The sea is calm tonight.
Matthew Arnold, Dover Beach
The tide is full, the moon lies fair
Upon the straits
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”