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.

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.

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