Neither should a ship rely on one small anchor, nor should life rest on a single hope.

Epictetus

This is my eighteenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December  2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $734 804
• Vanguard Lifestrategy Growth  – $42 624
• Vanguard Lifestrategy Balanced – $75 539
• Vanguard Diversified Bonds – $102 960
• Vanguard ETF Australia Shares ETF (VAS) – $76 267
• Betashares Australia 200 ETF (A200) – $5 780
• Telstra shares – $ 3 732
• Insurance Australia Group shares – $20 308
• NIB Holdings – $6 564
• Gold ETF (GOLD.ASX)  – $79 125
• Secured physical gold – $12 623
• Ratesetter (P2P lending) – $41 746
• Bitcoin – $110 570
• Raiz app (Aggressive portfolio) – $10 896
• Spaceship Voyager app (Index portfolio) – $98
• BrickX (P2P rental real estate) – $4 718

Total value: $ 1 328 354 (-$8 678)

Asset allocation

• Australian shares –  34%
• International shares – 19%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.4% (3.0% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.5% (1.5% over)
• Australian bonds – 9%
• International bonds – 9%
• Total bonds – 19.0% 
• Cash – 1.3%
• Gold – 6.9%
• Bitcoin – 8.3%
• Gold and alternatives – 15.2% (0.2% over)

Comments

This month has been one of taking some small new actions, and experimenting with some different tools to apply my overall plan. Most significantly, I have opened and used a new low cost brokerage account, with Self Wealth, to start purchasing Betashares A200 ETF, a new very low cost (0.07%) Australian shares ETF.

The A200 is a new index ETF, similar to the Vanguard VAS ETF, though currently with lower fees, and covering the ASX200, rather than the ASX300. Self Wealth’s platform enables a flat brokerage fee of less than half my previous online brokerage account. In turn, this has made a move away from contributing to my Vanguard high growth fund as a primary destiny for new investment, into A200, more economic, at least by my calculations. So my amended approach in future will be fortnightly purchases of A200 or other low cost ETFs. An added benefit of this will be more rapid movement to my target asset allocation, as previously 10% of each Vanguard high growth contribution was effectively contributing to my bond holdings.

A further experiment has been opening a small account at Spaceship, a new app based micro-investing option. Spaceship is a new entry into the micro-investing market, currently offering no fees on balances of less that $5000. The app is simple, and the application process was relatively fast and efficient. I chose their only index portfolio, which is based on direct holdings of globally diversified large companies. While lacking some of the appeal and finish of the Raiz app, zero fees on small balances is a remarkable offering.

This month my portfolio has faced headwinds from some declines in the price of Bitcoin, which has actually recently enjoyed a period of relatively low volatility. In a further change to my alternatives allocation, now that my physical gold holdings have reached about one percent of my total portfolio, I have paused regular weekly contributions to my Goldmoney account, to focus new cashflow into Australian shares.

This has left my overall asset allocation as close as to my investment policy targets as it has been for some time. With the Australian share market closer to long term valuations than the US market, this is leading me to hold off on increasing my international diversification for now. My next major decisions in that area will be on receiving my July distribution payments.

This month the Productivity Commission released its fascinating draft report into superannuation. A focus of my thinking over this past month has also been a rough review of my ‘global’ financial position, taking into account superannuation funds, and their asset allocation. This blog covers only my accessible non-superannuation assets, because of its focus on creation of a passive income stream well before eligibility to draw on superannuation. Nonetheless, ignoring its effect would be incorrect. Currently my superannuation is invested primarily in a low cost high growth index product, and my spreadsheet experiments have focused on ensuring that my portfolio decisions don’t occur in isolation from my broader financial position.

Progress

Progress to:

• objective #1: 89.9% or $147 646 further to reach goal.
• objective #2: 65.1% or $712 646  further to reach goal.

Summary

Exploration of new products and approaches has diverted my attention from overall portfolio performance this month, in part by design. I have been focused on smaller regular optimisations I can make, and questioning choices that could result in higher ongoing costs for no benefit.

Following on from my looking at safe withdrawal literature last month, I have also come across the only Australian examination of the ‘4 per cent rule’ I have ever seen, How Safe are Safe Withdrawal Rates in Retirement? An Australian Perspective, published here (pdf). It highlights a particular humility we should have about just importing the ‘4 per cent rule’ unthinkingly from overseas studies, by pointing out the extraordinary performance of the Australian market, and the much lower safe withdrawal rates that would follow from a break in this extraordinary run. The paper is rich with insights and issues to consider for anyone investing for financial independence in Australia.

A hero perish, or a sparrow fall,

Atoms or systems into ruin hurl’d,

And now a bubble burst, and now a world.

Alexander Pope, An Essay on Man

This is my seventeenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December  2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $724 062
• Vanguard Lifestrategy Growth  – $42 356
• Vanguard Lifestrategy Balanced – $75 123
• Vanguard Diversified Bonds – $102 559
• Vanguard ETF Australia Shares (VAS) – $75 389
• Telstra shares – $4 238
• Insurance Australia Group shares – $19 734
• NIB Holdings – $6 684
• Gold ETF (GOLD.ASX)  – $80 190
• Secured physical gold – $12 333
• Ratesetter (P2P lending) – $43 336
• Bitcoin – $135 720
• Raiz app (Aggressive portfolio) – $10 557
• BrickX (P2P rental real estate) – $4 751

Total value: $ 1 337 032 (+$52 169)

Asset allocation

• Australian shares –  32 %
• International shares – 19%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.4% (4.6% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.4% (1.4% over)
• Australian bonds – 9%
• International bonds – 9%
• Total bonds – 18.8% (0.2% under)
• Cash – 1.3%
• Gold – 6.9%
• Bitcoin – 10.2%
• Gold and alternatives – 17.1% (2.1% over)

Comments

A few weeks ago, on a sunny morning trip at Sydney airport and ahead of an all day meeting in the city, I stopped by a newsagent, and bought a copy of the April Money Magazine. I had the unusual experience of seeing the following…

Money had profiled this blog, and a number of others such as Pat the Shuffler, following call out on twitter and some follow up discussions with several Australian FI bloggers.  A special welcome to new readers!

Compared to that unique experience of picking up a magazine, and reading my own plans, the execution of them has been low key this month. The portfolio has continued to recover to previous levels, led by higher equity prices, a lower dollar, and movements in Bitcoin. Some first quarter dividends have been reinvested into the Vanguard high growth fund. In addition a gradual draw down of Ratesetter funds is occurring, as each loan matures. The BrickX platform has added an extra residential property for investment, and as part diversifying as widely as possible within this platform, I made a small additional investment.

The retreat and then recovery of the overall portfolio over the the past four months has not directly disturbed my plans, but it has increased my focus on the next substantive piece of new information in the journey. Looking ahead, this still lies some way off – in the form of July distributions. A major equity price fall continues to be within my expectation, even in spite of listening to a compelling Meb Faber podcast interview with UK academic Elroy Dimson, on the relationship between valuations and future returns.

Progress

Progress to:

• objective #1: 90.6% or $138 968 further to reach goal.
• objective #2: 65.5% or $730 968 further to reach goal.

Summary

As I near my target I am finding myself increasingly restless, thinking more and more actively around issues of safe withdrawal rates, sequence of return risks, and wanting to hear perspectives from other FI adherents who have stopped work. With potentially large future declines in Bitcoin and equities quite feasible, it feels a risky time to be taking on sequence of return risks. To some extent, I feel involuntarily ‘paused’, waiting to see the next part of the story, without yet being able to clearly read the chapter heading.

Be content to seem what you really are.

Marcus Aurelius

This is my sixteenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December  2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $693 605
• Vanguard Lifestrategy Growth  – $41 574
• Vanguard Lifestrategy Balanced – $74 220
• Vanguard Diversified Bonds – $103 193
• Vanguard ETF Australia Shares (VAS) – $74 236
• Telstra shares – $4 279
• Insurance Australia Group shares – $18 910
• NIB Holdings – $7 824
• Gold ETF (GOLD.ASX)  – $80 389
• Secured physical gold – $11 612
• Ratesetter (P2P lending) – $45 954
• Bitcoin – $114 730
• Acorns app (Aggressive portfolio) – $9 953
• BrickX (P2P rental real estate) – $4 384

Total value: $1 284 863 (-$54 561)

Asset allocation

• Australian shares –  33 %
• International shares – 19%
• Emerging markets shares – 3%
• International small companies – 3%
• Total shares – 56.6% (4.4% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.3% (1.3% over)
• Australian bonds – 10%
• International bonds – 10%
• Total bonds – 19.6% (0.6% over)
• Cash – 1.4%
• Gold – 7.2%
• Bitcoin – 8.9%
• Gold and alternatives – 16.1% (1.1% over)

Comments

This post is a few days later that usual as I have been holidaying overseas as the new month rolled over, making the update a bit more challenging to achieve with overseas data limits to contend with.

This last four months has been a challenging one, with declines in the overall portfolio, taking it ‘back’ to levels in November. Nearly all of this represents growth, and then sharp decline, in the value of my errant Bitcoin holdings, with some falls in equity markets also. I have concentrated on placing new capital into equity markets, and seeking to move my actual asset allocation closer to my target allocation over time.

Most of my financial moves this month have been incremental changes to how I fund longer-term irregular expenses. Around two years ago I moved to a system of regular deductions into higher interest allocated Ubank sub-accounts to set aside cash for car replacement, major insurance and holiday expenses. The system has worked well, but I had not revised its assumptions and structure materially after setting it up. By making a more realistic assumption on car replacement (every 8 years rather than five), and by taking into account my growing passive income and counting it as part replacement for a conservative emergency account, I have been able to free up some more cashflow (more than $8000 per annum) for regular investment.

The only substantial moves in the portfolio have been continued falls in Bitcoin, reducing its potential to add to future portfolio volatility (in a glass half full view), some falls in equity valuations, and some advance in the value of gold securities. I am looking through most of these changes and increasingly focused on what the end of first quarter dividends payments and distributions will bring, and the reinvestment opportunities that represents.

Progress

Progress to:

• objective #1: 87.1% or $191 137 further to reach goal.
• objective #2: 63.0% or $756 137 further to reach goal.

Summary

With time away from ordinary work this month, it has at times felt like a small trial of a future potential lifestyle, a weighing of one option for years ahead. Watching a portfolio shrink even as new investments are added is difficult, but I seek to recall that I have been investing in markets that are volatile steadily over around 20 years. This has caught upswings, periods of flatness, and the Global Financial Crisis. The next signal of progress will be my March quarter passive income, rather than abstracts updrafts or downdrafts in my portfolio.

The pursuit, even of the best things, ought to be calm and tranquil.

Cicero

This is my fifteenth portfolio update. I complete this update monthly to check my progress against my goals.

Portfolio goals

My current objectives are to reach a portfolio of:

• $1 476 000 by 31 December 2018. This should produce a real income of about $58 000 (Objective #1).
• $2 041 000 by 31 July 2023, to produce a passive income equivalent to $80 000 in 2017 dollars (Objective #2)

Both of these are based on a real return of 3.92%, or a nominal return of 7.17%

Portfolio summary

• Vanguard Lifestrategy High Growth – $704 616
• Vanguard Lifestrategy Growth  – $42 310
• Vanguard Lifestrategy Balanced – $74 994
• Vanguard Diversified Bonds – $102 353
• Vanguard ETF Australia Shares (VAS) – $76 562
• Telstra shares – $4 652
• Insurance Australia Group shares – $20 358
• NIB Holdings – $8 436
• Gold ETF (GOLD.ASX)  – $77 905
• Secured physical gold – $10 684
• Ratesetter (P2P lending) – $48 179
• Bitcoin – $154 110
• Acorns app (Aggressive portfolio) – $9 895
• BrickX (P2P rental real estate) – $4 370

Total value: $1 339 424 (+$23 490)

Asset allocation

• Australian shares –  32 %
• International shares – 18%
• Emerging markets shares – 2%
• International small companies – 3%
• Total shares – 55.4% (5.6% under)
• Australian property securities – 3%
• International property securities 3%
• Total property – 6.2% (1.2% over)
• Australian bonds – 10%
• International bonds – 9%
• Total bonds – 19.6% (0.6% over)
• Cash – 1.3%
• Gold – 6.6%
• Bitcoin – 11.5%
• Gold and alternatives – 18.1% (3.1% over)

Comments

This month my attention has been focused on the small and welcome breakout of media exposure to the Australian FI movement, including Pat the Shuffler’s ABC piece, Aussie Firebug’s followup interview, and a broader piece in Fairfax on the movement as a whole.

Another activity carried over from last month has been continuing to optimise my insurance coverage. Previously, I had faithfully paid my home contents insurance each year, resolving to test the market next year, when I had more time. Over an hour or so one weekend recently, this finally happened. Four or five quotes later, I had a offer that saved around $180 per year, for the same coverage from a major reputable insurer. Most surprising was the reaction when I phoned my current provider, and asked them to consider the competing offers, and whether they wanted to adjust their quote. They offered a nominal discount, but indicated they could and would not match even the average of other offers. So from this month, I have switched providers and invested the difference in Acorns.

Bitcoin’s recovery from it’s falls earlier this year was the most dominant element of portfolio performance this month. A slow withdrawal from both Ratesetter and a drawdown of surplus funds in my emergency fund are providing a good cashflow to consider future quarterly investments in shares, in which I am still underweight. Other parts of the portfolio have not moved significantly.  Gold securities have risen, and most share markets have partially or fully recovered from the recent sharp falls, and much heralded return to volatility

Progress

Progress to:

• objective #1: 90.5% or $136 575 further to reach goal.
• objective #2: 65.6% or $701 575 further to reach goal.

Summary

This month has felt like a calm and steady accumulation of assets, even as market, portfolio volatility has fallen away. The growth in the overall portfolio is starting to be a increasing factor in thoughts about how I spend my time in the future, at the moment providing a cushion against uncertainty. Slowly, I am beginning to have more deliberate thoughts about how I value my time, what tradeoffs I am prepared to make for how long, and what ‘next’ could possibly look like.