If you can look into the seeds of time

And say which grain will grow, and which will not

Speak then to me.

Shakespeare, Macbeth, Act I, Scene 3

This is my seventy-ninth 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	$769,333
Vanguard Lifestrategy Growth Fund	$40,487
Vanguard Lifestrategy Balanced Fund	$72,451
Vanguard Diversified Bonds Fund	$87,427
Vanguard Australian Shares ETF (VAS)	$385,859
Vanguard International Shares ETF (VGS)	$579,897
Betashares Australia 200 ETF (A200)	$280,714
Telstra shares (TLS)	$2,291
Insurance Australia Group shares (IAG)	$7,221
NIB Holdings shares (NHF)	$10,140
Gold ETF (GOLD.ASX)	$129,373
Secured physical gold	$20,519
Bitcoin	$514,175
Raiz app (Aggressive portfolio)	$20,817
Spaceship Voyager app (Index portfolio)	$3,525
BrickX (P2P rental real estate)	$4,488
Total portfolio value	$2,928,717 (+$87,366)

Asset allocation

Australian shares	34.4%
Global shares	32.1%
Emerging market shares	1.4%
International small companies	1.8%
Total international shares	35.4%
Total shares	69.8% (-10.2%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.2%
International bonds	5.1%
Total bonds	7.3% (+2.3%)
Gold	5.1%
Bitcoin	17.6%
Gold and alternatives	22.7% (+7.7%)

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

Comments

The financial independence portfolio advanced materially this month, growing by 3.1 per cent or $87,000.

This takes the portfolio total well beyond the anticipated $2.75 million target, even while some of its most important component parts – such as the equity portfolio – sit below what I am seeking as a condition of moving to any changed work arrangements.

The portfolio as a whole has only experienced three months at value levels beyond the current level, all off the back of then bouyant Bitcoin and equity markets at the end of 2021.

Australian equities showed capital growth of around 1.7 per cent across the month. International equities advanced slightly more, with gains of around 2.5 per cent.

Overall, this has led the total equity portfolio to exceed $2.0 million, with over $1.0 million in both Australian and international shares, a milestone that is significant in both the long journey, and this shorter record, which commenced – in 2017 – at a time when the entire portfolio had yet to exceed a million dollars in value.

Other asset classes showed less favourable performance, with a significant decline in the value of gold holdings – of 5.0 per cent – and bonds declining slightly.

Bitcoin advanced considerably across the month, by 10.5 per cent, seemingly reacting to some positive regulatory developments in the United States around Securities and Exchange Commission processes towards an approval of a Blackrock sponsored Bitcoin spot ETF.

These developments all combined to collectively deliver growth across the month which continued to build on the progress over the first half of the year.

The relatively stronger performance of international equities has meant that to continue to target a 50/50 allocation between Australian and global equities, new investments have been in Vanguard’s Australian shares ETF (VAS).

Generally equity markets appear to be reacting favourably to gradually falling headline inflation results, as the ‘base rate’ effect starts to gradually take hold, lowering the ‘rate of change’ which inflation rates measure. Even an armed march on Moscow by the Wagner group appeared unable to break this generally benign market stance.

Pending July distributions: early signals for portfolio income flows

A number of the exchange traded funds (A200, VGS and VAS) have announced provisional distribution rates for the June quarter, allowing a clearer insight into likely quarter and end of financial year portfolio income.

These will be reported in full in the first half of July, as the distributions on various other funds are able to be finalised, in a regular portfolio income report.

The June distributions announced so far have come in at around previous projections in the case of Australian equities. For the Vanguard global equity ETF (VGS), signalled payouts have been higher than expected, totalling around $6,000, the highest per unit payout for that fund since 2016.

Given the normally higher expected dividend payout rates of Australian shares, this may herald a pattern of needing to regularly reinvest distributions from both domestic and international shares back into Australian equities, to ensure a continuing even balance is maintained between the two.

As it stands, I expect second quarter distributions to be around $56,000. In turn this would mean portfolio income of around $63,000 for the first half of the year (1 January to June 30), and income over this past financial year (2022-23) of $92,000.

Closing views: the shape of progress over the financial year and beyond

The close of the financial year provides the opportunity to review broader progress over the past six and twelve months, outside of what can be at time relatively ‘noisy’ monthly volatility.

Over the past six month period, the portfolio has grown by 20 per cent, or $487,000. This is the second largest growth in dollar terms for any six month period on the journey so far.

Progress over the last twelve months has now almost entirely reversed the large falls experienced in the first half of 2022, returning the portfolio to approximately its prior level at the start of 2022.

Looking just at the purely financial asset portfolio (e.g. excluding a volatile Bitcoin from the figures) the record is similarly positive. In financial assets, the past six months has been the second highest period of growth in equity, bond and other financial asset holdings experienced to date.

Stepping back still further, and looking at the entirety of the financial independence portfolio and superannuation assets combined provides an even wider view.

Since 2019, it can be seen from the chart below that there has been a overall forward progress across the past 5 years from an ‘all assets’ portfolio of around $2.0 million to around $3.78 million today.

This stacked column chart also shows a few other trends discussed in these monthly updates.

Traceable within it are the various vacillations of Bitcoin’s price and the growing significance of ETF’s as part of the portfolio mix, most recently with the expansion in holdings of Vanguard’s global shares ETF (VGS) indentifiable in orange.

Trends in average distributions and expenses

This month average total expenses (red line) continued to rise, reaching above $6,600, while the moving average of distributions (the blue line) also continued to increase to just under $9,000.

The chart above measures distributions against an estimate of total expenses. The total expenses figure is based on actual credit card spending, with the addition of a fixed allowance for annual fixed expenses.

The distributions component of this chart has been updated to reflect the provisional distributions from the ETFs that are currently known.

The blue line will likely appear to slightly ‘move’ next month as confirmed distributions from the Vanguard retail funds mean that it can be updated to fully reflect actual out-turn distributions, rather than placeholder median assumptions.

At the moment the total gap between distributions and total expenses has remained at around $2,300 per month.

Progress

Measure	Portfolio	All Assets
Portfolio objective – $2,750,000 (or $94,800 pa)	107%	138%
Total average expenses (2013-present) – $85,100 pa	119%	154%
Target equity holding in portfolio – $2,200,000	93%	N/A

Summary

This month my emergency fund arrangements were tested by an unfortunate (minor) car accident, meaning a lot of expenses, inconvenience and time spent on the phone and online lodging insurance claims.

The experience made me glad that I have entirely separated out the financial independence portfolio from day to day finances, and built a supporting cash ‘margin of safety’ outside of the reported portfolio, including setting aside cash to replace the car and meet emergencies.

It meant that from the point of view of portfolio progress, this month looked little different from any other in terms of capacity to invest or other impacts. Over coming months, however, there is likely to be a need to ‘refill’ some shorter term contingency funds used.

Yet even throughout this, the forward progress of the portfolio continues to press itself on my mind.

The equity portfolio being at 93 per cent of its final target feels the most significant of all of the various reported metrics at the moment. For the first time, there is “only” a $155,000 gap to bridge, compared to more than $400,000 a year ago. Depending on financial markets, this remaining gap could conceivably close relatively quickly, or stretch wider.

Markets and the seeds of time will inevitably reveal their decisions in this area – but it is not impossible that the equity target could be reached in the next 6 to 18 months, fulfilling one of my remaining conditions to then start the process of fully reassessing and potentially re-negotiating current full-time working arrangements from a position of some strength.

At these times, as the portfolio advances strongly, the reality of the potential ending of one phase, forever, and beginning of another feels like it is rushing towards one. The line between those phases comes more clearly into view, even as it remains hard to entirely pin down.

As the depths of winter pass, the seeds of time, and the knowledge of the grains that will grow – and which will not – remain shrouded at the moment, and the future is yet unspoken.

Disclaimer

The specific portfolio allocation and approach described has been determined solely based on my personal circumstances, objectives, assessments and risk tolerances. It is not personal financial advice, or recommendation to invest in any particular investment product, security or asset, and investors considering these issues should undertake their own detailed research or seek professional advice.