Peril of Waters – Mapping the Equity Portfolio

Posted on June 16, 2020June 16, 2020 by The FI Explorer

Ships are but boards, sailors but men.

There be land-rats and water-rats, water

thieves and land thieves, I mean pirates,

and then there is the peril of waters, winds and rocks.

Shakespeare, The Merchant of Venice

Equities have historically been the most reliable and effective wealth-generating asset class, and provide the main impetus – or centre of effort – for my current journey to financial independence.

The success of this journey relies heavily on equities continuing to provide, over the years and decades ahead, consistently high market returns on a risk-adjusted basis.

The financial independence portfolio is built on a passive index approach to Australian and global equities. This means investments in equity market index funds automatically occur in proportion to the market capitalisation of each company, sector and market.

Until recently, this led to benign neglect in the details of just what structurally made up the equity component of my portfolio. This neglect can no longer be justified – especially as the equities investments continue to make up around 70 per cent of the overall portfolio.

The exploration of the bond portfolio late last year has provided both an impetus and a model to better understand both the individual components and overall shape of the equity portfolio.

This longer read article explores the make up of Australian and global equities within the financial independence portfolio. It looks beneath the individual investment vehicles and analyses exactly how and where it is currently invested.

Here, in the equities area, the goal is to simply observe, rather than to identify areas for changes for future investment. In short, to understand broadly where the dollars in the equity portfolio are actually invested.

Continue reading “Peril of Waters – Mapping the Equity Portfolio”

Monthly Portfolio Update – January 2020

Posted on February 1, 2020July 14, 2020 by The FI Explorer

The day advanced as if to light some work of mine

Thoreau, Walden

This is my thirty-eighth portfolio update. I complete this update monthly to check my progress against my goal.

Portfolio goal

My objective is to reach a portfolio of $2 180 000 by 1 July 2021. This would produce a real annual income of about $87 000 (in 2020 dollars).

This portfolio objective is based on an expected average real return of 3.99 per cent, or a nominal return of 6.49 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund – $813 282
Vanguard Lifestrategy Growth Fund – $45 802
Vanguard Lifestrategy Balanced Fund – $83 162
Vanguard Diversified Bonds Fund – $110 472
Vanguard Australian Shares ETF (VAS) – $178 121
Vanguard International Shares ETF (VGS) – $34 965
Betashares Australia 200 ETF (A200) – $272 399
Telstra shares (TLS) – $2 046
Insurance Australia Group shares (IAG) – $8 970
NIB Holdings shares (NHF) – $6 492
Gold ETF (GOLD.ASX) – $106 701
Secured physical gold – $17 252
Ratesetter (P2P lending) – $14 755
Bitcoin – $153 530
Raiz app (Aggressive portfolio) – $18 365
Spaceship Voyager app (Index portfolio) – $2 534
BrickX (P2P rental real estate) – $4 477

Total portfolio value: $1 873 325 (+$94 067)

Asset allocation

Australian shares – 42.8% (2.2% under)
Global shares – 22.6%
Emerging markets shares – 2.4%
International small companies – 3.1%
Total international shares – 28.1% (1.9% under)
Total shares – 70.9% (4.1% under)
Total property securities – 0.2% (0.2% over)
Australian bonds – 4.5%
International bonds – 9.5%
Total bonds – 14.0% (1.0% under)
Gold – 6.6%
Bitcoin – 8.2%
Gold and alternatives – 14.8% (4.8% over)

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

Pie alloc Jan 20

Comments

This month saw exceptional growth in the portfolio, with a net increase of $94 000 after a small fall last month. Monthly prog Jan 20 This is the fastest growth in the past half year. It is also the second largest absolute increase in over three years of measurement.

As the histogram below – which counts the frequency of occurrences in a specified range of monthly value changes (with red denoting losses) – makes clear, this is one of the most positive outcomes in the three year record.

Continue reading “Monthly Portfolio Update – January 2020”

There Lies the Port – Year in Review and Monthly Portfolio Update – December 2019

Posted on January 1, 2020February 15, 2021 by The FI Explorer

There lies the port; the vessel puffs her sail:

There gloom the dark, broad seas.

Tennyson, Ulysses

Year in Review

This year began with a review of my portfolio goals, designed to update the financial independence targets to reflect the median and mean average of annual full-time earnings.

The review also introduced a number of personal financial independence benchmarks, such as meeting credit card expenses or an estimate of actual expenditure through assumed average portfolio earnings. In addition, this year introduced reporting progress on an ‘All Assets’ basis (taking into account superannuation holdings), as well as an immediately accessible portfolio basis.

Destinations closing – The long day wanes

These changes left no less than eight metrics to track and report on. At the beginning of 2019, I had met only two of these eight financial independence measures (Objective #1 and ‘Credit card purchases’ on an all assets basis).

As 2019 closes, six of the eight measures have been met or exceeded, and by contrast only two remaining outstanding.

These two measures remaining to be met are reaching Objective #2 and a portfolio total that would allow the funding of current expenses from the FI portfolio alone. For both, I close out the year within fairly clear sight of these unmet goals. Progress through the year is summarised below.

Continue reading “There Lies the Port – Year in Review and Monthly Portfolio Update – December 2019”

Monthly Portfolio Update – November 2019

Posted on December 1, 2019January 16, 2022 by The FI Explorer

My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year
Therefore my merchandise makes me not sad

Shakespeare, The Merchant of Venice (1596)

This is my thirty-sixth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My objectives are to reach a portfolio of:

$1 598 000 by 31 December 2020. This should produce a passive income of about $67 000 (Objective #1) – Achieved
$1 980 000 by 31 July 2023, to produce a passive income equivalent to $83 000 (Objective #2)

Both of these are based on an expected average real return of 4.19 per cent, or a nominal return of 7.19 per cent, and are expressed in 2018 dollars.

Portfolio summary

Vanguard Lifestrategy High Growth Fund – $797 618
Vanguard Lifestrategy Growth Fund – $45 218
Vanguard Lifestrategy Balanced Fund – $81 294
Vanguard Diversified Bonds Fund – $109 367
Vanguard Australian Shares ETF (VAS) – $158 769
Vanguard International Shares ETF (VGS) – $28 471
Betashares Australia 200 ETF (A200) – $268 114
Telstra shares (TLS) – $2 057
Insurance Australia Group shares (IAG) – $9 996
NIB Holdings shares (NHF) – $8 100
Gold ETF (GOLD.ASX) – $98 376
Secured physical gold – $15 868
Ratesetter (P2P lending) – $16 915
Bitcoin – $128 630
Raiz app (Aggressive portfolio) – $17 535
Spaceship Voyager app (Index portfolio) – $2 377
BrickX (P2P rental real estate) – $4 418

Total portfolio value: $1 793 753 (+$33 713)

Asset allocation

Australian shares – 43.2% (1.8% under)
Global shares – 22.9%
Emerging markets shares – 2.4%
International small companies – 3.2%
Total international shares – 28.4% (1.6% under)
Total shares – 71.6% (3.4% under)
Total property securities – 0.2% (0.2% over)
Australian bonds – 4.8%
International bonds – 9.8%
Total bonds – 14.6% (0.4% under)
Gold – 6.4%
Bitcoin – 7.2%
Gold and alternatives – 13.5% (3.5% over)

Presented visually, below is a high-level view of the current asset allocation of the portfolio. Pie November 19

Comments

This month the value of the portfolio increased again by around $33 000 in total, building on the previous two months of growth.

Monthly prog Nov 19

The equity part of the portfolio has grown by around $50 000 to now reach over $1.25 million for the first time. This increase includes new contributions and the last part of the previous June distributions being ‘averaged into’ equity markets. The equity component of the portfolio has increased by around 40 per cent this calendar year.

Continue reading “Monthly Portfolio Update – November 2019”