The dangers of life are infinite, and among them is safety.

Goethe

This is my seventh portfolio update. I complete this update 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 – $658 142
• Vanguard Lifestrategy Growth  – $43 422
• Vanguard Lifestrategy Balanced – $77 463
• Vanguard Diversified Bonds – $109 494
• Telstra shares – $5 731
• Insurance Australia Group shares – $16 936
• NIB Holdings – $6 900
• Gold ETF (GOLD.ASX)  – $74 678
• Secured physical gold – $5 955
• Ratesetter (P2P lending) – $56 747
• Bitcoin – $32 365
• Acorns app (Aggressive portfolio) – $5 998
• BrickX (P2P rental real estate) – $3 927

Total value: $1 097 758

Asset allocation

• Australian shares – 30%
• International shares – 21%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.7% (4.3% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7.1%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 24.3% (5.3% over)
• Cash – 1.6%
• Gold and alternatives – 10.3% (0.3% over)

Comments

The overall portfolio is up around $5 000 this month from a combination of new investments and downward market movements.

Looking back to the last update, the significant changes have been a further appreciation of the Bitcoin holdings in the portfolio, some declines in the value of gold ETFs, and further expansions into the Brickx real estate platform, as new properties were offered.

As can be seen, the portfolio allocation to equities continues to be below target. This is despite regular significant investments to the Vanguard high growth fund (itself around 90 per cent equities). This is challenging, because despite the allocation remaining underweight, I am not confident that the Australian equity market is not over-valued. The other driver to the misallocation is my experimentation with Ratesetter, which effectively shows up in an above target allocation to fixed interest and bonds.

For the past three years I have been comfortable with this slight imbalance, however, the issue will become pressing when distributions for the half year just past are paid. This, in many ways, feels like far more  significant ‘information’ about my journey to my objective than the absolute level of the portfolio. It will determine if the year target of $28 000 was unrealistic, and provide, crucially, more guidance on what is a dependable level of passive income from the portfolio.

My current intention is to either slowly feed these distribution into the Vanguard high growth fund, or potentially take the leap into Vanguard ETFs. This will force a choice between lump sum investing, or dollar cost averaging, a long-standing investment and FI debate centred on psychology versus historical experience to date. In short, do I give weight to the darker clouds, or the sun seeking to shine through?

Some developments in personal circumstances this month means that some uncertainty over my future investing capacity and plans has receded. This means that should the darkening clouds start to break, there is a better chance of investing aggressively through a market decline.

Thinking about this made me curious about my past record of investing during challenging periods. Instead of speculating about it, or worse, discovering the truth only halfway through a decline, I decided to track back through my records and find out. This turned into a bit of project (of more later), but they showed that across 2008-2009 my contributions into markets were about $50 000 each year. Which is not too bad, especially considering that in 2009 I changed jobs, and spent some time without any earned income.

Progress

Progress to goal: 74.4% (+10.0% ahead of target) or $378 242 further to reach goal.

Summary

Writing this update – and ending the financial year – without finally knowing the level of my passive income over the past six months makes this feel incomplete. I will provide my half yearly passive income update in the next few days, as the data becomes available.

The sensation of markets kept aloft, not offering good clear information on value, and being precarious remains strong. Perhaps this is why I am so eagerly looking forward to the concreteness, the reality, of distributions as a signpost of how far I have still to travel. The resolution of uncertainty, as well as lots of reading and listening to other FI bloggers, such as Adventures with Poopsie, Aussie Firebug, and Retire Before Dad have been keeping me motivated for the next stage of the exploration.

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.