Monthly Portfolio Update – December 2016

Posted on by The FI Explorer

I keep a diary in order to enter the wonderful secrets of my life. If I didn’t write them down, I should probably forget all about them.

Oscar Wilde, The Importance of Being Earnest

This is my first portfolio update. I aim to update this monthly to check my progress against my aims.

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%.

Those return estimates are the result of a probably unhealthy amount of detailed research about average returns of different asset classes, especially equites and bonds. As this was a quite involved process, I will post on it separately. I’m encouraged, though, that it seems to roughly equate to the widely used ‘4% rule’.

Portfolio summary

  • Vanguard Lifestrategy High Growth – $579 423
  • Vanguard Lifestrategy Growth  – $42 393
  • Vanguard Lifestrategy Balanced – $75 740
  • Vanguard Diversified Bonds – $111 009
  • St Andrews ‘Top 200’ Australian shares (indexed) – $11 929
  • Telstra shares – $6 798
  • Insurance Australia Group shares – $14 963
  • NIB Holdings – $5 700
  • Gold ETF (GOLD.ASX)  – $74 008
  • Secured physical gold – $1 809
  • Ratesetter (P2P lending) – $33 782
  • Bitcoin – $12 946
  • Acorns app (Aggressive portfolio) – $3 735
  • BrickX (P2P rental real estate) – $2 066

Total value: $976 311

Asset allocation

I track my asset allocation twice through each year, rather than monthly, but here is where that stood at the end of December.

  • Australian shares – 31%
  • International shares – 21%
  • Emerging markets shares – 3%
  • International small companies – 3%
  • Total shares – 58%
  • Australian property securities – 4%
  • International property securities 3%
  • Total property – 7%
  • Australian bonds – 12%
  • International bonds – 12%
  • Total bonds – 24%
  • Cash – 1.8%
  • Gold and alternatives – 9.1%

Comments

The core of the portfolio are low-cost Vanguard index funds, and aside from some smaller shareholding picked up over time, the portfolio contains no actively managed products.

When I look at the portfolio above, dear reader, my reaction is “so much to explain”. Behind every holding there is a story and logic, at least there was at the time of initial investment! I’m very conscious that it is not the simplest portfolio possible in the circumstances. It mainly reflects three things – the time at which I discovered certain products, my previous explorations, and also a continuing curiosity about trying a few different products once my core indexed portfolio was fairly well established.

My goal is to simplify some of these holdings over time, and to continue, at the edges, to try and take advantage of and try some of the really interesting new fintech products as they are launched.

Progress

Progress to goal: 66.1%

Summary

First portfolio update done! I hope to introduce a few more charts and progress bars over time, as I get more of a handle on the tools and what’s possible. It feels good to be ‘two-thirds’ of the way to my goal. I’m looking forward to explaining my portfolio elements in a bit more detail in future posts.

 

 

Setting Sail – 2017 Goals and Plans

Posted on by The FI Explorer

Our plans miscarry because they have no aim. When a man does not know what harbor he is making for, no wind is the right wind.
Seneca

New Years Resolutions were never really my thing, but for about ten years, I have kept track of my net worth and portfolio. Twice a year, with only a few gaps over the past decade, I tended spend an afternoon in front of my laptop, with an Excel file, working out what has happened over the past six months.

Truth is, I don’t know what made me choose this approach, especially as I also have long updated my net worth and account balances on a weekly basis. It’s perhaps a sign that I have some repressed accountant genes or something. Somewhere (it might have been William Bernstein’s Four Pillars of Investment) I had picked up the idea that what I needed was plan, or an investment policy, and a system of regularly reporting and analysing the results.

Ten years later, this process has evolved a lot. The excel spreadsheet is a spidery tribute to growing complexity, trial and error experimentation, and a healthy interest in quantification of all kinds of different numbers and ratios. For a long time, for example, I enjoyed tracking the number of weeks I could afford to live with my current expenses, with no income. A kind of early financial independence impulse, I guess.

Yet in many essential features, while the plan has evolved, the process still involves the same steps:

  • working out how to manage my savings and portfolio
  • deciding an asset allocation between alternatives such as shares, bonds and other asset types
  • setting a goal for my portfolio – usually comfortably in the distance, with years beginning in the 2020’s
  • taking all of the above and turning it into steps and actions for the six and twelve months ahead

My main goals for 2017 are:

  1. Continue to invest in low-cost passive index approaches (mostly…see goal 5)
  2. Contribute $75 000 to my existing portfolio regularly using dollar cost averaging
  3. Achieve total interest and distributions of $28 000
  4. Maintain an emergency fund of around 12 months of expenses
  5. Keep on experimenting at the edges of finance technology and new products – particularly with passive index-based Exchange Traded Funds

Going for a post New Years Eve bike ride today, I listened to one of my favourite podcasts at the moment – the Mad Fientist. He was interviewed Fiery Millennials and Millennial Boss, and both emphasised the role of making goals public to foster accountability. I aim to give regular updates on progress towards these goals.

So I have set my sails, and leave harbour!

An Unexpected Journey – An Introduction

Posted on by The FI Explorer

 

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This journey started unexpectedly when over the past two years, after just under 20 years of saving and investing, it became possible to imagine reaching financial independence over the next five or so years.

As this realisation dawned, I began to consume more financial blogs, articles and books, and wonder if there might be some invisible catch…some trick or oversight that meant it could not be done.

This blog aims to find that out.

Many financial blogs are aimed at either getting the absolute basics of achieving financial independence (get out of debt and saving) or at describing the rewarding lifestyles many have achieved after reaching their goals.

There are many fascinating blogs out there that have inspired this first step, such as Aussie Firebug, Dividends Downunder and Financial Samurai. Relatively few that I have found (and I acknowledge this may be my fault!) seem to come from the perspective of that “in between” time when the goal is in sight, even if a little distant.

What I also want to share is my exploration of different investment and finance tools and apps. I have a curious nature. If I can help anyone who may also be curious about the exciting new ways to invest and save from my own small explorations, that will be rewarding.

My interests are low cost investing, financial economics, new technologies, and, incongruously enough, ancient history. Blogging is completely new to me, and I am seeking to learn as I go.

The first day of a New Year seemed the best time to start a new journey.

Thank you for reading these first steps. Please do join me on this unexpected journey, and let’s see where it leads!

The FI Explorer