I was waiting for something extraordinary to happen, but as the years wasted on nothing ever did unless I caused it.
Charles Bukowski
Year in Review
This year has represented a significant pause, or lacunae, in the journey to financial independence.
This is not unexpected, indeed many prior entries have meditated on exactly this potential – for a significant delay or reversal of progress.
The engine of this significant reversal is market volatility, combined with the growing size of the portfolio. This means the direction and pace of travel is less within one’s choosing than at any other time.
At the start of this year, the portfolio goal was notionally met. The focus of this year was intended to be:
- maintaining the overall portfolio target of $2.62 million;
- achieving a minimum equity portfolio target of around $2.1 million; and
- building a cash reserve of at least one year of normal expenditure.
The original focus of this year was on the latter two objectives, but in fact, none of the objectives have survived contact with markets this year.
For the past half a year, the portfolio has slipped significantly below the target. The minimum equity portfolio has not been reached. Further investments to achieve the first two objectives has meant no meaningful progress on building a cash reserve.
In turn, this means that the three essential pre-conditions which were set for any movement from my current work arrangements are not within immediate reach.
The concerted negative movement against the financial independence benchmarks through this year is summarised below.
Progress against FI measures through 2022
| Measure | Portfolio | All Assets |
| Portfolio objective – $2,620,000 (or $91,600 pa) | 113%→93% | 144%→123% |
| Total average expenses (2013-present) – $84,700 pa | 122%→101% | 156%→133% |
| Target equity holding in portfolio – $2,100,000 | 88%→87% | N/A |
2021 was an exceptional year of growth in the portfolio. This year was the reverse of this, an unprecendented period of major contraction in the portfolio.
The portfolio was reduced in value by around $500,000 this year, or around 17 per cent of its size on 1 January 2022. This is both the largest dollar loss – and proportional loss of portfolio value – in a single calendar year.
The only other year of loss over a calendar year period was in 2018, where around a 3 per cent (or around $40,000) loss was suffered.
Sailing against the wind: the course of the voyage
This year has felt like sailing against a strong wind. Progress has not been apparent, and temporary periods of advances have invariably been succeeded by backward pushes.
Most starkly, despite regular investments and reinvestments of earnings, the overall equity portfolio remains below where it started the year, despite a modest recovery through the second part of this year.
Highlighting this point, 2022 has been the only calendar year in which there has been a overall reduction in value of equities on the journey to date.
Continue reading “Year in Review and Monthly Portfolio Update – December 2022”
