It’s been a long time between drinks as far as investing updates go.

I used to do these more often, but it turns out the last one was a year ago!

So let’s fix that today, with a post outlining what’s been happening with my finances. Not because I want you to copy me, or because I want to show off. But I know how valuable and interesting it is to read about how other people are managing their investments. We can see what they’re doing and why they’re doing it, and even if we don’t change anything about our own approach, it’s just useful to share.

As you might guess, nothing here is a recommendation. I don’t want you to do anything… except enjoy the post 🙂

OK, let’s get started.

Current wealth breakdown

In the below image, you’ll see the breakdown of where the Strong Money household currently has its wealth parked. I don’t share the numbers for privacy reasons, but you can get a general sense of things.

For those who may be new to my situation, it’s a little more complicated than some in the FIRE space.

I started off with an all-property portfolio and have been transitioning into shares since leaving work in 2017. There’s a few more properties to offload, which we plan to do within the next five years or so. Then we’ll just have a nice and simple cash-producing share portfolio and no other hassles or headaches!

We don’t add anything to super; it just sits there in the background. Instead, we’re just focused on building our personal share portfolio. I keep very little cash given we are both earning some part-time income and our shares provide a solid income these days (more on that soon).

And I’m also a tiny shareholder in Pearler which is essentially a ‘passion’ investment. I believe in what the team here is doing and think it serves a valuable purpose for people who were simply not being served before (true long-term investors with a goal of FI who want a simple, easy to use platform with good automation). I look forward to seeing what else they build.

Let’s move on to how our investments have been performing.

Share market update

Markets have been interesting over the last 12 months to say the least.

We’ve had quite a few wobbles, some ups, some downs, and it doesn’t feel like the market has done all that well. So I was somewhat surprised to see that my portfolio is not in the red at all. In fact, it’s in the green…by quite a lot!

You’ll see the portfolio soon, but this was a pleasant outcome for all the uncertainties around. War, inflation, conflicting economic news and a huge spike in interest rates. Despite all that, shares have done pretty well!

Here’s a few brief examples up to 30 June…

IVV (US Market): 23.1% VAS (Aussie Market): 14.4%

Damn, if only all years were like that ;) Just goes to show that even when there are plenty of large and important issues to worry about, it doesn’t necessarily spell bad news for markets.

Property market update

Given we still have some properties in the portfolio (in Perth where we live), I’m keeping a close eye on how the property market is going.

Here’s a nicely summarised table from CoreLogic:

Perth was actually the best performing market over the last 12 months. Our properties are probably up about 10% over the last 18 months. Which is welcome news, after not doing much for most of the last decade!

Property across the country seems to have turned a corner, and sentiment is now positive. Rental markets are tight and less stock on the market for sale is pushing rents and prices higher. With high population growth, and a struggling building sector, I don’t see much to suggest things will get cheaper anytime soon.

We’ve had some nice rent increases on our properties here in Perth. But in truth, despite the recent growth, rents and prices are, on average, only a little bit higher than 10 years ago.

At this stage, I’ll be looking to offload a property in the next year or two. I could do it now, but I think prices are likely to continue rising, so I’m happy to wait (yes, it’s a bet).

Investment income and portfolio

The next chart shows our investment income for the financial year ending 2023, and the history of our dividend income since we started investing in shares.

This is our dividend income, plus franking credits. I don’t count rental income since the costs and mortgages soak up all the rent (and some), plus the properties aren’t part of the primary goal of building our cash-generating share portfolio.

“Whoa, that’s a hell of a jump,” you’d be thinking. It sure is. So what happened?

This huge increase is the result of a few things:

The 2022 figures are suppressed because half way through the year we sold a huge chunk of shares to buy our house. We then also sold an investment property and transferred the loan to our current home, giving us a huge pile of cash from the sale to invest. This is a strategy I call and wrote about-- security substitution, and is only available with certain lenders. I also wrote about our decision to invest the cash in our offset account, whereas we were I drip-feeding the money in before.

The next chart is our current portfolio.

Our REITs have been struggling up until very recently, as there’s a lot of caution over the sector given the moves in interest rates. The ones I own aren’t overly leveraged and own what seem like good long term assets, so I don’t see it being much of an issue. But I could be wrong, so we’ll see.

VGS has become a bigger portion of the portfolio, which was part of the plan, but also due to its strong performance this year.

Current actions and future plans

At the moment there’s no major changes planned. On a month-to-month basis, we’re just investing whatever we can into shares. Since we figured out how efficient shares are at generating income and decided to go this route, the focus has been on continuing to buy as much as we can and grow the annual income over time.

I’ll probably keep increasing the level of international shares in the portfolio, with a long term target of 50%. This seems to me like a nice round number to aim for. Occasionally, I also toy with the idea of simplifying further to just the two index funds. But given I already spend close to no time on the current setup I’m not really bothered, and I do like having some different assets in the portfolio.

And just like growing the investment income over time, I’m also focusing on boosting the amount we allocate to philanthropy each year. It’s just getting started, but I find it quite exciting to build up a trajectory like this. This one is recorded by calendar year since it’s easier to track with our household spending.

So there you go. I hope you found this little update interesting 🙂

Everyone’s situation is different, so there may be nothing here that applies to you. But the idea is to peel back the curtain on how I approach my finances so you can see how someone else is doing it, and how imperfect it may be.

That way you won’t feel like you have to create some type of optimal portfolio and be paranoid about doing something wrong. Or that those who may be further along than you are super intelligent and have some secret approach you don’t have access to.

At the end of the day, the specifics are much less important than doing the big things right. Earning a good income, saving as much as you can, investing on a regular basis, taking a long term approach, and staying focused on your goals despite all the headlines and noise going on all around you.

Thanks for reading, and happy long-term investing!