The sinews of war are infinite money.

Marcus Tullius Cicero, Phillipics V

This is my one hundred and third 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 $3,000,000. This should be capable of producing an annual income from total portfolio returns of about $103,500 (in 2025 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 $2,400,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$932,316
Vanguard Lifestrategy Growth Fund	$47,358
Vanguard Lifestrategy Balanced Fund	$82,604
Vanguard Diversified Bonds Fund	$93,539
Vanguard Australian Shares ETF (VAS)	$632,587
Vanguard International Shares ETF (VGS)	$835,016
Betashares Australia 200 ETF (A200)	$334,933
Telstra shares (TLS)	$2,585
Insurance Australia Group shares (IAG)	$11,466
NIB Holdings shares (NHF)	$8,508
Gold ETF (GOLD.ASX)	$224,240
Bitcoin	$1,839,080
Raiz app (Aggressive portfolio)	$27,326
Spaceship Voyager app (Index portfolio)	$4,501
BrickX (P2P rental real estate)	$4,447
Plenti Capital Notes	$84,000
Financial portfolio value (excluding Bitcoin)
Total portfolio value	$5,164,506 (+$111,580)

Asset allocation

Australian shares	26.7%
Global shares	24.6%
Emerging market shares	1.0%
International small companies	1.2%
Total international shares	26.9%
Total shares	53.6% (-26.4%)
Total property securities	0.1% (+0.1%)
Australian bonds	3.1%
International bonds	3.3%
Total bonds	6.4% (+1.4%)
Gold	4.3%
Bitcoin	35.6%
Gold and alternatives	40.0% (+25.0%)

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

Comments

The portfolio performed strongly this month, reaching the highest level so far on the journey, with a growth over the month of 2.2 per cent or $111,000.

This was driven for the most part by continued recovery in equity markets, with some additional contribution from an increase in the price of Bitcoin.

Together, these placed the overall portfolio above its previous highs in January.

Gains across this month were broad, with Australian equities increasing in value by 1.7 per cent, and global shares performing strongly as well – with a 2.4 per cent growth in value.

The value of gold holdings fell as some immediate uncertainty in global capital markets eased, with a fall in value of around 2.1 per cent.

Bond holdings increased by around 0.9 per cent, while Bitcoin also increased around 2.5 per cent.

Growth in the financial portfolio represented just over half of the total increase that the full portfolio experienced. This comparative performance of these two different conceptions of the portfolio are the subject of more analysis below.

This month saw a further investment into international shares, with additions to the Vanguard Global Shares (VGS) ETF holdings.

As noted in the past several updates, this reflects a decision to move to an approach of systematic reinvestment of a fixed proportion of accumulated paid out distributions and additional excess cash built up from previous distributions.

As this update is being prepared, a range of retail and exchange traded funds are in the process of finalising their June quarter distributions. Based on estimates of median and mean past payouts, this may see distributions of approximately $36,000. Typically, these form the largest quarterly payments of the year.

A different course? Tracking the traditional financial portfolio performance

For the first fifteen years of the financial independence journey – from first investment to the first purchase of Bitcoin, the portfolio was constituted by a traditional set of equity and bond based holdings, in different vehicles, held over time.

With the first purchase of Bitcoin, however, a small wedge was introduced between a set of financial assets typically held by many investors, and the overall portfolio. As this wedge has grown over the years, I first took the decision to incorporate Bitcoin holdings in the overall portfolio scheme from the commencement of this record.

As recently as March 2019, Bitcoin represented only 4 per cent of the portfolio, and even recently as December 2022, after significant volatility and falls it still only constituted around 11 per cent.

Yet, prior to those falls, and again more recently, the value of Bitcoin holdings have risen to represent a material proportion of the overall portfolio.

This volatility has been reflected in monthly reporting, and at times it has swamped and obscured the underlying performance of the traditional elements of the financial portfolio.

Separate from the issue of how Bitcoin has tended to behave as part of the portfolio, recently examined in this update, and its role in the portfolio, discussed in 2019 and in each annual review, it is worth looking for a few moments at how the underlying financial portfolio has performed.

That is, what has been the difference ‘with and without’ Bitcoin?

At the highest level, this is best illustrated by separating out the overall levels of the full portfolio and the traditional ‘financial assets only’ portfolio over time.

The chart below does this, with the (blue) total portfolio line representing the sum of the financial portfolio (green) and the value of Bitcoin holdings (red).

For the purpose of providing ongoing clarity, and to overcome the inevitably more crowded bar chart style presentation through time, this above chart may move to become my standard reporting format in future.

The evolution and growth of financial portfolio since 2017

The financial portfolio performance can be isolated and examined several ways.

As is evident from the graphs above, the performance of the financial portfolio has been a generally steadier movement towards and then beyond the portfolio’s targets.

The financial portfolio passed the current portfolio goal on a stand alone basis in September 2024, and has so far never fallen below the $3.0 million target.

When the monthly movement of the financial portfolio is set out, as in the chart below, there is inevitable – and not particularly meaningful – volatility evident.

Most of this is a function of the observation period. Across the record of the portfolio since 2007, for example, there have only been two six-month periods in which the financial portfolio suffered a net loss – the first half of both 2020, and 2022.

The trend-line in the chart above averages out variations across a 24 month period, to allow a better view of underlying trends, looking through monthly ‘noise’.

This shows that since around 2019, on average, the financial portfolio has expanded around $20,000 per month. From around early 2024, this has accelerated to around $35,000 per month, despite regular contributions to the portfolio ending in this phase.

Several sharp monthly losses are evident in the record, notably March 2020, a period across 2022, and more recently, slightly lower losses across February to March this year.

Examined on a percentage, rather than a dollar, basis allows a clearer view across time, given the growing dollar value of the portfolio since 2017 will tend to produce greater apparent volatility measured in nominal dollars over time.

From the chart below it can be seen that the average monthly growth in the portfolio has fallen over the period, from just under 2 per cent to around 1 per cent.

Nevertheless, growth in the range of around 2 per cent per month is quite frequent, with the highest growth rates experienced being around 6-7 per cent.

Small losses of 2 per cent or less are relatively frequent, with the largest since monthly loss in the financial portfolio being just over 12 per cent, in March 2020.

Comparing other measures of the volatility of the financial and full portfolio

Generally, however, as would be expected, the financial portfolio is less volatile than the full portfolio including Bitcoin.

Updating previous coverage of this issue in January, from the chart below it can be observed that currently the rolling 12-month volatility of the financial portfolio (red line) is much lower than the full portfolio (blue).

There are significant periods of divergences in these measures, at critical times such as through 2020, the volatility of the financial portfolio has represented a large part of the portfolio’s total volatility.

Across 2021-2023, howeverm and since the beginning of 2024 the pattern has been much lower financial portfolio volatility, in the order of a standard deviation of 2-3 per cent per month.

Another lense to place on the volatility of the financial and full portfolio is examining the correlation between each of these.

The chart below looks at the rolling 12-month correlation of the financial portfolio and Bitcoin holdings over the past 7.5 years.

This measure set out the degree to which the two move together. In this way, it represents the tendency of the value of Bitcoin holdings – the additional element in the full portfolio which is not included in the financial portfolio – to more up or down together.

Note that this correlation picks up only information on the direction of movement, telling us less about the magnitude of the co-movements.

Reflections on the voyage of the financial portfolio journey

Comparing the journeys of the full and purely financial portfolio raises some intriguing counterfactual questions, such as – what would an alternate journey have looked like if only the financial portfolio had existed?

The simple answer is that the financial journey would have closely paralleled the actual path taken.

In the period 2000 through to late 2020, Bitcoin represented less than 11 per cent of the full portfolio holdings. From that time, Bitcoin holdings started exceeding $250,000, and forming an increasing – though variable – component of the full portfolio.

Evidently, then, around half of the period of this record (commencing in 2017), and over 80 per cent of the full pathway to financial independence occurred with primarily traditional financial assets being central.

In planning and execution, therefore, achieving the portfolio target with sufficient traditional financial assets in place has always been the objective.

As can be seen from the charts above, a journey in which only financial assets were invested in would have looked much like the one actually taken, up to late 2020.

After that time, this alternative hypothetical journey would have broadly felt smoother, and significantly slower, but with still some significant monthly variations to contend with. It would have reached the current target on a sustained basis in September 2024, compared to the full portfolio reaching the overall target a year earlier.

This illustrates that the journey has differed only by narrow degrees, and more recently, due to the divergence of financial portfolio. In fact, it is difficult to identify any single investment or personal decision that would have been taken differently, in an alternative scenario of only relying on a purely traditional financial portfolio.

Perhaps two possible differences might have arisen:

• First, overall, there might have been slightly greater likelihood of maintaining a higher allocation to gold, as a diversifying element of the portfolio. As has been seen, this would not have represented a negative outcome, in the circumstances that actually played out.

• Second, and here the difference is more ephemeral and psychological, it would likely have felt a less ‘safe’ journey, without the additional ‘buffer’ that the Bitcoin holdings created, above just simply meeting the portfolio goals and objectives.

This latter difference might appear surprising at first glance, but it reflects both the size of the holding, and its capacity to act in a different manner to other portfolio elements. Absent these holdings, and this is speculation, the end of the journey might have felt marginally less secured than has actually transpired.

As alternative futures go, it is hardly the stuff of compelling fiction. Rather, it highlights the general approach taken to keep non-traditional assets in view, but not to make decisions solely based on their performance or variation through time.

Without these non-traditional assets, however, the voyage would have been steadier, longer, but far less interesting.

Trends in average distributions and expenses

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 notional monthly allowance for other fixed expenses.

This month average total expenses (red line) continued its steady recent rises this month. These expenses are currently running at just under $8,700 per month.

Using the most recent estimates of the three year moving average of distributions (the blue line) using updated data has levelled off at about $7,600 per month.

This leaves a continuing deficit between expenses and average distributions of around $1,100, which remains close to the largest gap experienced to date.

Progress

Measure	Progress
Portfolio objective – $3,000,000	172%
Financial portfolio income as % of total average expenses (3 yr average) – $103,800 pa	110%
Target equity holding in portfolio – $2,400,000	115%
Financial portfolio income as % of target income – $103,500 pa	111%

Summary

This month has seemed, by virtue of the greater amount of disposable time at my fingertips, to stretch rather leisurely out.

This is not a personal diary, and so it is not intended for this record to set out fully the use of the abundance of time that has opened. Rather, the focus is on the experience and possibility of the financial journey towards this point, and make contemporaneous observations, in ignorance of the future.

In this spirit, therefore, it is sufficient to say that the first month of a part-time cadence in the revised work arrangements has been a restful, rewarding, and novel experience. The tempo of daily life has changed, and a range of tasks, interests, and plans long deferred have been activated by the addition of time – from personal fitness and reading goals, to many hours of hiking and cycling.

The increased free time has led to additional time thinking about the portfolio, its management and shape, but none of these thoughts lend themselves to immediate action. There are some further steps I will take to ‘clean up’ elements of the small holdings. This is be more tax efficient to do in the future, compared to previous financial years.

Through this time I have spent many hours re-listening to accounts of the European financial and central banking histories across the period 1919 to 1945, continuing my careful reading of Felix Somary’s The Raven of Zurich.

The interest in this period – aside from its inherently colourful human aspect – is due to its providing a rare window into how monetary, and reserve currency regimes shift alongside eras of geopolitical instability and change. This is not to suggest that there are neat analogies or prescriptions from such periods, that knowledge of this history is a secret key to unlock either portfolio benefits, or especial protections.

Such histories can merely serve as a reminder of some of the signs and portends of regime shifts, and their historical contingency, driven often by small events interlocked with powerful underlying forces.

In several respects, the global financial architecture seems to be poised at the potential for similarly critical alterations, during this period of instability.

The repricing of US bond yields evident in the last five years, the recent movements of the Japanese central bank to unwind a decades long ‘carry trade’ position, the systematic ongoing purchases of gold as a reserve asset for central banks, all point to changes to the fundamental monetary policy regime that has operated over the past few decades. Added to this global conflicts, in prospect and in progress, an an end to a previous US approach to trade barriers and tariffs, and it is clear that elements of the established global economic order – such as it is – are in motion.

These changes do not have an necessary or simple consequential imperatives for the portfolio.

In fact, it is quite possible that upon examination the implications of any single single scenario, or of multiple competing plausible scenarios are not clear for future asset allocation decisions.

The arguable ‘under-exposure’ to fixed interest and bonds during this phase, for example, has probably been positive. In variance to mainstream portfolio theory, the relatively steady allocation to gold during the last 16 years has by no means detracted from after-tax returns. Yet there is no certainty that this state of affairs will persist.

What does seem clear is that the prospects for the continued use of financial repression, unexpected inflation, and re-basing of global monetary arrangements seem higher now than at any time since the Global Financial Crisis – arguably, higher than at any time since the early 1980s. For this reason, I was particularly interested in this review of the history of inflation in the UK recently presented by British economist and life peer Lord Brian Griffiths at the ‘Library of Mistakes’.

The increased level of geopolitical conflict that played out this month, and the prospect of further conflicts to come, means that Cicero’s warning – or simple truth – could continue to play a dominant role in asset prices over the next year. In this case, it will be critical to differentiate between asset price inflation, and the sustainable rise in the inflation-adjusted capacity of the portfolio to support the objective of ongoing financial independence.

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.

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.