The sea is calm tonight.
The tide is full, the moon lies fair
Upon the straits

Matthew Arnold, Dover Beach

This recorded journey towards financial independence started seven years ago, with an initial objective of building a passive income of $58,000 per annum by July 2021.

Since that time, goals have evolved and changed, with the most recent target being achieved from March 2023 onwards, as well as temporarily before that.

Each year in early January I spend time reviewing my investment goals and how I plan to reach them.

This longer post talks about reflections arising as part of this annual review, updates my portfolio goal including the measures and assumptions I will assume, and discusses how I will approach the closing stages of my financial independence journey through 2024 and potentially beyond.

The aim each year is to have a clear written record of the objectives, approaches and reasoning underlying the plan, to serve as a reference point through the year to come. The process also enables the updating of plans and assumptions for changes in circumstances, thinking, as well as available data and evidence.

The full tide on the voyage to financial independence

This year represents a different task to many of those faced before. Last year, the challenge was to rebuild after the most substantial falls in dollar terms that that portfolio ever experienced.

For 2024, however, the task is to build on the tentative and contingent achievements of the past twelve months – in particular, the passing of the portfolio goal, and the secondary target equity level in the portfolio.

While this tide is full the immediate tasks are two-fold.

• First, to provide for a reasonably assured passive income which is consistent in real after-inflation terms with the target chosen.

• Second, to set aside the reserves of cash that will be essential to movement to potential reliance entirely on investment returns and the application of the safe withdrawal rate to the portfolio over an extended multi-decade period.

While the tide is currently full, it can of course turn – quite easily.

The past two years have been an object lesson that arbitrary numerical targets can be exceeded, only for markets to fall back sharply. This is simply what markets do, at times.

So all the plans for the year must bear this caveat: that with a turn of fate, the primary task may revert to what it has before, restoration and achievement of the overall portfolio level, and an equity target.

Continue reading “Fair Upon the Straits – Reviewing the Portfolio Goal and Investment Plan”

It is difficult to say what is impossible – for the dream of yesterday is the hope of today and the reality of tomorrow.

Robert Goddard

Year in Review

This year has been one of the most significant in the journey to financial independence so far.

Following the set-backs of 2022, the portfolio achieved strong forward momentum through most of the past year.

The original guiding goals set for this year were three-fold:

• achieving and maintaining the overall portfolio target of $2.75 million;

• achieving a minimum equity portfolio target of around $2.2 million; and

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

The first of these goals was achieved in March. The second was just achieved in the last month, following upward movement in equity markets and a final regular investment for the year.

The cash reserve targeted has not yet been built, though this may change over the coming year.

This means that two of the three pre-conditions which were set for any movement from my current work arrangements have been met, while the last is still a little way off.

Taking a look at movement against the financial independence benchmarks set through this past year highlights the significant progress made in the past 12 months.

Progress against FI measures through 2023

Measure	Portfolio	All Assets
Portfolio objective – $2,750,000 (or $94,800 pa)	89%→121%	117%→154%
Total average expenses (2013-present) – $87,800 pa	96%→130%	127%→167%
Target equity holding in portfolio – $2,200,000	83%→102%	N/A

The past few years have seen major oscillations in the final portfolio value.

Last year saw a loss of around $500,000 across the calendar year, immediately following a strong portfolio performance in 2021.

This past year has seen the portfolio grow by over $870,000, or 35 per cent of its initial value at the start of the year.

This is the largest dollar value gain in a calendar year over the history of the portfolio, and a percentage growth of a similar scale to growth in 2019 and 2017.

Each of these previous advances changed fundementally the type of portfolio which was being managed – and the gains this year will do the same.

Progress of the journey

This year has been in its essentials a resumption of the trend of growth, assisted by compounding and bouyant markets, that has been a feature of the journey since 2007.

This growth has reversed the losses of 2022, and restored something that looks quite close to a consistent geometric style expansion in the portfolio.

Continue reading “Year in Review and Monthly Portfolio Update – December 2023”

The moving finger writes; and, having writ,
Moves on: nor all thy piety nor wit.
Shall lure it back to cancel half a line,
Nor all thy tears wash out a word of it.

Omar Khayyam

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

Portfolio goal

My objective is to achieve and maintain a portfolio of at least $2,750,000 by 31 December 2024 or earlier. This should be capable of producing an annual income from total portfolio returns of about $94,800 (in 2023 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.45 per cent.

A secondary focus will be achieving the minimum equity target of $2,200,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$761,609
Vanguard Lifestrategy Growth Fund	$39,947
Vanguard Lifestrategy Balanced Fund	$72,181
Vanguard Diversified Bonds Fund	$87,529
Vanguard Australian Shares ETF (VAS)	$454,520
Vanguard International Shares ETF (VGS)	$607,310
Betashares Australia 200 ETF (A200)	$275,474
Telstra shares (TLS)	$2,036
Insurance Australia Group shares (IAG)	$7,525
NIB Holdings shares (NHF)	$9,096
Gold ETF (GOLD.ASX)	$138,218
Secured physical gold	$21,884
Bitcoin	$634,473
Raiz app (Aggressive portfolio)	$21,884
Spaceship Voyager app (Index portfolio)	$3,494
BrickX (P2P rental real estate)	$4,434
Plenti Capital Notes Market Loan	$5,000
Total portfolio value	$3,145,606 (+$154,243)

Asset allocation

Australian shares	34.0%
Global shares	30.7%
Emerging market shares	1.3%
International small companies	1.7%
Total international shares	33.7%
Total shares	67.6% (-12.4%)
Total property securities	0.1% (+0.1%)
Australian bonds	1.9%
International bonds	4.7%
Total bonds	6.9% (+1.9%)
Gold	5.1%
Bitcoin	20.2%
Gold and alternatives	25.3% (+10.3%)

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

Comments

The financial independence portfolio moved in a strongly positive direction this month, with a gain of around $154,000.

This means the portfolio sits about any previous month end figure, and just below it highest value ever calculated in November 2021.

Overall, the portfolio grew by 5.2 per cent, making it the second strongest monthly performances of the year.

The growth in the portfolio was broad-based.

Global equities grew in value by 5.0 per cent. Bitcoin rose in value by 5.2 per cent. Australian equities also joined in the expansion, appreciating around 5.0 per cent. Even bond holdings turned in a positive perfomance, of around 3.0 per cent

The only significant capital losses across the month were a reduction in gold prices, resulting a 2.1 per cent loss on gold ETF holdings.

This performance occurred in a period of continued growing acceptance that Australian interest rates may still not have peaked, or may not be in a position to decline as rapidly as those overseas due to domestic inflationary forces.

Continue reading “Monthly Portfolio Report – November 2023”

Time is the wisest counsellor of all.

Pericles

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

Portfolio goal

My objective is to achieve and maintain a portfolio of at least $2,750,000 by 31 December 2024 or earlier. This should be capable of producing an annual income from total portfolio returns of about $94,800 (in 2023 dollars).

This portfolio objective is based on an assumed safe withdrawal rate of 3.45 per cent.

A secondary focus will be achieving the minimum equity target of $2,200,000.

Portfolio summary

Vanguard Lifestrategy High Growth Fund	$724,110
Vanguard Lifestrategy Growth Fund	$38,118
Vanguard Lifestrategy Balanced Fund	$69,131
Vanguard Diversified Bonds Fund	$84,578
Vanguard Australian Shares ETF (VAS)	$420,542
Vanguard International Shares ETF (VGS)	$578,045
Betashares Australia 200 ETF (A200)	$262,175
Telstra shares (TLS)	$2,030
Insurance Australia Group shares (IAG)	$7,183
NIB Holdings shares (NHF)	$8,688
Gold ETF (GOLD.ASX)	$141,183
Secured physical gold	$22,310
Bitcoin	$600,385
Raiz app (Aggressive portfolio)	$20,107
Spaceship Voyager app (Index portfolio)	$3,347
BrickX (P2P rental real estate)	$4,431
Plenti Capital Notes Market Loan	$5,000
Total portfolio value	$2,991,363 (+$105,860)

Asset allocation

Australian shares	33.6%
Global shares	30.7%
Emerging market shares	1.3%
International small companies	1.7%
Total international shares	33.7%
Total shares	67.3% (-12.7%)
Total property securities	0.1% (+0.1%)
Australian bonds	2.2%
International bonds	4.8%
Total bonds	7.0% (+2.0%)
Gold	5.5%
Bitcoin	20.1%
Gold and alternatives	25.5% (+10.5%)

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

Comments

The portfolio increased in value by around $105,000 through this month, pushing it to its highest level since late 2021.

This move represented a 3.7 per cent increase in its value, more than offsetting losses through the last two months.

The different segments of the portfolio sharply diverged across the month, as higher inflation outcomes in Australia and yield increases in government bond markets globally challenged the comparative value and outlook for equities.

The equity portfolio suffered sharp losses in its domestic component, down around 3.3 per cent after accounting for dividends being distributed. In the case of international shares the losses approached 2.7 per cent, cushioned by a weaker currency performance on the part of the Australian dollar.

Continue reading “Monthly Portfolio Report – October 2023”