Month: January 2017

Portfolio Income Update – Half Year to December 31, 2016

Posted on by The FI Explorer

What then is freedom? The power to live as one wishes.

Marcus Tullius Cicero

My goal is to to build up a passive income of around $58 000 by July 2021, but I have been tracking the interest and distributions from my portfolio investments off and on for the past fifteen years or so. More of that in future posts!

Twice a year, though, I prepare a summary of the total income from my portfolio income. As part of the transparency and accountability of this journey, I want to regularly report this income.

Passive income summary

  • Vanguard Lifestrategy High Growth – $7 605
  • Vanguard Lifestrategy Growth  – $464
  • Vanguard Lifestrategy Balanced – $660
  • Vanguard Diversified Bonds – $442
  • St Andrews ‘Top 200’ Australian shares (indexed) – $191
  • Telstra shares – $118
  • Insurance Australia Group shares – $241
  • Ratesetter (P2P lending) – $2120
  • BrickX (P2P rental real estate) – $5

Total passive income: $11 846

Resized Dist

Comments

That’s not supposed to happen! The amount went down. This is actually a recurring pattern in distributions in my portfolio, and I think it must relate to the underlying distributions schedule in the Vanguard funds. So big picture, I hope that there may be a small bump upwards in the July 2017 report. My investment plan actually is based on an assumption of $28 000 per annum.

The Vanguard funds typically distribute twice a year, except for the diversified bond fund. Australian shares that I have owned have distributed only twice a year. Interestingly, the bond funds can produce quite variable distributions, which doesn’t quite align with the theory.

By far the most ‘visible’ and regular income has come from my investment in Ratesetter’s peer to peer (P2P) lending platform, with returns of 8-9% for terms of between three and four years.

My small investment in P2P real estate has also started to produce some very small yields. This is attributable to the low yields in those parts of Australia’s residential property the fund has available. But it will be interesting to seek if it grows, and how it fares in any property market falls – constantly predicted to occur here in coming months and years.

Overall, I’m happy with this level of distributions, which means that on average my investments are producing an average of $1974 every month.

 

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!