I was waiting for something extraordinary to happen, but as the years wasted on nothing ever did unless I caused it.

Charles Bukowski

Year in Review

This year has represented a significant pause, or lacunae, in the journey to financial independence.

This is not unexpected, indeed many prior entries have meditated on exactly this potential – for a significant delay or reversal of progress.

The engine of this significant reversal is market volatility, combined with the growing size of the portfolio. This means the direction and pace of travel is less within one’s choosing than at any other time.

At the start of this year, the portfolio goal was notionally met. The focus of this year was intended to be:

• maintaining the overall portfolio target of $2.62 million;

• achieving a minimum equity portfolio target of around $2.1 million; and

• building a cash reserve of at least one year of normal expenditure.

The original focus of this year was on the latter two objectives, but in fact, none of the objectives have survived contact with markets this year.

For the past half a year, the portfolio has slipped significantly below the target. The minimum equity portfolio has not been reached. Further investments to achieve the first two objectives has meant no meaningful progress on building a cash reserve.

In turn, this means that the three essential pre-conditions which were set for any movement from my current work arrangements are not within immediate reach.

The concerted negative movement against the financial independence benchmarks through this year is summarised below.

Progress against FI measures through 2022

Measure	Portfolio	All Assets
Portfolio objective – $2,620,000 (or $91,600 pa)	113%→93%	144%→123%
Total average expenses (2013-present) – $84,700 pa	122%→101%	156%→133%
Target equity holding in portfolio – $2,100,000	88%→87%	N/A

2021 was an exceptional year of growth in the portfolio. This year was the reverse of this, an unprecendented period of major contraction in the portfolio.

The portfolio was reduced in value by around $500,000 this year, or around 17 per cent of its size on 1 January 2022. This is both the largest dollar loss – and proportional loss of portfolio value – in a single calendar year.

The only other year of loss over a calendar year period was in 2018, where around a 3 per cent (or around $40,000) loss was suffered.

Sailing against the wind: the course of the voyage

This year has felt like sailing against a strong wind. Progress has not been apparent, and temporary periods of advances have invariably been succeeded by backward pushes.

Most starkly, despite regular investments and reinvestments of earnings, the overall equity portfolio remains below where it started the year, despite a modest recovery through the second part of this year.

Highlighting this point, 2022 has been the only calendar year in which there has been a overall reduction in value of equities on the journey to date.

Continue reading “Year in Review and Monthly Portfolio Update – December 2022”

The sea washes across the decks and maststep

And dark daylight already shows through long rents in the sails

Alcaeus, Fragments

This is my sixty-second 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 $2,620,000 through 2022. This should be capable of producing an annual income from total portfolio returns of about $91,600 (in 2022 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.5 per cent.

A secondary focus through 2022 will be achieving the minimum equity target of $2,100,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$790,086
Vanguard Lifestrategy Growth Fund	$42,487
Vanguard Lifestrategy Balanced Fund	$76,957
Vanguard Diversified Bonds Fund	$97,297
Vanguard Australian Shares ETF (VAS)	$367,311
Vanguard International Shares ETF (VGS)	$288,466
Betashares Australia 200 ETF (A200)	$274,868
Telstra shares (TLS)	$2,089
Insurance Australia Group shares (IAG)	$5,372
NIB Holdings shares (NHF)	$7,476
Gold ETF (GOLD.ASX)	$115,439
Secured physical gold	$18,425
Plenti (P2P lending)	$56
Bitcoin	$586,560
Raiz app (Aggressive portfolio)	$20,463
Spaceship Voyager app (Index portfolio)	$3,459
BrickX (P2P rental real estate)	$4,997
Total portfolio value	$2,701,808 (-$246,827)

Asset allocation

Australian shares	36.6%
Global shares	24.4%
Emerging market shares	1.6%
International small companies	2.0%
Total international shares	28.1%
Total shares	64.6% (-15.4%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.6%
International bonds	5.9%
Total bonds	8.5% (+3.5%)
Gold	5.0%
Bitcoin	21.7%
Gold and alternatives	26.7% (+11.7%)

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

Comments

Over the past month the portfolio has witnessed its largest ever nominal dollar loss, of around $247,000.

This represents a decline of 8.4 per cent in the portfolio, which is the second largest percentage fall after March 2020. It has pushed the portfolio down to levels of around six months ago, notionally at least undoing all progress since winter.

Despite this, the portfolio still – narrowly – sits above the revised portfolio goal of $2.62 million

The story of the month was of simultaneous waves from west and east, to borrow another phrase from the Greek poet Alcaeus. Sharp falls in equity markets through January and continued falls in the value of bitcoin for most of the month contributed in nearly equal parts to the final result.

Australian shares fell around 5.5 per cent for the month. Global equity holdings also declined in value by around 4.5 per cent.

Increasing market conviction around future US interest rate rises also saw the value of bond holdings simultaneously fall, with relatively large losses incurred – of about 1.9 per cent.

The only bright spot in the portfolio was gold holdings, which increased in value by nearly 1.6 per cent to reach levels not experienced since November 2020.

Broadly, however, what can be seen in the chart below is what occurs when multiple asset classes exhibit at least short-term correlation, each responding to perceptions of sharply changed market conditions.

Continue reading “Monthly Portfolio Update – January 2022”

Prudently the god covers the outcome of the future in dark night

Horace, Odes, III.xxix

This is my sixtieth monthly portfolio update. I complete this regular update to check progress against my goal.

Portfolio goal

My objective is to reach a portfolio of $2,585,000 by 31 July 2022. This would produce a real annual income of about $90,500 (in 2021 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.5 per cent.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$828,192
Vanguard Lifestrategy Growth Fund	$44,284
Vanguard Lifestrategy Balanced Fund	$79,775
Vanguard Diversified Bonds Fund	$99,241
Vanguard Australian Shares ETF (VAS)	$375,442
Vanguard International Shares ETF (VGS)	$273,120
Betashares Australia 200 ETF (A200)	$287,049
Telstra shares (TLS)	$2,169
Insurance Australia Group shares (IAG)	$5,612
NIB Holdings shares (NHF)	$8,400
Gold ETF (GOLD.ASX)	$113,675
Secured physical gold	$18,243
Plenti (P2P lending)	$531
Bitcoin	$875,660
Raiz app (Aggressive portfolio)	$20,909
Spaceship Voyager app (Index portfolio)	$3,598
BrickX (P2P rental real estate)	$4,988
Total portfolio value	$3,040,888 (+$20,033)

Asset allocation

Australian shares	33.7%
Global shares	21.8%
Emerging market shares	1.5%
International small companies	1.9%
Total international shares	25.2%
Total shares	58.9% (-16.1%)
Total property securities	0.2% (+0.2%)
Australian bonds	2.4%
International bonds	5.4%
Total bonds	7.8% (-7.2%)
Gold	4.3%
Bitcoin	28.8%
Gold and alternatives	33.1% (+23.1%)

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

Comments

This month the financial independence portfolio gained around $20,000, maintaining its positive momentum over the past two months.

Though this represented modest portfolio growth in percentage terms – of 0.7 per cent – it pushed forward progress further above the recently reached threshold of $3.0 million.

The monthly movement across November means that the portfolio has advanced in 10 out of the last 12 months.

Through the month there was generally muted and offsetting movements beneath the ‘headline’ portfolio value.

Australian shares and bonds remained relatively stable through the month. The value of gold holdings increased by around 5.6 per cent to reach the highest value in around a year. Coincidentally, international equities also advanced by 5.6 per cent.

Bitcoin declined by around 3.3 per cent through the month, having briefly reached new highs early in the month.

As a result of these varying cross-currents, the portfolio generally ended up fairly close to where it began.

Continue reading “Monthly Portfolio Update – November 2021”