I now suggest that in addition we each give him a large tripod and a cauldron. Later we will recoup ourselves by a collection from the people, since it would be hard on us singly to show such generosity with no return.

Homer, The Odyssey, Bk.13

This is my one hundred and fourteenth 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	$997,919
Vanguard Lifestrategy Growth Fund	$49,823
Vanguard Lifestrategy Balanced Fund	$85,002
Vanguard Diversified Bonds Fund	$91,999
Vanguard Australian Shares ETF (VAS)	$665,779
Vanguard International Shares ETF (VGS)	$1,085,623
Betashares Australia 200 ETF (A200)	$340,266
Gold ETF (GOLD.ASX)	$280,130
Bitcoin	$1,142,705
Plenti Capital Notes	$84,000
Financial portfolio value (excluding Bitcoin)	$3,680,541 (+$105,837)
Total portfolio value	$4,823,246 (+$67,667)

Asset allocation

Australian shares	29.0%
Global shares	31.9%
Emerging market shares	1.2%
International small companies	1.3%
Total international shares	34.3%
Total shares	63.4% (-16.6%)
Australian bonds	2.7%
International bonds	3.6%
Total bonds	6.3% (+1.3%)
Gold	5.8%
Bitcoin	23.7%
Gold and alternatives	29.5% (+14.5%)

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 continued to recover, growing by approximately $68,000 in headline terms, or around 1.4 per cent.

This growth is attributable to appreciation in financial assets, with the narrower financial portfolio alone increasing by $106,000 or 3.0 per cent. This places the financial portfolio technically at the highest level ever reached, just above the level attained at the end of February.

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

The contributors to this strong performance were positive movements in global equity markets, combined with some currency benefit. This in turn has helped the global equity portfolio to reach its highest ever level, in absolute dollar terms, rising by 5.6 per cent. The global equity portfolio is also around 54 per cent of the total equity portfolio, a level not seen since the second half of 2017.

Australian equities were slightly positive across the month, rising by 1.0 per cent, while bond slightly rose in value by 0.8 per cent.

Across alternative asset classes, Bitcoin also drifted lower by around 3.2 per cent across the month and gold continued its recent negative performance, falling by around 1.0 per cent.

The month, as previously, small additional new investments were made in global equities (through the Vanguard exchange traded fund VGS), in accordance with the decision to regularly reinvest excess distributions and cash holdings.

Harbour dues: proposed changes to capital gains taxation

This month also saw the delivery of the Federal budget, and announcement of a set of potential reforms to the taxation of a range of assets and some trusts.

The impact of these will differ according to every personal circumstance, but I have been considering what they mean – if anything – for my longer-term financial independence portfolio and status.

The reforms abolishing the 50 per cent capital gains discount on a prospective basis, and returning to a modified form of CPI-indexation to seek to tax real gains at a minimum of 30 per cent are complex in effect. Whether they provide more generous, or less generous treatment of capital gains in future is a function of the level of inflation and capital growth. In circumstances of relatively low inflation, and higher nominal capital growth, the net result is an increased taxation of capital gains.

As others, and financial media commentary has observed, at the margins this makes higher capital growth investments arguably less attractive in after tax returns than previously, assuming a return to recently experienced inflation levels of 2 to 3 per cent. As a result, in theory, it increases the relative attraction of higher dividend shares, compared to equities in which capital growth is higher.

The initial question two fold, therefore. Will the changes be implemented in something like the form proposed? And, how do equity market pricing (i.e. other investors) respond to this?

Sitting beyond these is a further question: what implications does this have for my portfolio and strategy?

One potential implication is that it makes higher yielding Australian shares potentially more attractive vehicles for me, compared to the recent approach of pursuing higher-capital growth international equities through the Vanguard global shares ETF.

At this point, however, I will not be hurrying into a change of my strategy. This for several reasons.

• First, shifting investment approaches in service of optimising tax consequences is usually unwise. While real after-tax returns are the core target for an investor, the primary lens applied across investment choices should be risk tolerance, diversification, liquidity and a range of other factors, with tax consequences being understood, but not the driver of choices. Tax policies and treatments can and do change over the life of an investment.

• Second, a change of this kind would involve building a greater concentration risk into a small market affected by its own idiosyncratic risks. That is, increasing exposure to Australian shares in preference to, at the margin, wide global diversification, would represent a judgement that the after-tax returns boost this may provide under certain conditions more than offset the potential downsides and risks of further concentration of investment into only listed Australian firms. There is not a clear basis for this judgement.

• Third, one of these aforementioned idiosycratic risks, which has apparently just crystallised, is the exposure of Australia’s relatively small equity market to unexpected government taxation proposals which may have significant flow on consequences for the attractiveness of the Australian economy and after-tax returns of Australian-based investors in Australian listed firms. This represents important new information on the riskiness of future after-tax returns of Australian asset holders.

• Fourth, while my exposure to high capital growth equities is significant, there is considerable uncertainty both about the future level of capital growth, and the inflation environment these will occur in. That is, to move to a different position based on a backward-looking assumption of a return to a lower inflation environment matched to high nominal capital returns would represent an expectation that these past conditions represented default or ‘normal’ conditions.
  
  It is quite plausible that geopolitical and macro-economic conditions across highly indebted developed economies lead conditions away from these past regimes, to conditions featuring different combinations and relationships between inflation, returns and the components of these returns.
  
  That is, in an era featuring levels of government debt approaching in relative terms that of post-Second World War economies, where productivity growth is stalled, and supply chain disruptions and geo-political instability are driving high energy and commodity prices and persistently higher inflation, leveraging my own future after-tax returns to a return to conditions of what was termed ‘the great moderation’ may be unwise. Of course, historical conditions of low and stable inflation may be re-established, perhaps most plausibly by a recession in place of conditions of stag-flation, but my conviction on this score is not so strong that I would base future after-tax returns on this specific scenario.

• Fifth, it is by no means clear that listed Australian firms will of necessity always feature significantly higher dividend payout ratios than comparable international equities.
  
  It is certainly arguable that Australia’s franking credit regime make the passing through of profits through dividend payments to Australian investors relatively advantageous and valuable, in the hands of Australian investors. Nonetheless, recent years has seen a reduction in the average dividend yield of the Australian equity market, even as it lagged international equity benchmarks. It is possible that what will be observed over time is the slow erosion of dividend flows from lower profitability, greater funding of growth from retained profits, or a combination of both.

Expected second quarter and half-year distributions

At the end of this current month, the portfolio will receive distributions, including paid out dividends and capital gains from a variety of Vanguard retail funds and the three exchange traded funds held.

These typically form the largest set of distributions of the four sets received across the year.

Since 2023, these second quarter or June distributions have consistently averaged just over $30,000.

This year second quarter estimates are for distributions of around $37,000, a slightly higher figure based largely on the potential for the Vanguard High Growth funds to distribute at levels closer to their past averages. It is quite feasible, however, that this does not occur this year.

The chart below sets out overall distribution levels by quarter over the journey.

It highlights the projection for this coming second quarter payments sits well within the longer-term averages – acknowledging that higher levels experienced in the past were a function of changes to payout timings in Vanguard funds held, rather than just being representative of differing levels of portfolio distributions.

In turn, these projections allow some estimate to be made of overall projected distributions across the financial year to June 30.

The chart below sets out the components and levels of these returns.

Looking at this chart, what stands out is the relative stability in nominal terms of distributions over the last three financial years, at approximately $94,000 per annum.

Notably, this is lower than in 2021-22, and also 2020-21.

This levelling off has occurred in a period of sustained new investment into the portfolio, albeit directed in more recent years largely into lower dividend global equities.

Across the time series, it is difficult to make the argument that there has been any sustained growth. Depending on the methodology used, the growth across the period is between 0.3 to 0.8 per cent per year in real terms, much lower than the expansion of the assets during the period. In fact, the data itself is insufficient to either reliably estimate a growth rate, or conclude it is statistically different from zero.

This highlights the erosion of what used to be an unstated assumption of early entries of this record about distributions, across 2017 to 2019.

At that time, distributions appeared to be growing, albeit unevenly, such that it was possible to conceive of pursuing an approach to FI of simply drawing upon distributions for the meeting of expenses through time. With three years of essentially static distribution payments, this will not occur in the foreseeable future, as total expenses over the past three years average at about $109,000.

This means that practially implementing full financial independence, unless there is a sharp change in distribution levels, will rely on the progressive sale of some assets through time.

Trends in average distribution, portfolio income and expense measures

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

The chart below primarily measures distributions against an estimate of total expenses.

The total expenses figure (set out in the red line) 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 a series of ‘safe’ portfolio income. 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 kept rising slightly to around $9,100 per month. As a result, total estimated annual expenses is steady at around $109,000.

Using the most recent estimates of the three year moving average of distributions (the blue line), paid out distributions have continued their recent rise to around $7,900 per month.

This leaves the monthly deficit between total expenses and average distributions narrowing slightly to about $1,100.

Using the newer ‘SWR portfolio income’ measure, however, portfolio income remained steady at around $10,400 per month. This is around $1,300 per month higher than total expenses, meaning a maintenance of a consistently positive ‘safety margin’.

Progress

Measure	Progress
Portfolio objective – $3,250,000	148%
Financial portfolio income as % of total average expenses (3 yr average) – $108,900 pa	117%
Target equity holding in portfolio – $2,600,000	118%
Financial portfolio income as % of target income – $112,000 pa	113%

Summary

This month has been one of greater time and space to explore life beyond full-time work, including some interstate travel to deliberately trial different ways of using and thinking about time, since mid-2025.

With now a full 12 months of reduced work hours, it is interesting to look back on expectations and realities, and what I have learnt. The most dominant impression is a of a calm, unhurried, expansion in the physical and psychological experience of time itself. In full-time work, in previous roles, scores of small and large deadlines and meetings pushed one along, making time disappear in what seemed at the time like mostly purposeful busyness.

By contrast, now, time itself seems to move slower, and pause for me in a quite luxurious, merciful way. In some senses, the experience is a little akin to entering a kind of permanent day light savings period, every day. One looks at the clock, and is surprised anew at each time that in somewhat frivolous contrast to the famous Robert Service poem, its earlier than you think.

With this luxury of time, I have spent significant time ignoring current events and instead re-reading and pausing over works from a different era. This month my attention has been focusing on Sophocles Orestan trilogy, Virgil’s Aeneid, and Homer’s The Odyssey. These pre-modern works, designed for performance and oral retelling, provide a sharply different, and harsh, perspective into past societies conceptions of human virtue and the role of fate and chance.

The other era I have been reading further about is Weimar Germany, through The Weimar Years by Frank McDonough.

What is arresting in this work is the interdependence and combinations of individually unforeseeable events, transpiring to lead to a generational erasure of national wealth, opening the door to political developments that would have unimaginable consequences for the rest of the century. In the tangled details of banking failures, failed renegotiations of the treaty of Versailles, inter-allied debt arrangements and political contingencies there lies an all too ominous truth: placed together, events can have an alchemy that turns them into the substance of fateful history.

Amid these kinds of forces, even emerging forces of a weaker kind, asset prices, price levels, sustained asset returns have little weight.

This is even more true as governments start on a deliberate project of seeking reshape the landscape of relative prospective returns on capital investment assets. At such times, the first preparation one can make is to look to where kings or history may look, and understand the fragile hold we may each have on what they may seek to recoup through time.

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.