Monthly Portfolio Report – July 2023

Posted on August 1, 2023July 31, 2023 by The FI Explorer

The farther back you can look, the farther forward you are likely to see.
Winston Churchill

This is my eightieth monthly portfolio update. I complete this regular update to check progress against my goal.

Portfolio goal

My objective is to achieve and maintain a portfolio of at least $2,750,000 by 31 December 2024 or earlier. This should be capable of producing an annual income from total portfolio returns of about $94,800 (in 2023 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.45 per cent.

A secondary focus will be achieving the minimum equity target of $2,200,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$776,574
Vanguard Lifestrategy Growth Fund	$40,530
Vanguard Lifestrategy Balanced Fund	$72,853
Vanguard Diversified Bonds Fund	$87,316
Vanguard Australian Shares ETF (VAS)	$404,668
Vanguard International Shares ETF (VGS)	$592,416
Betashares Australia 200 ETF (A200)	$286,699
Telstra shares (TLS)	$2,270
Insurance Australia Group shares (IAG)	$7,513
NIB Holdings shares (NHF)	$9,936
Gold ETF (GOLD.ASX)	$131,560
Secured physical gold	$20,805
Bitcoin	$488,404
Raiz app (Aggressive portfolio)	$21,631
Spaceship Voyager app (Index portfolio)	$3,549
BrickX (P2P rental real estate)	$4,451
Total portfolio value	$2,951,175 (+$22,458)

Asset allocation

*Australian shares*	*35.1%*
Global shares	32.4%
Emerging market shares	1.4%
International small companies	1.8%
Total international shares	35.7%
Total shares	70.8% (-9.2%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.2%
International bonds	5.1%
Total bonds	7.3% (+2.3%)
Gold	5.2%
Bitcoin	16.5%
Gold and alternatives	21.7% (+6.7%)

Presented visually, the pie chart below is a high-level view of the current asset allocation of the portfolio.

Comments

This month the financial independence portfolio increased modestly at a ‘headline’ figures level, with an increase of 0.8 per cent, or around $22,000.

What may be easily missed, however, is that this relatively modest headline movement compared to last month obscures a set of wider incremental changes that continue to subtly reshape the portfolio from within.

As an example, looking at only the non-Bitcoin ‘financial portfolio’ shows a growth of around $48,000 – which is actually a greater level of expansion than the equivalent movement in financial assets last month. The equity portfolio has advanced to 95 per cent of its eventual target, or $2.09 million.

So beneath the apparent steadiness of the monthly portfolio value this month there sits some emerging, and no doubt some ebbing or changeable, trends.

Australian equities advanced around 2.0 per cent in capital growth terms through the month, while international equities posted similar gains of around 2.2 per cent over the same period.

Portfolio Income Update – Half Year to June 30, 2023

Posted on July 17, 2023September 12, 2023 by The FI Explorer

And since I am embarked on the boundless sea and have spread my full sails to the winds, there is nothing in all the world that keeps its form. All things are in a state of flux, and everything is brought into being with a changing nature.
Ovid, Metamorphoses, Bk.XV

Twice a year I prepare a summary of total income from my financial independence portfolio. This is my fourteenth portfolio income update since starting this record. As part of the transparency and accountability of this journey, I regularly report this income.

My primary goal is to maintain a portfolio of at least $2,750,000 which is capable of providing a passive income of around $94,800 (in 2023 dollars).

A secondary focus is achieving a minimum equity target of $2,200,000.

Portfolio income summary

Investment	Amount
Vanguard Lifestrategy High Growth (retail fund)	$16,568
Vanguard Lifestrategy Growth (retail fund)	$928
Vanguard Lifestrategy Balanced (retail fund)	$833
Vanguard Diversified Bonds (retail fund)	$102
Vanguard Australian Shares ETF (VAS)	$6,187
Vanguard International Shares ETF (VGS)	$7,245
Betashares Australia 200 ETF (A200)	$4,532
Telstra shares (TLS.ASX)	$45
Insurance Australia Group shares (IAG.ASX)	$76
NIB Holding shares (NHF.ASX)	$156
Raiz app (Aggressive portfolio)	$251
Spaceship Voyager app (Index portfolio)	$0
BrickX (P2P rental real estate)	$19
Total Portfolio Income – Half-Year to June 30, 2023	$36,942

The chart below sets out the income or distributions received on a half-yearly basis from the financial independence portfolio over the past seven years.

True Wind – A History of Taxable Investment Income

Posted on October 16, 2021October 16, 2021 by The FI Explorer

My treasure’s in the harbour, take it.
_{Shakespeare, Antony and Cleopatra, Act 3, Scene 11}

Introduction – why analyse taxable income investment?

Each year measuring taxable investment income produced by the financial independence portfolio has provided an alternative independent benchmark of progress on the journey to the portfolio goal.

This measure is distinct from the regularly reported portfolio distributions, through being generated entirely from annual tax records.

Generally, my portfolio income analysis focuses solely on ‘after-tax’ dollars received in the bank account as the primary data. This is reported twice a year.

Nevertheless, this separate annual series of taxable investment income can also help illustrate progress. For example, it can highlight exactly what my taxable income might be in the absence of any paid work. That is, if early retirement was taken today.

Last year some analysis showed some broad trends. More time and new data, however, now provides the opportunity for a longer and fuller view of trends in taxable investment income across the journey.

This longer read post expands the analysis from the last review. It builds into this review data from four additional years of tax records covering the earlier phases of the journey.

The theme of this analysis is how the momentum of gradual progress can build over 15 years, turning a breath of wind into a powerful force through time, and compounding as the years pass.

Along the way it also corrects some minor inconsistencies in data reporting on dividends and franking credits in earlier years of previous analysis.* It also refines the analysis through a greater focus on income from income-producing financial assets, rather than all portfolio assets.

Taxable income investment grows significantly over 2020-21

Taxable investment income for financial year 2020-21 totalled over $68,000. This is a more than 60 per cent increase from the past two financial year totals of around $42,000.

Taxable investment income is defined here as the combined totals of taxable income from the tax assessment categories of partnerships and trusts, foreign source income, franking credits and ‘other income’.

That is, the measured taxable investment income is the total of Items 13, 20 and 24 on the 2021 tax return. Capital gains under Item 18 are excluded.

Figure 1 below shows the levels of taxable investment income for the past fifteen years. This is expanded to cover four additional earlier years, from 2006-07 to 2009-10.

[Chart - Figure 1 - Trends in Taxable Investment Income]

Line of Position – Superannuation and the Financial Independence Portfolio

Posted on September 14, 2021September 14, 2021 by The FI Explorer

A ship should not ride on a single anchor, nor life on a single hope.
Epictetus, Golden Sayings, Fragment xvi

Setting out: looking beyond the horizon

In sea navigation, lines of position allow the fixing of the true position of a ship by helping to account for drift from wind or currents.

Each month this record regularly assesses the position reached with a relatively narrow focus on changes and trends affecting the financial independence portfolio. This is consistent with the intention of documenting a journey towards financial independence, and retirement well before the traditional age.

The primary focus on financial independence has meant that until the beginning of 2019, I did not regularly record the impact of superannuation on the achievement of the portfolio’s objectives.

From that time, I recorded a simple ‘All Assets’ measure of progress, which effectively counted the impact of superannuation on the measures. Typically, super has recently represented around 30 per cent of additional ‘buffer’ on progress against the goals set.

In this longer post, the aim is to look beyond the FI portfolio which is reported on, and provide more detail on what the whole financial asset picture looks like – taking into account both superannuation and the FI portfolio.

Measuring the changing position across the journey so far

The goal and plan has always been to target financial independence through my private investment portfolio alone, with superannuation perhaps providing an additional margin of safety.

Reflecting this, superannuation – the approximate Australian equivalent to 401K accounts in the US – has been a quietly evolving part of this financial journey in the background, since the earliest phases.

Over time, I have generally sought to contribute beyond the minimum guarantee amounts, making voluntary contributions with the approximate target of reaching an average 15 per cent of earnings in overall contributions.

This has resulted in a steady growth in the superannuation across time, as can be seen in Figure 1 below.

Clearly evident above are the impact of some market declines – in the second half of 2018, and the most recent March 2020 market falls. Yet also as apparent is the overall trend of steadily compounding returns across time.