The truth is, we know so little about life, we don’t really know what the good news is and what the bad news is.
Kurt Vonnegut
This is my ninth 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 – $630 261
- Vanguard Lifestrategy Growth – $40 998
- Vanguard Lifestrategy Balanced – $73 030
- Vanguard Diversified Bonds – $105 335
- Vanguard ETF Australia Shares (VAS) – $24 325
- Telstra shares – $4 892
- Insurance Australia Group shares – $16 187
- NIB Holdings – $7 200
- Gold ETF (GOLD.ASX) – $76 559
- Secured physical gold – $6 781
- Ratesetter (P2P lending) – $57 655
- Bitcoin – $59 549
- Acorns app (Aggressive portfolio) – $6 901
- BrickX (P2P rental real estate) – $4 487
Total value: $1 114 160 (+$54 131)
Asset allocation
- Australian shares – 31%
- International shares – 20%
- Emerging markets shares – 3%
- International small companies – 3%
- Total shares – 55.7% (5.3% under)
- Australian property securities – 4%
- International property securities 3%
- Total property – 6.7%
- Australian bonds – 12%
- International bonds – 11%
- Total bonds – 23.2% (4.2% over)
- Cash – 1.5%
- Gold – 7.5%
- Bitcoin – 5.3%
- Gold and alternatives – 12.8% (2.8% over)
Comments
This month the portfolio increased by over $54 000. This in part is inflated by my ‘averaging’ in another contribution to Vanguard’s Australian Shares ETF, after strong distributions in July.
A significant component of the increase also comes from appreciation of Bitcoin holdings, which now quite unexpectedly makes up more than five per cent of the portfolio. Originally, because the amounts were small I folded this allocation into a ‘gold and alternatives’ category, but I have broken it out this update, so that I have better visibility on what is happening to both the gold and Bitcoin components. This reveals that my gold allocation remains under my benchmark of 10 per cent. An issue I have to think about is how much these two assets move together, or actually ‘covary’ (i.e. move in different directions, dampening volatility). Psychologically, I’m not sure if I really regard the Bitcoin gains as real.
This month I moved to a less costly online broker (directshares), which has halved the cost of buying ETFs. It’s not the least cost provider, but due to my banking set up, was a good compromise for ease of access and speed of moving funds. As a portfolio monitoring device, I have also stumbled onto Sharesight, which I have yet to explore fully. It’s free for small simple portfolios and seems a really smooth and polished way to understand portfolio returns, and their capital and dividend parts.
Equity markets continue to hold up, which means that even if I take account of a further Vanguard Australian shares increment still to be fed into the portfolio, my equity allocation is still sitting below my target, at market highs. This is not a comfortable position to be. To date I have always relied on new contributions to slowly readjust my allocations back to target. At some point, though, this becomes mathematically problematic, because the new contributions simply won’t ‘shift the dial’ enough.
This uncomfortable truth is currently meekly sitting alongside another, my dislike of transaction costs and triggering tax events. Increasingly, equity market conditions – especially in the United States, has made me consciously start playing out in my mind what a sharp turnaround might practically look like in my portfolio. My base case is a potential halving of equity markets (in the short term), knocking out around $300 000 of equity value. The difficult question – would this be good news or bad news at this point in portfolio accumulation?
Finally, the Brickx real estate platform has recently expanded to offer an Adelaide property for investment, so to maintain and enhance diversification I have made a small expansion in holdings. So far the portfolio has produced total returns of 5.5 per cent and delivered total distributions of $39.
Progress
Progress to goal: 75.5% (+4.2% ahead of target) or $361 840 further to reach goal.
Summary
Passing the 75 per cent milestone has been a significant surprise, and focused attention on just how definable and potentially close is my investment target. Four years ago, if I had been measuring, this figure would have been 33 per cent. Barring a major external market event, reaching my goal within two, three or four years is beginning to sink in as a concept.
Hi Explorer,
I very much appreciate you sharing this. Such a comprehensive portfolio! I’ve just started investing in Ratesetter, albeit to a much lesser extent than yourself. Was wondering how you’re finding it?
Cheers.
TTM
Hi TTM!
Thanks for the feedback! Comprehensive by curiosity and accident rather than design, but thank you! On Ratesetter, so far I’ve found it very good in terms of returns, but I am a little cautious about how it would go in a major credit market event. It does have the provision fund. If you’re curious about the sector, google ‘Peer to peer economics Oxera’, and there is a detailed report that talks a lot about what’s behind the model, typical lenders and borrowers. It helped give me a bit better a sense of what I was buying into. Let me know how your experience goes!
Hi TTM –
I’ve been with Ratesetter for a few months now and it is working well. Am only offering loans in the 3 year lending market and averaging about 8%. Which interestingly is exactly the same proportion of my total portfolio allocated for this investment type. I do like their provision fund which covers lenders in the event of defaults but as many have noted P2P lending like this has not been tested in a big downturn – hence my max allocation of 8%.
Hi BlinBlinski – Thanks for stopping by. For the same reason, I’m loathe to make it a bigger proportion. There is a quite an active P2P ‘fan’ community out there, advocating the sector (podcasts even), but I agree. I’ve mainly been in the 5 year market, average returns of about 9 per cent, but I notice them drifting down slowly.
Thanks to you both! And you’re backing up my thoughts of only setting aside a small proportion of assets for P2P. We’ll have to see how it has progressed when those 3-5 year loans are fully paid back.
Cheers
I did the math while reading and actually thought to myself “hmm, only $350,000 to go.” Barring the unexpected, out of your control, you should easily make your goal. Then I reflected on my thinking of “only $350,000” – we haven’t even reached our first triple figures invested yet! Just goes to show how your thinking does adjust to the situation. It’s amazing to see you move from 33% to 75% in four short years. Gives me hope.
Thanks for comment Mrs ETT, I’ve really enjoyed following your journey too! $350 000 at once sounds huge, but not completely undoable. You are right. One of my favourite measures used to be week on week portfolio growth, that used to be very motivating, so I think different mental tools and perspectives become useful at different times. At or near my goal, I really will have to fully assess, is this the finish line? What now?
HI TE
Just found your blog and am now scouring the contents, many thanks for posting the information within. My funds are pretty simple though have moved slightly over the years, originally STW, VTS, VEU and VGB, however new additions over recent years have been new monies into VAS, VGS, VAF and I’ve still holdings in CBA that roll along and regularly throw off some free shares
Your Bitcoin and Peer 2 Peer Lendings are an interesting sideline
Hi Bazza!
Thanks very much for visiting and I’m really glad you’re getting value out of reading. I’m curious about your situation, do you have a blog/twitter? I have actually been looking over further ETF options this weekend. VAS I think will win out, but for my situation and interests I’m quite curious about Beta Shares RAFI, which is supposed to be a ‘fundamental index’ based approach (essentially indexes to different fundamentals than market cap) and the Vanguard high yield fund. I admire those people who can stick to the simplicity of the ‘2-3 fund portfolio, but not sure if I’ll ever be one of them.
Remember, dividend reinvestment is a purchase decision at current price!
Bitcoin was supposed to be a tiny sidelight, currently its a bit disorientating and dazzling!
Do you include super in the above portfolio?
Do you have a paid off PPOR?
Im aiming for 800k outside super and 200 inside. No PPOR.
Hi Jerry, thanks for the comment. I don’t include super in that, although I do track that and have a similar allocation approach there. Yes, I don’t include housing as that is paid off (and really an expense), and no plans to move. Curious about how you got to $800 000 and $200 000 respectively?
While knowing that super is there, I have taken the initial simplifying approach of not counting it, as the hope is to retire before 65, and minimise legislative risk.