A person often meets his destiny on the road he took to avoid it.

Jean de la Fontaine

This is my one hundred and tenth 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 $3,250,000. This should be capable of producing an annual income from total portfolio returns of about $112,000 (in 2026 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.45 per cent.

A secondary focus will be maintaining the minimum equity target of $2,600,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$984,041
Vanguard Lifestrategy Growth Fund	$49,548
Vanguard Lifestrategy Balanced Fund	$85,395
Vanguard Diversified Bonds Fund	$94,309
Vanguard Australian Shares ETF (VAS)	$673,809
Vanguard International Shares ETF (VGS)	$986,442
Betashares Australia 200 ETF (A200)	$343,574
Gold ETF (GOLD.ASX)	$330,966
Bitcoin	$1,340,262
Plenti Capital Notes	$84,000
Financial portfolio value (excluding Bitcoin)	$3,632,084 (+$38,077)
Total portfolio value	$4,972,346 (-$88,331)

Asset allocation

Australian shares	28.4%
Global shares	28.8%
Emerging market shares	1.1%
International small companies	1.4%
Total international shares	31.3%
Total shares	59.7% (-20.3%)
Australian bonds	3.2%
International bonds	3.5%
Total bonds	6.7% (+1.7%)
Gold	6.7%
Bitcoin	27.0%
Gold and alternatives	33.6% (+18.6%)

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

Comments

This month the portfolio fell by around $88,000, or 1.7 per cent.

This reflected significant declines in the price of Bitcoin (of nearly 9 per cent), against an unsteady period for most equity-based assets. There was relatively high volatility through the month under a variety of geopolitical strains.

The financial portfolio sits at the highest ever level, of $3.6 million, despite the overall ‘headline’ portfolio value being below the absolute levels of a year ago.

The chart below sets out the performance of both the full and ‘financial assets only’ portfolios since the commencement of the journey.

Across the month, geopolitical instability has driven market nervousness, and the rise in bond yields in Japan continues to signal an important regime shift in the deepest elements of the global financial architecture.

Yields on government debt are rising across Western economies, even as inflation is relatively contained in many jurisdictions. The fundamental price of ‘risk-free’ assets is changing, at a rather unanticipated pace, bringing with it question of ‘financial dominance’ and central bank independence. Developments in commodity markets and strategic metals, such as silver, were also in focus.

Australian equities benefited from some of these developments, rising around 1 per cent through this month. International equities fell modestly, by around 3 per cent, as US markets in particular reacted to the changing global trade and debt market conditions. Despite this, US market valuations, on this view, appear to remain relatively anchored when earnings growth and cash yield considerations are taken into account.

Gold has increased by an extraordinary 14 per cent over the month, exceeding the gains by Australian and international equities over the past twelve months.

Increasingly private investors, and central banks alike are rediscovering – at least temporarily – some of the hedging properties of gold. Over the past year, gold holdings have returned above 66 per cent. This has pushed the allocation to gold to the highest level in about 5 years, and in nominal dollar terms, means movements from here exert a far stronger impact than previously.

By contrast, Bitcoin has fallen by 28 per cent over the past year, and as mentioned fell sharply this month.

This month saw portfolio distributions received, of around $16,000, from the last quarter of 2025. These have been added to a cash fund that is proportionally reinvested through this year, with a portion also being set aside to meet expected tax liabilities.

Wings of time: portfolio compounding theory meets real-world data

Part of the function of this record has been to ‘test’ the theory of reaching financial independence in the real world, as opposed to the cells of an Excel spreadsheet, with their neat eliding of reality.

Tracking expenses and the portfolio’s safe withdrawal income is one dimension of this. Another is examining whether what is often called the ‘miracle of compounding’ occurs in quite the same manner as often presented in materials on financial independence or wealth-building more generally.

Recently, algorithms assisting, I have been interested to see a lot of Youtube financial independence themed content in my feed about various defining acceleration points, or milestones in the journey.

Typically, these relate to concepts like the portfolio assuming its own gradual momentum or central role in wealth generation, compared to new investments. That is, one’s portfolio ‘working harder’ than one’s own contributions.

Of late, this interest has led me to undertake some preliminary empirical testing of how this has looked in my own case, using what data I have, which is rather imperfect for the task.

The question I posed was: what has been relative and evolving role of contributions, and portfolio returns (income and other returns) to total portfolio goals?

Each financial independence journey will be a different mixture, from a ‘brute forcing’ of FI through hard savings (i.e. high savings rates) across short timelines, where portfolio returns play little role, to gentler slower journeys through time – where that time taken means a larger role for compounding investment returns.

Tracing with study: analysing the contributors to portfolio growth

Curious to see the trends in my own case, I turned to AI to produce some analysis (Claude, in this case), feeding in data on taxable investment income, investment and reinvestments of distributions, and overall portfolio growth, to seek to separate out trends in the drivers or sources of portfolio growth.

A few caveats apply to this analysis.

I have tested and retested the data, but this is by no means a guarantee. The primary data is also a mixture of calendar and financial year data, and assumes taxable investment income is a proxy for income returns.

Finally, the data has also been smoothed, as a function of the estimation process is obviously that as market returns fall in a year, the apparent importance of contributions and re-investment rises as a mathematical result. This is both undeniably true, but also potentially misleading across short volatile timeframes, obscuring longer-term underlying trends.

The chart below sets out the results of this imperfect estimation process, across the last 12 years.

In it, net new investment contributions are set out as a percentage of total portfolio growth experienced in a year, in blue. Investment income produced by the portfolio, which was reinvested, is given in green. The purple area of the graph depicts ‘market appreciation’ experienced, i.e. all portfolio value increases experienced that cannot be attributed to new investment, or reinvested investment income.

Sources of portfolio growth – 2014 to 2015 – Smoothed trend

What this shows is three broad phases in the journey to financial independence since 2014.

• Contributions-dominated accumulation (2014 to 2018): In the phase contributions were the dominating force of portfolio growth, as the portfolio was in the accumulation stage. Contributions made up between 50 to 60 per cent of the portfolio’s forward momentum, with re-investment of portfolio income making up another 15 to 20 per cent routinely. In this initial phase, investment returns (i.e. market appreciation in the graph) made up around 20-30 per cent of portfolio growth.

• Transition and volatility (2018 to 2022): The second phase saw the role of contributions peak in 2018, and commence a downward trajectory, which steepened and then bounced back across 2021 into 2022. This indentation in the data is a function of the smoothing of market volatility experienced, during which the roles of contributions and portfolio returns effectively switch. Within this period of volatility, however, was a critical crossover point or milestone. From 2021 onwards, new contributions consistently made up less than 50 per cent of portfolio growth.

• Capital-driven growth (2022 to 2025): A third phase commences in 2022, where contributions reach a temporary peak of just above 40, new investment income adds 30 per cent to that, and returns on the existing portfolio only constitute around 30 per cent of portfolio growth. This temporary apparent resurgence in the relative importance of contributions and income is largely a mathematical artefact of subdued market appreciation during 2022. After this point, market appreciation of the existing portfolio steadily builds from 28 to over 70 per cent of portfolio returns, across 2022 to 2025. At the end of this phase, net new investments make up only 12 per cent of portfolio growth

Investment income shows varying patterns across the three phases.

In the first phase (2014-2018), it remains stable at 15-20 per cent. During the transition phase (2018-2022), it averages around 15-19 per cent. Notably, during 2022-2024, investment income reaches its highest levels at 25-30 per cent as market appreciation was temporarily suppressed by volatility.

In 2025, as market appreciation surges to over 70 per cent, investment income moderates back to around 17 per cent and, indeed, may be expected to be lower going forward.

Patience and time: looking backward to look forwards

In a way, the most important feature of the chart is not the end point, but the moment when newly contributed money stops being the dominant explanation for progress.

Across a 12 year period, this chart shows a movement into a new stage of the financial independence journey, in which net new investments have less impact than before, and start to slide towards being marginal or irrelevant to the overall trajectory of the journey. Instead, the type, level and stability of returns from assets already in the portfolio dominate performance.

The broad situation in 2025 can be therefore characterised as the portfolio starting to generate wealth automatically, without significant input or effort. This is the desired and discussed ‘end state’ in the financial independence literature and videos mentioned above.

It is also a paradox, demonstrating that the heavy lifting on many FI journeys will be those early years of relentless, automatically applied savings and investment. As the journey continues there is simply less to do, less impact of any personal actions.

Projecting forward, this becomes quite stark. There is quite simply a limit to meaningful action, changing each year the portfolio that increases in size, usually decreasing.

Increasingly, new contributions become an irrelevantly small proportion of portfolio growth, and final outcomes. While it is true that a dollar invested in a later year will still compound in time, in just the same way those early investments did, the timescale of this compounding makes it less relevant than the choices made 20 or 30 years ago. Of course, these processes can be paused, or thrown into reverse, by sharp and then sustained market falls. No mathematical trend is unaffected by generational scale market events, even if market returns ultimately persist and recover in decades ahead.

As the impact of any action decreases, so too should the attention spent on it decrease, through time.

Rather attention should focus, to have a impact proportionate to its ‘cost’, either to ensuring the existing portfolio is optimised for compounding, and drawing down over time, or, more conceptually, to essentially non-financial decisions and optimisations. Other aspects of life, health, habits, refining how one spends time, and maximising the amount of satisfaction and happiness arises from the use of ones time becomes a higher ‘payoff’.

In one sense this transition to financial independence requires an ‘attentional’ re-allocation, that needs to be undertaken as consciously and deliberately as an asset allocation decision.

This is quite consistent with the earliest descriptions and common ‘sales pitch’ for financial independence as a goal that helped inspire me to this goal: an abundant life in which money and finances were not stressful issues, they just served and supported one’s life from the background.

Trends in average distribution, portfolio income and expense measures

Each month I track trends across average distributions, notional portfolio income and total expenses, with the analysis below focusing on the financial portfolio only, consistent with other updates.

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

The chart also has an additional of ‘safe’ portfolio income series. This is marked in green and is calculated as the product of the financial portfolio (i.e. excluding Bitcoin) and the selected safe withdrawal rate of 3.45 per cent.

This value can be viewed as the notional ‘safe withdrawal income’ currently provided by financial assets in the portfolio. It is estimated on a three-month moving average basis.

This month average total expenses (red line) rose slightly to around $8,900 per month. As a result, total estimated annual expenses has risen to $107,000.

Using the most recent estimates of the three year moving average of distributions (the blue line), paid out distributions have risen slightly to just over $7,500 per month.

This leaves the monthly deficit between total expenses and average distributions rising slightly to about $1,400.

Using the newer ‘SWR portfolio income’ measure, however, portfolio income has continued to grow to around $10,300 per month. This is around $1,300 per month higher than total expenses, sustaining a positive ‘safety margin’. For the first time since in almost a year that this has margin has decreased slightly.

Progress

Measure	Progress
Portfolio objective – $3,250,000	153%
Financial portfolio income as % of total average expenses (3 yr average) – $107,300 pa	117%
Target equity holding in portfolio – $2,600,000	114%
Financial portfolio income as % of target income – $112,000 pa	112%

Summary

The long summer days, and pause in work, has created an abundance of time this month, allowing greater freedom to structure the day in an unhurried way, providing an immersive sense of time itself expanding.

This has provided the time to ponder in a more detailed way the issue of compounding discussed above, and better understand the shape of the journey and its key crossover points than perhaps was possible at the time. Life can only be understood backwards, but unfortunately must be lived forwards, as Kierkegaard observed.

In the midst of 2021 I did note that the movements of markets and the performance of past investments had a greater and greater influence on progress than day-to-day actions, and also noted exceptional growth results, but I was not aware that a decisive crossover point had been reached. Similarly, I will not also be able to fully view the changing dynamics of the current portfolio, in terms of its contribution to the compounding journey, until a few years hence.

A part of this uncertainty arises from the shifting forces in financial markets at the moment.

The architecture and operation of global financial systems appears to be changing at a faster rate than at any time since 2009. The potential end of one monetary regime, and the commencement of another is rarely a smooth exercise, in which asset return ‘truths’ remain unchallenged. Some of these issues were recently discussed in panel sessions in the annual Davos forum.

For decades previously, gold and silver have traded less as monetary metals than commodities, and low or negative Japanese risk-free rates provided a seemingly never ending supply for cheap global capital. Trends in trade barriers and tariffs were largely unidirectional, and the US Treasury note was the preferred form of global reserve asset, even for countries in geo-political competition with the US.

Systematically, each of these elements has come under greater question. It is impossible to predict the second and third order impacts of the collapse of even a single one of these converging trends, let alone their of their simultaneous interactions.

One approach to theses change is to ‘double down’ on simplicity, and argue that continued exposure to just a mix of Australian and global equities is, drawing on history, the best way to meet this uncertainty, and that any departure from this represents unnecessary ‘diworsification’, to borrow the term of Peter Lynch. That term is often misapplied, however, in a way that is at variance with his original meaning, and clear empirical evidence about the strong benefits of investment across assets with low correlation, in such a way as to increase average portfolio returns and decrease volatility.

Applied in this incorrect form, it will just lead to returns that are not superior to a well-constructed portfolio inclusive of some low correlation assets, with greater volatility. In many cases, this will be unnoticed, as many investors will be perfectly willing and able to bear this greater volatility. This increased tolerance, however, should not to be mistaken as have ‘improved’ on the benefits of properly designed diversification.

Rather, it should be recognised for what it is, either an unknowing, or willing, acceptance of greater unrewarded risk, and potentially compromised returns.

The underlying reality is that correlations that look historically stable can change, with no fanfare, or announcement, or clarity about the best path ahead. Even well diversified investors, in such times, can end up finding their destiny, as it were, on the very path they took to avoid such risks.

Note for readers

Over the last year, there has been a noticeable degradation in the useability of my standard blogging interface. As an alternative, and because I am not interested in becoming a coder, plug-in or website management expert, I have created a rough and ready backup Substack and imported past posts. The formatting of past posts may not be as tidy as here, but should the blog ever seem to ‘disappear’ or cease, it will likely just be a signal that I have switched entirely to Substack and started posting there.

Also, if you are reading this article on a website called “Geldmountain”, please be aware that this and other updates have been reproduced without any contact or permission. Please feel free to view the original site, and subscribe if you wish, here.

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.