I love all waste
And solitary places; where we taste
The pleasure of believing what we see
Is boundless as we wish our souls to be.
Percy Bysshe Shelley, Julian and Maddalo
Twice a year I prepare a summary of total income from my financial independence portfolio. This is my nineteenth portfolio income update since starting this record. As part of the transparency and accountability of this journey, I regularly report this income.
As discussed in my recent post, my primary goal is to maintain a portfolio of at least $3,250,000 which is capable of providing a passive income of around $112,000 (in 2026 dollars).
Portfolio income summary
| Investment | Amount |
| Vanguard Lifestrategy High Growth (retail fund) | $9,366 |
| Vanguard Lifestrategy Growth (retail fund) | $417 |
| Vanguard Lifestrategy Balanced (retail fund) | $792 |
| Vanguard Diversified Bonds (retail fund) | $668 |
| Vanguard Australian Shares ETF (VAS) | $11,750 |
| Vanguard International Shares ETF (VGS) | $5,387 |
| Betashares Australia 200 ETF (A200) | $6,223 |
| Plenti Capital Notes | $3,790 |
| Total Portfolio Income – Half-Year to December 31, 2025 | $37,922 |
The chart below sets out the distributions received on a half-yearly basis from the financial independence portfolio over the past eight years.
The following pie chart is a breakdown of the contribution of each major current investment in the portfolio to the total calendar year distributions.
Comments
This half-year to 31 December 2025 the portfolio produced total distributions of $37,922, or around $6,300 per month over the past six months.
This is a quite stable half-year result, consistent with past years, but also smaller than absolute distributions for the same period going back to 2020.
Higher payouts earlier in 2025, however, means that this average result has still led to second highest nominal level of distributions in a full calendar year, at $101,000. This is about 5 per cent above the forecast of a year ago, of $97,000, made using average distribution rates per unit for the Vanguard retail funds and exchange traded funds (ETFs).
This portfolio income report is the first since the liquidation of a range of smaller investments and direct shareholdings from the financial independence portfolio.
This aids in clarity, but it should nevertheless be noted that some of the graphs below around portfolio structure and distributions also exclude reporting the Plenti loans income, which was around $7,600 across the full year. This accounts for different totals in some graphs of portfolio income composition (which uses only on the ETFs and Vanguard fund distributions) and the full reported half and full year totals.
The level of quarterly distributions across the year continues to stabilise, with the last three years in particular showing a relatively high level of predictability within a reasonably narrow band.
This stabilisation has arisen from increased investments over time in ETFs paying out on a quarterly basis, and the automatic shift in Vanguard legacy funds to newer funds with quarterly payouts.
Long-term trends in calendar year portfolio income: 2000 to 2025
At the end of the year, I also seek to provide a longer term perspective, on this occasion, covering the full financial independence journey of around 26 years.
This calendar year just passed portfolio distributions totalled around $101,000 – or approximately $8,400 per month.
This the second highest level of calendar year distributions on the entire journey, and is above the mean of the last five years of results.
The chart below gives a 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 (i.e. excluding Bitcoin).
The chart above reflects a long journey over a variety of market conditions, using an evolving set of investment vehicles. The constant it reflects is actual nominal dollars received from investments, be it in interest, dividend payments, or distributions – including distributed capital gains. It excludes franking credits, which in the last financial year totalled around $13,000.
Last year I observed a ‘delinking’ of measures of portfolio value and distributions, attributing some of this to that prior analysis in early 2025 not excluding the volatile impact of Bitcoin on overall portfolio value.
The chart above does exclude this factor, but notably the ‘delinking’ is still visible, particularly in 2017 and 2021. This likely reflects a few different factors.
The first is the movement away from funds with relatively high episodic capital gains payouts. These were in evidence in 2021, for example.
The second is a shift in investment towards lower dividend international equities more recently.
The third is perhaps harder to validate, but might be termed ‘yield compression’ in equities more generally. In Australia this has seen average dividend yields fall slightly. In the US, a major component of global markets, changes in the composition of the index, in particular the increasing prominence of low or no dividend technology giants has also led to falls in already comparatively lower average dividends.
This has led to some stark results that are worth further evaluation below. While the financial portfolio value has tripled since 2017, current portfolio distributions are only 25 per cent higher than 2017 in nominal terms, and even less in real terms.
Despite this, there is still some evidence of the powerful compounding element of the journey, with more dividends received in the last three years than occurred in the first 17 years combined.
Over the past five years, the median average annual distribution using half-year figures has fallen to around $79,000 while the mean average has been around $98,000.
As in previous updates, it should be emphasised 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 received earlier on the journey.
This slightly exaggerates the relative apparent significance of recent progress compared to earlier years, but it does not change the essential analysis.
The results for this year would appear to confirm a general trend for distributions over the past five years to generally to fall in a range of between around $80,000 to $100,000 per annum, but with substantial temporary variations each year.
A changing composition of portfolio distributions: from 2017-2025
An examination of the changing composition of the distributions of the financial independence portfolio used to be a major focus of the portfolio income update, as new investments were made, and allocations into different investment vehicles occurred.
The major observed trends are natural products from these changes, including the fact that all major new investments from 2018 onwards have been made into just three exchange-traded funds – A200, VAS and VGS.
The chart below shows this slow change process in action – setting out the different level and components of each of the past nine calendar years.
As can be seen, there is substantial stability across the past three years, allowing for some volatility year to year from ETF investments. These years show that distribution income is dominated by payouts in these three ETFs, and the Vanguard High Growth retail fund.
Longer-term perspectives on the changing composition of distributions: 2000-2025
A longer term view of the same processes is set out in the chart below.
This maps the level of, and changes in, major components of portfolio distributions over the past 25 years.
The most visible element of this chart remains the previously high and extremely variable distributions from the Vanguard High Growth fund (teal), prior to its transition to a new fund structure with quarterly distributions in 2024.
These payments often included a high level 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 five year distributions from the VAS (purple) and A200 (blue) and to a lesser extent VGS (grey), exchange-traded funds have continued to grow to become become significant in their own right.
As noted last year, one shorter term trend that is apparent is the re-emergence of interest income to be a visible contributor with the Plenti Capital note investments – marked in darker blue. Earlier parts of that line also represent interest income, mostly from Plenti peer-to-peer lending or other high interest savings accounts.
Over the horizon: Estimating 2025 portfolio distributions
In this report a simplified approach is taken to presenting estimated future portfolio distributions.
As noted last year, with the general trend towards a fairly stable level of quarterly payouts over time and new investment being small compared to funds already employed, there does not appear to be as significant value as previously in breaking down estimated distributions by quarter. Quite simply, quarterly variations represent essentially timing ‘noise’, and I prefer to zoom out and look at longer term trends.
The chart below is tracks past actual fund and ETF distributions for each year, and aggregates forecast quarterly distributions into a full calendar year estimate for 2026.
This analysis reaches forecasts of distributions based on median payouts from the Vanguard funds and equity ETFs only. It does not include, therefore, expected interest income from the Plenti Capital Notes, which again might be expected to be around $8,000 over 2026.
The forecast for 2026 is for distributions to total around $92,000, or around $100,000 including the Plenti Capital Note interest payments.
Bounded: a ‘working hours equivalent’ perspective on portfolio distributions
For some time, I have discussed a perspective of the portfolio itself being akin to an invisible, industrious substitute ‘worker’, consistently labouring to generate income through the year.
The chart below shows the development of annual portfolio income over the journey, calculated on an hourly basis, i.e. the per hour ‘earnings’ of the portfolio, counting each and every hour of the year.
An alternative way to view the same data is by considering the ‘earnings’ of the portfolio 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.
Over the last year, actual ‘per working hour’ earnings have been around $51, up from around $48 last year. This is around twice the minimum wage for most Australians in 2025.
Believing what we see: analysing constant dollar trends in portfolio distributions
An ongoing area of interest in the recent journey has been separating out the impact of inflation, and getting a clear picture of whether there are differences in trends in nominal, and real (i.e. constant dollar, or actual purchasing power) income.
The concept of a sustained, and if possible growing, real investment income is critical to the achievement of financial independence, especially when time-scales of decades are involved.
Earlier in the journey, and in the presence of low levels of inflation, nominal values can do a fairly serviceable job of reflecting the income potential of the portfolio. With sustained levels of inflation over time, however, tracking only nominal values can over-state progress made, in real, after-inflation terms.
For this reason, I have transformed distribution income into constant $2024 dollars in the below chart, which looks at trends over time in ‘real’ terms.
As observed in similar analysis last year, there is a good deal of variation year to year, but a surprisingly flat trend, given the tripling of financial assets held within the portfolio across the period.
To exclude the impact of high early – and then erratically timed – distributed capital gain through the period, I have looked at a second independent source, that of reported taxable investment income, excluding capital gains, each financial year.
This has the effect of removing from consideration all capital gains made (which it should be noted, is not strictly consistent with the theoretical concept of total return investing).
The result of doing this is significant, as can be seen from the chart below.
What this appears to show is a far more linear progression, as might be expected given the portfolio growth over that period.
For the last financial year, it shows a per hour rate of $47.56, double that of nine years ago. The income line grows at an average of around 9 per cent year on year, starkly contrasting the apparent stagnation of income in the distributions only measure in previous charts.
This is a more intuitive result, given the size of the underlying financial portfolio grew by around 3 times over that period.
A couple of other factors are also likely impacting on the trend of income from the portfolio, outside of portfolio size and capital gains.
- First, a generally low level of interest rates through the middle part of the period between 2016 to 2024, reducing income received from cash or fixed interest elements of the portfolio.
- Secondly, the concerted move to increase foreign equities exposure from the middle of 2020 to the beginning of 2024. Due to lower dividend payouts than Australian shares (an average approximately around 2-3 per cent versus approximately a 4 per cent longer term Australia average), this would be expected to lead to portfolio income increasing at a lesser rate than during 2017-2020, where new portfolio investments were mostly placed in domestic equities.
- Thirdly, a small compression in the level of Australia equity dividends over the past several years, compared to historical averages.
The first and third of these listed factors may be temporary, but it is not apparent that it would be wise to assume the reversal of these trends.
Hope’s painting: alternative measures of real portfolio income
A final cross-check on the real, after-inflation, trends in portfolio income growth is provided by comparing the taxable investment income measure with the growth in M2 (broad money supply) and CPI over recent periods.
This analysis was first set out last July, and has been updated below.
Measured growth in nominal taxable investment income compared to M2 and CPI
This shows that taxable investment income has only just kept pace with the growth in the total number of dollars in the Australian economy since 2022, even if it has grown at about double the rate of measured inflation.
Over a longer time period of five years, taxable investment income has grown substantially faster, at about three times the rate of the expansion of money supply, or six time measured inflation.
Broadly, these are positive and reassuring results. They are difficult to definitively interpret, however, given that they will also be picking up expansions in taxable income arising from material new investments over the past 3 to 5 years.
The test will come in the future, however, when no further investments fall within these time periods, and the measurement picks up solely organic investment income growth rather than growth generated by new investments being made.
Paused in descent? Trends in the long-term average distribution rate for the financial portfolio
One way of looking at some of the impacts of the above, and to look through the ‘illusion’ of nominal dollar analysis, is to look at the long-term trends and variations of the average rate of distributions as a percentage of the portfolio (i.e. an average ‘yield’ of the portfolio).
The chart below sets out the record from 2000 to 2025 on two different bases.
First, a red line tracks the distribution rate of the traditional financial portfolio – with Bitcoin holdings removed. The second blue line tracks the distribution rate of the whole financial independence portfolio, with the zero-yielding Bitcoin holding included.
This shows a general pattern of decline in the yield of the financial portfolio, with declines being particularly sharp since achieved yields peaking at around 8 per cent in 2017. In the last three years distributions have fallen to around 3.5 per cent, pushing the overall trend to be lower. Previously, a year ago, this trend line was essentially flat.
Once again, this likely reflects increased international equity allocations, constrained or stable Australia equity income, and a trend to vehicles with lower episodic capital gains payouts.
Upon the bank of land: directing the portfolio distributions
Based on distributions announcements for the exchange traded funds A200, VAS and VGS and the December distributions from the Vanguard funds, there will be approximately $16,000 of capital available for redeployment over the next week or so.
This sum is less than the full half-year total reported above because September 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.
With no identified need for an emergency fund any longer, in the light of a full funding of a general cash reserve of one years of expenses plus a further small contingency fund for major unexpected expenses, funds in excess of this can be reinvested.
Therefore, the remainder I provisionally intend to hold in a high interest savings account. This will be gradually reinvested through the year as mentioned in my review of my investment plans. Any further investments will likely be in low-cost passive foreign equity index ETFs (likely VGS), consistent with my current plan.
Observations
The discipline of looking at the actual tangible income produced by the financial independence portfolio has been an anchor for my developing thoughts and actions over the past nine years.
In the early stages, it provided a kind of ‘grounding truth’ of financial independence theory, by checking it against observable dollar flows into bank accounts. As investments shifted, so did the make-up and behaviour of the portfolio income.
The past three years has shown an apparent stabilisation in the nominal level of distribution payouts, with less variance tending to show up annually. Across 2026 I might, with greater confidence than previously, expect an income of some $100,000 to be produced by the portfolio, even as the notional yield of the portfolio appears to be stabilising at lower levels than in early stages of the journey.
This income falls below the portfolio income target and average expected expenses based on the past three years, implying that some form of very limited selling of assets would be required to meet the status of financial independence formally. Including consideration of the current level of franking credits actually moves the pre-tax equivalent income to $113,000, just above the notional target.
As seen in monthly portfolio updates, however, using a notional safe withdrawal approach, there is a considerable safety margin if the chosen withdrawal rate of 3.45 per cent is applied. Using the current financial portfolio value and the selected rate, this margin is approximately $12,000 per annum.
The above analysis shows that simply counting all portfolio distributions, and comparing them against expenses is a highly imperfect way to track degrees of independence as the journey progresses.
Similarly, what time has brought into greater focus is the threat that nominal ‘money illusion’ (considering higher nominal investment income without considering measures of real, constant dollar, wealth or changes in purchasing power) can provide an early and false positive signal that the journey is complete. Given significant escalations in price levels, and monetary growth, this risk is higher now than it was a decade ago.
Yet uncertainty remains a key presence, as these trends are analysed.
It is plausible that the stabilisation that has broadly occurred over the past three years will disappear, almost as soon as it is noticed. It is also possible that changes in equity and bond market valuations and yield will be disrupted, breaking an apparent plateau in annual distributions received of around $80,000 to $100,000.
Tentatively, however, it no longer appears prudent to expect a reversion to average portfolio yields of 5 per cent, with the past years approximating 3.5 per cent. Yet it cannot be ruled out.
The portfolio will deliver its results and verdict on these possibilities soon enough. The prospect from here appears as boundless as I might wish it to be, but the question remains: may I truly believe what I see in the numbers over time?
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. Last financial year 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 $51,000.
For analytical simplicity some composition graphs exclude small income from smaller holdings such as IAG, NHF and Telstra, as well as Raiz, Spaceship and Plenti. The total income excluded by this approach for most of the period has constituted less than two 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.
Note for readers
Over the last few months, 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.