I feel like one

Who treads alone

Some banquet-hall deserted,

Whose lights are fled,

Whose garlands dead,

And all but he departed! Thomas Moore, Oft in the Stilly Night

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

Portfolio goal

My current portfolio objective is to reach a portfolio of $1 476 000 by 1 July 2021. My plan is that this should produce a real income of about $58 000. This is based on a real return of 3.92%, or a nominal return of 7.17%.

Portfolio summary

Vanguard Lifestrategy High Growth – $644 714

Vanguard Lifestrategy Growth – $41 365

Vanguard Lifestrategy Balanced – $73 383

Vanguard Diversified Bonds – $104 757

Vanguard ETF Australia Shares (VAS) – $34 978

Telstra shares – $4 652

Insurance Australia Group shares – $15 912

NIB Holdings – $6 888

Gold ETF (GOLD.ASX) – $75 519

Secured physical gold – $7 320

Ratesetter (P2P lending) – $58 100

Bitcoin – $61 417

Acorns app (Aggressive portfolio) – $7 212

BrickX (P2P rental real estate) – $4 445

Total value: $1 140 662 (+$26 502)

Asset allocation

Australian shares – 31%

International shares – 20%

Emerging markets shares – 3%

International small companies – 3%

Total shares – 56.3% (4.7% under)

Australian property securities – 4%

International property securities 3%

Total property – 6.7%

Australian bonds – 12%

International bonds – 11%

Total bonds – 23.2% (3.8% over)

Cash – 1.5%

Gold – 7.3%

Bitcoin – 5.3%

Gold and alternatives – 12.6% (2.6% over)

Comments

This month the portfolio increased by over $26 000. This includes a yearly bonus, which I chose to add as another contribution to my Vanguard Australian Shares ETF holdings. This was after a little vacillating between a few different ETF options. As ‘bonus’ money I felt a little more entitled than usual to allocate it as I wished, and considered Vanguard’s global share ETF, and some other fundamental indexing based ETFs. Unusually, buying into a fundamental index ETF of Australian shares would – at least on cursory inspection – have increased exposure to Australian banks compared to a standard ETF, which was not something that was attractive. In the end, simplicity prevailed, together with low fees and avoiding lifting exposure to US share markets.

The exercise (and some interesting Reddit discussions on ETFs) did make me think more consciously than I have for some time about my attitude to global share exposure. This has largely been driven more by accident than design. That is, it’s the result of the default allocations of Vanguard managed funds I have purchased so far, but I will likely consider this more in future investment policy reviews. Much of the literature available on what level of foreign diversification is optimum is based around US audiences, which is of limited use. On the one hand my future liabilities are likely to be in Australia dollars, on the other, it makes little sense to assume country-specific risk.

The most unusual and unsought source of paper gains this months arose from the ‘forking’ of Bitcoin, which left me with an amount of Bitcoin Cash (the new forked coin). My wallet service allowed a transfer of these back to Bitcoin original. This transaction, carried out entirely on a smart phone over breakfasts, had the effect of adding around $5000 to my original Bitcoin holdings. Hard to categorise that gain, or draw many conclusions from it.

The only other significant move I have made is to mildly increase my regular purchases of physical stored gold from Goldmoney, to seek to bring it closer to my target allocation of 10 per cent. In between times, have been listening to some excellent FI podcasts, including ChooseFI and Aussie Firebug’s interview with Pat the Shuffler.

Progress

Progress to goal: 77.3% (+7.9% ahead of target) or $335 338 further to reach goal.

Summary

With equity, bond and property markets poised as they are, sequence of return risks are looming larger. Sometimes it feels more likely that I face a ‘Sliding Doors’ scenario than an unremarkable mathematical progression to my goal. One option, in which I meet my target shortly, even more quickly than my projections, and another alternative reality in which some type of capital market event puts my progress back 2-5 years, or even longer. This is making me think more about portfolio allocation, however, there are no obvious steps at this stage.

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