portfolio in over a year. Underlying this large headline change, however, has been no real progress in the equity elements of the portfolio, and some new investment of distributions.

For the reinvestment of the substantial distributions that came in from my Vanguard funds, I finally selected an increase in my Vanguard Australian Shares ETF (VAS) holdings. My reason for this was that I remain concerned at valuations in the US stock market, and Australian market valuations seemed less stretched. The greater tax effectiveness of franked Australian dividends was also a factor. Overall, another consideration was not seeking to increase the complexity of my portfolio with purchase of another type of ETF. Being an explorer by nature, however, I can forecast curiosity in the future overcoming this particular factor.

The new asset allocations adopted in resetting the compass at the start of the year means that I am actively looking for greater international share exposure in coming months, in as simple a format as possible. Removing the Bitcoin holdings from consideration, I am making good progress in absolute terms in moving closer to my ultimate 65% allocation target. Market movements are now playing a much greater role in affecting my allocations. At some point this will become difficult to manage through just control of new investments and distributions, leading me to potentially trigger some rebalancing sales. A decision I will need to increasingly think about is how often and when this rebalancing should occur. My current default would be twice yearly if required.

My other significant step has been to actively reconsider the level and value of life and income insurances, in light of my portfolio’s passive income record. Collectively, this has saved around $700 from two policies with AMP. All this saving required was a careful look at my own circumstances, a few emails, scanning and returning a few documents and a few follow up actions. To make sure I could see the impact of this, and avoid it being swallowed up by another expenditure category, I immediately invested the savings in my Acorns account.

Progress

Progress to:

• objective #1: 89.2% or $160 066 further to reach goal.
• objective #2: 64.5% or $725 066 further to reach goal.

Summary

This month has seen greater uncertainty and volatility in both my portfolio and work life, with significant but ultimately unclear changes on the horizon. My progress to date, and the strong portfolio position at the moment has made this volatility easier to disconnect from.

For example, I have found myself curiously relaxed about the fall in Bitcoin values, having perhaps never mentally locked in the large gains of last year. Rather, the steady accumulation of assets on a dollar cost averaged basis continues to underpin the growth in the underlying portfolio.

As I look back, I realise I have been awaiting an equity and bond market pull back for almost the entire length of this blog. A lesson in the risks of market timing, to be sure, however, I’m not convinced this won’t occur soon.