The dangers of life are infinite, and among them is safety.

Goethe

This is my seventh portfolio update. I complete this update monthly to check my progress against my original goals.

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%.

Portfolio summary

• Vanguard Lifestrategy High Growth – $658 142
• Vanguard Lifestrategy Growth  – $43 422
• Vanguard Lifestrategy Balanced – $77 463
• Vanguard Diversified Bonds – $109 494
• Telstra shares – $5 731
• Insurance Australia Group shares – $16 936
• NIB Holdings – $6 900
• Gold ETF (GOLD.ASX)  – $74 678
• Secured physical gold – $5 955
• Ratesetter (P2P lending) – $56 747
• Bitcoin – $32 365
• Acorns app (Aggressive portfolio) – $5 998
• BrickX (P2P rental real estate) – $3 927

Total value: $1 097 758

Asset allocation

• Australian shares – 30%
• International shares – 21%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.7% (4.3% under)
• Australian property securities – 4%
• International property securities 3%
• Total property – 7.1%
• Australian bonds – 13%
• International bonds – 12%
• Total bonds – 24.3% (5.3% over)
• Cash – 1.6%
• Gold and alternatives – 10.3% (0.3% over)

Comments

The overall portfolio is up around $5 000 this month from a combination of new investments and downward market movements.

Looking back to the last update, the significant changes have been a further appreciation of the Bitcoin holdings in the portfolio, some declines in the value of gold ETFs, and further expansions into the Brickx real estate platform, as new properties were offered.

As can be seen, the portfolio allocation to equities continues to be below target. This is despite regular significant investments to the Vanguard high growth fund (itself around 90 per cent equities). This is challenging, because despite the allocation remaining underweight, I am not confident that the Australian equity market is not over-valued. The other driver to the misallocation is my experimentation with Ratesetter, which effectively shows up in an above target allocation to fixed interest and bonds.

For the past three years I have been comfortable with this slight imbalance, however, the issue will become pressing when distributions for the half year just past are paid. This, in many ways, feels like far more  significant ‘information’ about my journey to my objective than the absolute level of the portfolio. It will determine if the year target of $28 000 was unrealistic, and provide, crucially, more guidance on what is a dependable level of passive income from the portfolio.

My current intention is to either slowly feed these distribution into the Vanguard high growth fund, or potentially take the leap into Vanguard ETFs. This will force a choice between lump sum investing, or dollar cost averaging, a long-standing investment and FI debate centred on psychology versus historical experience to date. In short, do I give weight to the darker clouds, or the sun seeking to shine through?

Some developments in personal circumstances this month means that some uncertainty over my future investing capacity and plans has receded. This means that should the darkening clouds start to break, there is a better chance of investing aggressively through a market decline.

Thinking about this made me curious about my past record of investing during challenging periods. Instead of speculating about it, or worse, discovering the truth only halfway through a decline, I decided to track back through my records and find out. This turned into a bit of project (of more later), but they showed that across 2008-2009 my contributions into markets were about $50 000 each year. Which is not too bad, especially considering that in 2009 I changed jobs, and spent some time without any earned income.

Progress

Progress to goal: 74.4% (+10.0% ahead of target) or $378 242 further to reach goal.

Summary

Writing this update – and ending the financial year – without finally knowing the level of my passive income over the past six months makes this feel incomplete. I will provide my half yearly passive income update in the next few days, as the data becomes available.

The sensation of markets kept aloft, not offering good clear information on value, and being precarious remains strong. Perhaps this is why I am so eagerly looking forward to the concreteness, the reality, of distributions as a signpost of how far I have still to travel. The resolution of uncertainty, as well as lots of reading and listening to other FI bloggers, such as Adventures with Poopsie, Aussie Firebug, and Retire Before Dad have been keeping me motivated for the next stage of the exploration.