To him who is in fear, everything rustles

Sophocles

This is my sixth portfolio update. I aim to update this monthly to check my progress against my original goals.

Portfolio goal

My current portfolio objective is to reach a portfolio of $1 476 000 by 1 July 2021. My plan is that this should produce a real income of about $58 000. This is based on a real return of 3.92%, or a nominal return of 7.17%.

Portfolio summary

• Vanguard Lifestrategy High Growth – $653 150
• Vanguard Lifestrategy Growth  – $43 561
• Vanguard Lifestrategy Balanced – $77 698
• Vanguard Diversified Bonds – $109 821
• Telstra shares – $5 878
• Insurance Australia Group shares – $15 987
• NIB Holdings – $6 168
• Gold ETF (GOLD.ASX)  – $78 732
• Secured physical gold – $5 584
• Ratesetter (P2P lending) – $56 303
• Bitcoin – $30 409
• Acorns app (Aggressive portfolio) – $5 778
• BrickX (P2P rental real estate) – $3 205

Total value: $1 092 274

Asset allocation

• Australian shares – 30%
• International shares – 21%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.5% (3.5% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 24.3% (4.3% over)
• Cash – 1.7%
• Gold and alternatives – 10.5% (0.5% over)

Comments

The overall portfolio is up around $24 000 this month from a combination of new investments and market movements.

The largest market movement has been a near doubling of the value of my Bitcoin holdings. I hold 9.75 Bitcoins, purchased after listening to an Econtalk podcast with one of the founders of Xapo (a Bitcoin wallet and vault provider). The question posed by the guest was whether it might be wise to simply purchase a few Bitcoin ‘in case’ the model became widely adopted.

Being interested, I did so at an average cost of around USD$430, as much to understand the concept as to seek to profit. Bitcoin is volatile, and I hesitated before even considering it as part of my portfolio. I consider it a highly speculative holding, with enough similar characteristics to gold holdings that I consider the holdings together. Its trajectory over the last few weeks has been astounding, but already a significant reversal appears to be underway.  As a result of the run up, however, my gold and alternatives portfolio is slightly above its intended allocation.

Whilst mentioning asset allocation, I have for this monthly update standardised my asset allocation figures above, correcting an error which had crept into previous updates. My current year share allocation is 60%, with a 20% allocation to bonds. Over the next few years based on my investment policy I intend to glide this allocation up to 65% and down to 15% respectively. My previous reports did not reflect this year by year ‘sliding’ allocation change, but rather the end point, making my equity position look more under allocation than was actually the case.

Over the past month I have also marginally increased my allocation to the Brickx real estate platform, taking up an offer to subscribe into ‘bricks’ of a new Surry Hills unit property. The property is a $1.4 million unit, with a rental yield of 1.75%. This does not feel like a bargain. This investment is made as media reports continue to call the top of the Sydney and Melbourne property market.

My reasoning for the investment is to seek to diversify my holdings of real property across a greater number of investments, and secondarily, as a contrarian hedge on a wide set of market commentators being incorrect about the top of the market. Having said all that, it’s far more likely they are right, and my preference would be to invest in this new fractional form of ownership as the bubble deflated.

Progress

Progress to goal: 74.0% (+7.0% ahead of target)

Summary

As each month goes by, seeing small and steady progress to my target goal, I continue to think about the end point, and trying to imagine what it will feel like having met that goal. Inevitably, doubts surface. Do I need to reassess the goal? Would the income of that target goal be sufficient for what I would want to do? I need to do some thinking about what an ideal post work life would be, how my days and weeks would be structured. In part, my natural instinct is to defer, shy away from such hard thinking, I think at base because I have difficulty accepting I am actually this close to such an outcome.

This is all reinforced by a sense of unreality of markets today, exemplified by what has happened to the small Bitcoin holding in the portfolio. The Australian share market is not as overvalued as US markets, and therefore less risky, but this does not feel like the optimum time to be, as I am, shovelling large amounts of cash into equities. Nonetheless it is what my plan suggests, and so far, at least, I am gritting my teeth and keeping on course.

 

Tweet

Time brings all things to pass

Aeschylus, The Libation Bearers

This is my fifth portfolio update. I aim to update this monthly to check my progress against my original goals.

Portfolio goal

My current portfolio objective is to reach a portfolio of $1 476 000 by 1 July 2021. My plan is that this should produce a real income of about $58 000. This is based on a real return of 3.92%, or a nominal return of 7.17%.

Portfolio summary

• Vanguard Lifestrategy High Growth – $644 835
• Vanguard Lifestrategy Growth  – $43 390
• Vanguard Lifestrategy Balanced – $77 538
• Vanguard Diversified Bonds – $108 850
• Telstra shares – $5 625
• Insurance Australia Group shares – $15 512
• NIB Holdings – $7 200
• Gold ETF (GOLD.ASX)  – $78 333
• Secured physical gold – $5 198
• Ratesetter (P2P lending) – $55 915
• Bitcoin – $17 433
• Acorns app (Aggressive portfolio) – $5 299
• BrickX (P2P rental real estate) – $2 658

Total value: $1 067 786

Asset allocation

• Australian shares – 30%
• International shares – 21%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 57% (8% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 25% (10% over)
• Cash – 1.7%
• Gold and alternatives – 9.5%

Comments

The overall portfolio is up around $32 000 this month from a combination of new investments and market movements.

The most significant transaction this month has been the closure of my St Andrews Australia Share ‘Top 200’ index fund. This wasn’t by choice, the fund closed and returned investor funds as part of that process. It did mean, however, a stop to paying an investment fee rate of 1.65% per annum, which I was glad about. I had originally intended to use the return of funds to open my explorations of Vanguard ETFs, but this ran into a hitch. The brokerage firm I use requested that I sign a complex warrants disclaimer form, allowing me to trade in this apparently ‘exotic’ product. This didn’t sound right, so I have been doing some further investigations, before I commit any funds.

The early answer seems at this stage to be that the other ETF I own is unusual for not being structured as a warrant, and that this is not an unreasonable requirement. As I did not want the funds to sit outside the market while this question was answered, though, I took a ‘no regrets’ course and invested the $13 000 into the Vanguard High Growth fund that has a marginal annual fee of 0.35%, locking in an annual fee saving of about $170. All going well, I expect to try out a Vanguard ETF with the next available lump sum.

The most satisfying investment activity this month has been taking some of my old games consoles (N64, PS2 & PS3) and games into a second hand dealer, and obtaining cash for them. This has two payoffs, a reduction in clutter around the house, and more cash to invest, via Acorns. Putting these cash amounts into my Acorns portfolio, and seeing the amount invested grow by similar daily savings has been a really motivating way of incentivising finding those little extra steps to save a few additional dollars.  The $5000 or so in that account comes purely through those daily savings actions, taken over around a year.

My gold and bitcoin holdings continue to grow, which reflect the uncertain economic conditions at the moment, and, I assume, some China capital outflow. The top of the Australian property market is being called, rung out, on an almost daily basis. In fact, it received top billing on the day I invested around $250 more through the BrickX platform in a new Darlinghurst property. This makes me very cautious about expanding my BrickX holdings, despite my interest in the platform. I invested to achieve greater diversification within my BrickX portfolio (current fractional interests in 7 properties in Sydney and Melbourne).

Progress

Progress to goal: 72.3%

Summary

Markets continue to be very expensive, making me nervous about deploying new capital. There is more than a hint of the feeling of 2006-07 around, and I find myself thinking about how an Australian financial sector encountering a US or Irish style housing slow down looks like, in housing, equity market and employment terms.

In a way, this blog is a way of indulging these ‘market timing’ prognostications, without letting them influencing my investment decisions. A form of whistling past the graveyard. Podcasts continue to be another really source of motivation and thoughts, recently I have been listening to ChooseFI, who have just done a special on US FI guru J L Collins’ famous ‘Stock Series’. It’s worth a listen, and has me pondering some of the ideas, and unquestioned assumptions underlying that series.

If you have a garden and a library, you have everything you need.

Marcus Tullius Cicero

This is my fourth portfolio update. I aim to update this monthly to check my progress against my original goals.

Portfolio goal

My current portfolio objective is to reach a portfolio of $1 476 000 by 1 July 2021. My plan is that this should produce a real income of about $58 000. This is based on a real return of 3.92%, or a nominal return of 7.17%.

Portfolio summary

• Vanguard Lifestrategy High Growth – $608 318
• Vanguard Lifestrategy Growth  – $42 808
• Vanguard Lifestrategy Balanced – $76 407
• Vanguard Diversified Bonds – $111 730
• St Andrews ‘Top 200’ Australian shares (indexed) – $12 294
• Telstra shares – $6 211
• Insurance Australia Group shares – $15 112
• NIB Holdings – $7 104
• Gold ETF (GOLD.ASX)  – $75 087
• Secured physical gold – $4 146
• Ratesetter (P2P lending) – $55 516
• Bitcoin – $13 509
• Acorns app (Aggressive portfolio) – $4 652
• BrickX (P2P rental real estate) – $2 277

Total value: $1 035 183

Asset allocation

• Australian shares – 31%
• International shares – 20%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 57% (8% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 25% (10% over)
• Cash – 1.7%
• Gold and alternatives – 9.0%

Comments

The overall portfolio is up around $21 000 this month from a combination of new investments and market movements. I remain as concerned as in past months about both equity markets and property markets. Pilots of fast jets, passenger and military, are taught about the aerodynamic concept of the ‘coffin corner’  – an extreme combination of altitude and speeds, at which the ‘stall’ speed at which an aircraft will fall out of the sky approaches the maximum functioning speed of an aircrafts wings.  Equity, and Australian property markets feel like they are creeping up on that corner.

Despite this, I continue to buy new units in Vanguard’s high growth index fund twice a month. These conditions have deterred me from expanding my BrickX holdings further, despite being impressed with the accessibility and features of the product they offer (including investor webinars, which I participated in a few weeks ago). Should the updraft continue, it brings me closer to my goals, should there be a sharp correction, I hope to feel easier about new contributions of capital.

Over the next month, these types of choices will become less theoretical, because an AMP owned  Australian equity index fund (‘Top 200’) is due to close, and return the capital to investors. There will also be some dividend income and bond fund payments. This will be the trigger for my next exploration, this time into Vanguard exchange traded funds, which I have been looking more closely at recently.

This past month has been very busy, so my main FI activities has been podcasts. I made my way through Aussie Firebug’s back catalogue of podcasts. It is amazing to hear an Australian turning out some really interesting interviews, so thank you!

Progress

Progress to goal: 70.1%

Summary

This is the first quarter which I have tracked through this blog. I am still intending to post more frequently, between monthly reviews. Increasingly, as dates in the medium term future are mentioned, I’m consciously wondering ‘what will I be doing at that time, will I have reached FI? and left work?’. Will a garden and a library suffice – as Cicero would say they should?

Progress does seem incremental and slow at this stage, but I realise this is an illusion. Annualised, my current trajectory would see my net worth increase by $200 000 this year, which seems impossible to conceive.