There is a pleasure in the pathless woods,
There is a rapture on the lonely shore,
There is society, where none intrudes,
By the deep sea, and music in its roar

Lord Byron, Childe Harold’s Pilgramage

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

Portfolio goal

My objective is to maintain a portfolio of at least $2,870,000. This should be capable of producing an annual income from total portfolio returns of about $99,000 (in 2024 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 $2,300,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$855,620
Vanguard Lifestrategy Growth Fund	$43,993
Vanguard Lifestrategy Balanced Fund	$77,856
Vanguard Diversified Bonds Fund	$89,742
Vanguard Australian Shares ETF (VAS)	$525,433
Vanguard International Shares ETF (VGS)	$723,482
Betashares Australia 200 ETF (A200)	$309,151
Telstra shares (TLS)	$2,057
Insurance Australia Group shares (IAG)	$8,108
NIB Holdings shares (NHF)	$9,432
Gold ETF (GOLD.ASX)	$150,757
Secured physical gold	$23,865
Bitcoin	$1,193,341
Raiz app (Aggressive portfolio)	$23,150
Spaceship Voyager app (Index portfolio)	$3,996
BrickX (P2P rental real estate)	$4,545
Plenti Capital Notes Market Loan	$5,000
Total portfolio value	$4,049,528 (+$218,949)

Asset allocation

Australian shares	29.9%
Global shares	27.8%
Emerging market shares	1.2%
International small companies	1.5%
Total international shares	30.4%
Total shares	60.3% (-19.7%)
Total property securities	0.1% (+0.1%)
Australian bonds	1.8%
International bonds	3.9%
Total bonds	5.8% (+0.8%)
Gold	4.3%
Bitcoin	29.5%
Gold and alternatives	38.8% (+18.8%)

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

Comments

This month has seen a continuation of a six month period of expansion in the financial indepedence portfolio. Over the past month, the portfolio increased in value by $219,000, growing 5.7 per cent.

This has taken the portfolio to over $4.0 million for the first time in the journey.

Over the past six months, the portfolio has grown by over 40 per cent in value. A substantial part of that has been through increases in the price of Bitcoin, with the remainder being attributable to equity market performance.

Quite simply, there has never been a period of such strong portfolio growth. The portfolio is now approximately four times the size than when this record started in early 2017. The equity market component alone has doubled in the last four years.

Once again this month and consistent with the past few months, the growth in the portfolio was predominantly attributable to continued advances in the value of Bitcoin holdings, of around 14 per cent.

There was also a strong continued momentum in equity prices, with a growth in both international and Australian equities of around 3.4 per cent contributing around $75,000 to the monthly outcome. All else being equal, this can be expected to decline slightly in coming days to account for distributions being paid out.

Gold holdings also increased substantially in value this month, by around 7.7 per cent.

Over the past three years the gold holdings have gained around 50 per cent in nominal terms.

This means that even as the portfolio has grown, the overall allocation to gold has remained level over this timeframe. Gold appears to be being supported by continuing central bank purchasing activity, and easing expectations around interest rates.

The collective net result of all of these movements is to leave the traditional financial portfolio (that is, excluding Bitcoin) only around $14,000 short of the formal portfolio target of $2.87 million.

In other words, the portfolio target has been effectively met, at least within the range of quite normal daily equity market volatility, even if no value at all is ever recovered from Bitcoin holdings.

The pathless woods: first quarter distributions following fund changes

From today over the next few weeks, a range of the Vanguard funds and exchange traded funds will commence paying out their first quarter distributions.

Unlike a year ago, the new Vanguard retail funds my original investments were transitioned to will pay out on a quarterly basis. This will make the distributions of this quarter higher than historically has been the case.

Based on distributions announcements from the ETFs, first quarter distributions are likely to reach their highest levels ever, with a projected outcome of around $22,000.

Interestingly, the three ETFs alone (VAS, VGS, and A200) registered their highest ever level of first quarter payments, so the positive overall result is not simply a function of the move from half yearly to quarterly distributions on the part of the Vanguard retail funds.

A key driver of the overall outcome is the jump in the payout of the Vanguard global shares ETF (VGS), which registered its highest ever level over the past decade.

Overall, the result also marginally shifts future expectations of distributions, such that on an annual basis, using mostly median estimates, the portfolio can be expected on average to distribute around $87,800.

Trends in average distributions and expenses

This month the gap between the trailing average of total expenses continued to climb towards average distributions.

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

In a continuation of a trend, average total expenses (red line) are still rising, as has occurred since April 2022. These expenses are now approaching $7,400 per month.

Just as previously, the moving average of distributions (the blue line) continues to fall, a decline that has continued since early 2023, to sit now around $7,900.

The total ‘gap’ between distributions and total expenses is currently just $500 per month, compared to around $2,000 per month in early 2023.

Progress

Measure	Progress
Portfolio objective – $2,870,000	141%
Financial portfolio income as % of total average expenses (2013-present) – $88,400	111%
Target equity holding in portfolio – $2,300,000	106%
Financial portfolio income as % of target income – $99,000 pa	99.5%

Summary

Over this month, my day-to-day job made significant demands on my time, with travel, conferences and a series of high-consequence meetings. One of these meetings, ironically enough, on the topic of optimising private investment portfolio management.

Previously, at these biennial meetings and conferences, I have tended to take time to sit up the back, in the darkened last row of seats. As I did, I would often wonder at how many more of these functions I would appear, before departing, ghost-like, into a world beyond the bustling – imperious – seeming importance, of the few days.

This time was different, to turn an investment mistruth into a personal observation. This time I was absolutely sure I would never return to quite this set of functions again. There was a quiet knowledge that it was a bittersweet, but unannounced, last. This allowed me to observe it more through a sociological lense, as a live experiment played out, with relatively low impact on my future state.

What stood out to me was how much I appreciated all the individual people, each playing their essential role in the complex, contingent, but ultimately fleeting dance of events.

Giving up their time and a part of their life energies to carry it forward. All knowing that in a few years, it would all be done once more. The same appreciation is behind my knowledge that I could not do this again.

And so I find myself momentarily in a kind of liminal space, between two different worlds. I know, or at least have fairly high certainty, that I shall reach the next phase, the new reality. Yet for the moment, the structures and surrounds of the past are around me.

So what then, are the bonds that hold me temporarily in this space?

It is no longer any financial anxiety of not having the resources to do as I will – though this possibility cannot realistically ever be dismissed.

Rather, at this point, it is more about leaving the people I work with, the team I have constructed, the clients I have served in a way and in a manner which best recognises their kindness to, and trust in, me. A way that honours and recognises their contribution over two decades to the position I have been lucky enough to be able to place myself in.

It is a little indistinct what this looks like.

Berkshire Hathaway’s Charlies Munger described once the technique of ‘inverting the problem’, with a story of how as a weather forecaster for allied air forces in World War 2 he was asked to help with the planning of missions, with the goal of maximising the safe return of the aircrews.

The uncertainty of meteorology being great, he found this objective hard to conceptualise and analyse, until he ‘inverted the problem’. That is, he asked himself ‘if my goal were to kill the maximum number of allied air crew, where and how would I send them out, considering the prevailing forecasts?’. Then he quite simply did the opposite.

The opposite in the present case would be leaving without warning, without preparation of my team, regardless of the outlook or progress of a set of projects.

So I will continue to think about this, alongside the fact that no person is essential, that something will always, be left ‘undone’, and that once any intention is stated, that will inevitably set in place a set of dynamics of its own which are impossible to foresee.

In more quiet moments, I have continued to consume some investment and Bitcoin related content, such as this interview with Bill Bernstein, the author of Four Pillars of Investments, this excellent piece of the nature of equity market returns by Ben Felix, and this interview on portfolio allocation and Bitcoin.

Also of interest in the past month has been the summary report of the UBS Global Investment Yearbook. Within it is a study of global equity market risk and volatility through time, that points out the mean-reverting nature of equity market risks, after long periods of lower volatility.

This work just highlights the risks that are ever present in equity markets.

So perhaps next month, a violent storm will come, and push the portfolio well below its current level, and prolong the journey. Or perhaps resolve the anomalous, unexpected finish of the journey occurring with rough allocation of 30/30/30 between international equities, domestic equities and Bitcoin. At some point, such movements become probabilities, rather than possibilities.

Yet just as easily, the next month could see a continued presence in this current position, this pathless wood, and lonely shore, which I am looking forward to explore.

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.