You are not those who saw the harbour
Receding, or those who will disembark.
Here between the hither and the father shore
While time is withdrawn, consider the future
And the past with an equal mind.
T. S. Eliot, The Dry Salvages
Twice a year I prepare a summary of total income from my financial independence portfolio. This is my eighteenth portfolio income update since starting this record. As part of the transparency and accountability of this journey, I regularly report this income.
My primary goal is to maintain a portfolio of at least $3,000,000 which is capable of providing a passive income of around $103,500 (in 2025 dollars), based on an assumed safe withdrawal rate of 3.45 per cent. A secondary focus is maintaining a minimum equity target of $2,400,000.
Portfolio income summary
| Investment | Amount |
| Vanguard Lifestrategy High Growth (retail fund) | $27,072 |
| Vanguard Lifestrategy Growth (retail fund) | $1,136 |
| Vanguard Lifestrategy Balanced (retail fund) | $1,690 |
| Vanguard Diversified Bonds (retail fund) | $240 |
| Vanguard Australian Shares ETF (VAS) | $8,047 |
| Vanguard International Shares ETF (VGS) | $15,986 |
| Betashares Australia 200 ETF (A200) | $4,563 |
| Telstra shares (TLS.ASX) | $51 |
| Insurance Australia Group shares (IAG.ASX) | $152 |
| NIB Holding shares (NHF.ASX) | $156 |
| Plenti/Ratesetter (P2P lending) | $3,800 |
| Raiz app (Aggressive portfolio) | $411 |
| Spaceship Voyager app (Index portfolio) | $0 |
| BrickX (P2P rental real estate) | $13 |
| Total Portfolio Income – Half-Year to June 30, 2025 | $63,316 |
The chart below sets out the distributions received on a half-yearly basis from the financial independence portfolio over the past nine years.
The following pie chart is a breakdown of the contribution of each major current investment in the portfolio in the last financial year.
Comments
This half-year to 30 June 2025 the portfolio produced total distributions of $63,300 – or around $10,600 per month over the past six months.
This is the third highest level of distributions received in a half-year period across the entire journey.
The reporting of half-yearly portfolio income is somewhat a function of past investments. As the record commenced, around 70 per cent of all assets were held in legacy Vanguard retail index funds which only produced biannual distributions, at the end of June and December.
This has now changed, through alterations of Vanguard funds initiated by the fund manager itself, and increasing investment in low cost ETFs. This means that some distributions are now also received in March and September, flattening the profile of distributions over the course of a year.
These half-year results are therefore simply a function of prior quarterly ETF and fund results for the March quarter (of around $29,000) together with June quarter distributions of $30,183, and Plenti interest earnings of $3,800 over the last six months.
The chart below sets out the observed pattern of quarterly distributions over the past nine years (including forecasts for the remainder of 2025 in transparent dark green).
What can be seen is that June quarter distributions have exhibited less variability in the past three years, with the movement of the legacy Vanguard funds to quarter-by-quarter distributions.
Over time, as the intensive phase of investment for financial independence is passed, one would expect growth in distributions to flatten, as the total amounts of invested assets no longer grow as significantly on a year-to-year basis. This should allow a better picture to emerge over time of the true variability of the level of distributions.
The currents of action: trends in portfolio income over 2000-2025
The end of each financial year allows for a reflection on the longer-term trends in portfolio income over the entire financial independence journey so far.
Across the full financial year just ended, portfolio distributions were $103,188 (or $8,599 per month), around 9 per cent higher than the previous financial year.
This is the second highest level of financial year distributions, outside of the brief exceptional period of FY2020-21.
The chart below sets out history of total portfolio distributions in nominal dollars, with the green bars indicating the period covered since the start of this written record.
The red dotted line (the RHS axis) tracks the average level of the financial portfolio across each year.
This year I have adjusted this graph to include only the traditional financial portfolio assets, reflecting that while Bitcoin holdings represent a significant nominal financial value presently, they do not produce distributions.
So, for this purpose of tracing the relationship between the value of assets held, and portfolio income produced, the above chart arguably produces a less distorted picture of whether financial distributions have generally moved closely with the level of underlying financial investments held.
What can be observed is that even with this adjustment, there is a good deal of variance around the red trend-line of financial assets held, in terms of actual portfolio distributions produced. This becomes quite apparent, in particular, from FY2017.
Over the past five years, the median average annual distribution has remained stable at around $83,000 while the mean average has increased slightly to around $99,500.
The effect of compounding remains a distinguishing feature of distributions. Around 77 per cent of the nominal value of all distributions has occurred since 2017, and just under 40 per cent in the past four financial years.
As in previous reports, it needs to be noted that for simplicity the graph above tracks nominal dollars and so mildly overstates the ‘real’ value of recent distributions and portfolio values compared to distributions earlier on the journey.
This tends to exaggerate the relative apparent significance of recent progress compared to earlier years, but the impact is not significant enough to alter the overall analysis.
The results for this and past financial years would seem to suggest that distributions may fall in a range of between $90,000 to $100,000 per annum, but with inevitable variations across years.
Applying past median and average distribution rates from funds and the ETFs held, together with a forecast of Plenti interest income, a forward-looking estimate of portfolio income of around $98,000 for the current 2025-26 financial year can be reached.
Such permanence as time: the evolving composition of portfolio distributions over 2017-2025
The composition of portfolio distributions is no longer as fluid as previously in the journey, as major elements of the portfolio are in place, and new investments as a proportion of existing assets drop off.
From the chart below it can be noticed that the last four years have demonstrated some stability over time, with a fairly balanced contribution to final outcomes from the major four funds and ETF vehicles.
It should be noted that the simplified chart above excludes the paid out Plenti Capital Note interest (around $7000 over the last financial year). These notes will mature over the next few years and the capital will be reinvested in the ETFs listed above.
In the past I have recorded the detailed quarterly breakdown of the composition of distributions received. While interesting, in this phase detailed speculative analysis over the level and reasons for variations in quarter distributions appears less valuable than full financial or calendar year results.
More broadly, what matters and is experienced is the aggregated results over time, with, for example, moderate variations in how much one particular fund or ETF pays out in any given quarter, half-year or even year not having much practical impact.
A sense of this variation can be observed in the chart below, which sets out the level of, and changes in, major components of portfolio distributions over the past quarter century.
The key feature of this chart is still the high and variable distributions from the Vanguard High Growth fund (teal).
As previous updates have noted these have in the past included large elements of paid out capital gains arising from fund rebalancing to meet allocation targets, or fund redemptions, neither of which are pure investment income generation.
Over the past four year distributions from the VAS (purple) and A200 (blue) and VGS (light purple), exchange-traded funds have continued to grow to become clearly visible.
In and out of time: an ‘hourly earnings’ perspective on portfolio distributions
A different perspective on the portfolio’s levels of distributions is provided by considering earnings on an hourly basis.
The chart below sets out the progress of annual portfolio income over the full journey, calculated in nominal dollar terms on an hourly basis, i.e. the per hour ‘earnings’ of the portfolio, counting each and every hour of a year.
As previously reported, a second way to view the same data is by considering the ‘earnings’ of the portfolio constrained to within only normal working hours.
This assumes that the portfolio only produces earnings in hours in which an ordinary worker would – so it equates to approximately the standard pre-tax hourly ‘wage’ the portfolio is able to produce.
This illustrates that over the past year, actual ‘per working hour’ earnings have been around $52, up from around $48 last year.
The backward look: examining movements in the constant dollar value trends in portfolio distributions
Consistent with the last portfolio income update, I have also again transformed the nominal distributions per ordinary working per hour chart above into constant 2025 dollar terms using the RBA’s consumer price index (CPI) measure, with the results for FY2000 to 2025 below.
This also shows some variability, with more relative stability over the past four years evident from the 5-year moving average (red dotted line).
Once again, this measure will be especially interesting to watch as the future plays out, as it will be a critical indicator of the relationship over time between investment earnings, compared to the nearest comparable alternative of wage earning.
The past has a different pattern: comparing distributions and the unit of measure
A feature of distributions over the past four financial years is that they have grown only modestly.
After reaching around $97,000 in FY2022, distributions have been relatively flat in overall, even as the absolute level of the financial portfolio producing those distributions grew around 60 per cent. In fact, distributions across this past financial year are only around 15 per cent higher in constant dollar terms than levels of distributions in FY2018, despite currently invested funds being 3.5 times greater.
A small part of this disconnect between invested funds and distributions has been heavier relative investment up to 2024 in international shares, to reach the targeted allocation (of 50 per cent of equities held). With lower average dividends, international equities will produce fewer distributable dividend payments, and relatively greater capital growth.
Some higher levels of realised capital gains being distributed under previous managed fund structures may have also played a role. For example, previously, by looking at measure of ATO defined taxable investment income (excluding capital gains), it could be shown that investment income had grown from around $22 per working hour in FY2017 to around $45 in FY2024.
Even taking these caveats into account a question remains: are distributions keeping pace with true purchasing power?
Typically, as the issue of purchasing power is discussed in financial independence terms, focus centres on measures of the consumer price index. There are problems with this, however, as measures of CPI are impacted by artificial and temporary government policies, and, even more significantly, the sample ‘bundle’ of goods and services measured excludes a range of costs, and is not a stable basket through time.
Hence, many CPI baskets assume consumers seamlessly adopt cheaper substitutes, without considering the value lost through this assumed consumer indifference between the old and new product. It is certainly also true, and far from trivial, that CPI measures often do not fully reflect the gains in consumer utility from technological innovation and advancement in the quality of goods and service.
In specific terms, this means reliance on a flow of investment earnings that only grow by CPI implicitly signs one up to a lifetime of incremental substitution within a fluid externally defined ‘basket of goods’, rather than a stable absolute living standard, with this effect potential offset in some cases by those quality gains not captured in shifting consumer prices for goods or services.
One alternative measure to use is the measure of ‘M2 Money Supply’.
This is known as a broad measure of money supply, and includes cash and saving deposits, at call accounts and small term deposits. In simplest terms, this can be thought of as a measure of the absolute number of ‘money claims’, defined in Australian dollars, on goods, services or assets in the real economy.
The benefit of monetary supply measures are that they pick up elements missed by CPI measures, for example asset pricing inflation, and the inherent dilution to the purchasing power of a dollar through an increase in the number of dollars in circulation.
The table below compares the growth over the last 3 and 5 years in three series, taxable investment income, monetary supply and the ordinary consumer price index.
From this it can be seen that investment income has grown faster than both monetary supply, and CPI across both periods.
A point to note, however, is that this result does not take into account the essential point that taxable investment income grew over this period not just due to increases in dividends or paid out capital gains, but also because of continued growth in the size of the portfolio due to regular investments up to early 2024. This has the effect of substantially upwardly biasing the results in the income column.
What is also evident from the table, however, is that M2 growth is substantially higher than reported CPI growth over both time periods.
This means that while investment income has substantially outpaced CPI, indicating a protection of purchasing power by this measure of price levels, the story is less positive when the measure of monetary supply is considered.
That is, if one defines maintenance of purchasing power as controlling a stable proportion of ‘tokens’ or ‘money claims’ (dollars), as a proportion of the total issuance of ‘tokens’ (or dollars circulating in the economy), then the investment income challenge is substantially harder than if one considers only CPI movements.
Some may consider this an abstract or arcane concept, with no real-world consequences.
Yet, by analogy, shareholders in any company are correctly not indifferent when new shares are issued by the firm out of a recognition of the same underlying concern – a tangible dilution of their claims to real assets.
As the investment portfolio moves into a longer period of stability with limited new investments, it will be useful to benchmark the growth of distributions and measures of taxable investment income against monetary supply. The alternative is losing sight of one important dimension of the purpose of investment, the protection and growth of the real purchasing power across a full range of assets, goods, and services through time.
Portfolio distributions and expenses: ending the voyage on sand?
For around the past year total average expenses have exceeded average portfolio distributions, leading to a widening gap, of up to around $1100 per month in recent months.
As a measure of financial independence, portfolio distributions covering total expenses is at once intuitively appealing, and potentially misleading.
This journey target focuses on a safe withdrawal rate, and is based on total returns (capital and income) approach, rather than an objective of ‘living off dividends’. In any case, funds can and do distribute capital gains, sometimes at substantial levels.
These factors mean that the standard monthly graph of distributions and expenses produced in each portfolio update is broadly indicative of trends to watch, but not an absolutely accurate measure of whether the portfolio is reaching its objectives. Most recently, as measures of distributions on a backward looking three-year average basis have grown weakly, and expenditure has steadily increased, the clear impression is of the goal of financial independence receding, rather than being sustained.
Despite the limitations in the measure discussed above, this has been a signal worth recording and reflecting on. Yet its flaws as a guide mean that supplementary data is warranted, before evaluating outcomes more fully.
The below chart seeks to do this, by adding a new data series to the regularly updated graph.
As before, the red line represents average total expenses on a three-year moving average basis, and the blue line is the three-year moving average of distributions.
Added to this graph is a new series – represented by the green line – of the estimated available portfolio income, calculated as the product of the financial portfolio (i.e. excluding Bitcoin) and the selected safe withdrawal rate of 3.45 per cent.
In other words, the newly added measure is an estimate of the sustainable long-term portfolio returns (whether these occur through income or capital growth) hypothetically available each month to support financial independence, from the set of traditional portfolio assets held.
This chart highlights a quite different trend and journey than the simple comparison of distributions and total expenses.
It shows a general upward trend, reflecting the growth in the portfolio over time and its capacity to produce future portfolio income. As it is not affected by unusually large distributions (including of capital gains) over FY2021, it features a later ‘crossover point’ with total expenses of January 2024, instead of June 2021. Currently, it shows a $900 per month surplus in SWR projected income, compared to a $1,200 monthly deficit when only paid out distributions are considered.
An alternative view of the same progression, expressed in terms of the percentage of total expenses met by both alternative measures is set out below.
A key trend visible in this chart is a general stagnation in the progress in safe withdrawal rate projected returns between August 2021 and October 2023, followed by a pushing above the target, and – so far – its maintenance since early 2024.
Currents of action: the use of distributions payments
Based on the distributions announced for the exchange traded funds A200, VAS and VGS and the June distributions from the Vanguard funds, there will be approximately $30,000 of capital available for use over the next two weeks.
This sum is less than the full half-year total of $63,000 reported above because March quarter distributions from a number of the funds and ETFs have already been paid.
I intend to set aside around 33 per cent of these payments in cash to meet future Pay As You Go Instalment tax liabilities.
Consistent with practice this year, I plan to add the remaining excess distributions to an account set aside for regular reinvestments, and reinvest this in equal monthly components through to the end of 2026. This is adopted to ensure the protection of the real value of these surplus assets over time, and somewhat mitigate sequencing risk in the period leading up to an anticipated future with no further fixed or regular paid work, and transitioning to a position closer to full FIRE.
Time the destroyer: the end of the emergency cash reserve
Twice a year since 2017 I have typically reviewed the level of my required emergency cash reserves, which in the initial stages of the journey were based on having a full year of expenses separate and outside of the portfolio.
This was designed to cover any unexpected periods without employment, or large unanticipated one-off expenses.
With the approach, and then formal reaching of, the portfolio target, however, the need for this fund has dropped away. It was set at the relatively nominal level of $4,000 six months ago. This was in recognition of the fact that a loss of employment income would not be a significant emergency, as the portfolio income, estimated in a number of ways, could already almost fully meet average expenses. This was simply the last in a series of progressive lowerings of the required emergency reserves, since the emergency fund sat at $33,000 in 2020.
While the formal emergency fund has dwindled over time in importance and size, portfolio distributions over the past 18 months have initially been directed into a more general cash reserve.
This reserve is now fully funded.
It is set equal to estimated annual average expenses (around $104,000), and can be viewed as effectively an absorbing ‘buffer’ to recognise the potential volatility of portfolio distributions, and ordinary expenses, with sufficient liquidity to meet one-off contingencies so as to not require the sale of any portfolio assets in disadvantageous market circumstances in cases of major unexpected expenses.
In addition to this reserve is a smaller contingency fund (currently of around $23,000) designed to meet unexpected one-off expenses without compromising the functioning of the general cash reserve. Neither of these funds make up a formal part of the reported financial independence portfolio.
As mentioned, as the general cash reserve is now fully funded, the emergency fund has been wound up, and further distributions will therefore be directed toward regular reinvestment, in the next 18 months.
Observations
This portfolio income report is just the second to be released following the portfolio having fully reached its overall target, as well as its secondary target of level of equities holdings.
Over time these portfolio income reports reflect a changing range of preoccupations through the journey, such as the exact composition of the overall income, as elements of the portfolio changed, or the significance of paid out capital gains or income over time. A focus throughout has been seeking to build up a reasonable projection of expected future distributions, based on past history.
As the journey evolves from one of building the portfolio income through regular investments to experiencing the income once the overall portfolio goal is met, the perspective shifts again.
Movements in components, or quarter by quarter trends recede in importance. Rather, the element in focus becomes: does the evolving evidence from portfolio income received support the fundamental proposition that a portfolio of at least $3.0 million, with at least $2.4 million in equities can support the targeted level of passive income?
So far, it does, with a significant caveat.
It is not yet assured that the growth in portfolio income generated will exceed the growth in alternative measures of purchasing power, such as M2 monetary supply. That presents the risk of an future income which while nominally maintaining pace with CPI, actually subtly contracts, in terms of its broader capacity to command a real stock of future goods, services and assets.
In taking a wider perspective, the distance travelled should not be forgotten.
The portfolio now reliably produces distributions that significantly exceed annual average full-time earnings, generating $11.78 per hour of every single day and night over the past year. This stream is likely to result in portfolio of distributions of $98,000 over the financial year to come, meaning that full reliance on the distributions would see need for only a notional realisation of $6,000 per annum of portfolio assets to meet current average expenditure.
The recent stability of portfolio income has been a tangible encouragement towards the next step in the FI journey. Quarterly distributions now loom relatively larger in significance than ongoing salary payments in the new specialised role.
Truly, I am not the person who originally saw past harbours recede and imagined others to gained, curiously and idly estimating alternative hypothetical investment plans some 25 years ago in quiet moments spared from the reach of work. Time has expanded, with the bounty of the portfolio income playing its role in that. It is time to consider the future and the past with an equal mind.
Explanatory Notes
Income distributions reported above do not include associated franking credits. My current preference is to seek to track cash actually delivered to my bank account as a tangible and easy to calculate measure. In the financial year 2023-24 franking credits valued at approximately $13,000 were received from all shares, ETFs and Vanguard retail funds, bringing the total half year distributions on a notional ‘pre-tax’ basis to approximately $70,000.
For analytical simplicity some composition of distributions graphs exclude the small amount income from smaller holdings such as Plenti, IAG, NHF and Telstra, as well as Raiz, and Spaceship. The total income excluded by this approach ($4582) constitutes around than 7.2 per cent of the total income received over the period.
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.