Time flies in the world of finance.
Turns out, I haven’t done a portfolio update since August last year!
That’s partly because I’ve had lots of other interesting things to write about, along with delving into other topics on the
Aussie FIRE podcast
(check that out if you haven’t already).
In this article, I’ll share…
– How our investments have been going
– Current wealth breakdown + passive income
– What I’m investing in right now
– Review of property and share markets
– Plans going forward
By the way, these posts are simply to share. I don’t write them because I want you to copy me, or to show off. But, I know how valuable and interesting it is to read about what others are doing with their own money.
So, nothing here is a recommendation; please do your own research before investing, as all investments come with risk. That being said, I hope you enjoy the article 🙂
OK, let’s get started.
Current wealth breakdown
In the below image, you’ll see the breakdown of where the Strong Money household’s wealth is currently parked.
I don’t share numbers for privacy reasons, but you can get a general sense of things.
From
last time,
our IP and home equity have increased, and our shares/super have decreased, percentage wise. That’s due to strong property performance
–
we’ve still been consistently adding to our share portfolio each month!
For those who may be new to my situation, here’s an explainer:
I have been investing in shares since 2015, left work in 2017, and since then have been steadily transitioning the portfolio from property to shares. There’s a few more properties to offload, which we plan to do within the next few years. Then it’ll just be a simple income-producing share portfolio with 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).
I’m also a tiny shareholder in Pearler, which is essentially a ‘passion’ investment for me. I believe in what the team here is doing, and think it serves a valuable purpose for people who were not being served before (long-term investors with a goal of FI who want a simple, easy to use platform with good automation).
Let’s move on to look at how shares and property have been performing.
Share market update
Since my last update back in August last year, share markets have been pretty strong.
There was a small wobble back in September to October. But since the start of November, markets have been cruising in a mostly-upwards trajectory.
Over the last 12 months, here’s the rough performance of the two key markets most Aussies are exposed to and interested in (at the time of writing):
People have been forecasting lacklustre performance for the US market for about 10 years now. And the market simply keeps powering on, delivering what are relatively insane returns.
Now sure, the market definitely isn’t cheap, with a PE ratio of 20-25. But the companies themselves are virtually printing cash, as tech becomes an ever-increasing part of our lives.
I don’t know what’s going to happen from here, but it’s been an expensive bet to get wrong. When in doubt, I just assume the market knows more than I do.
It’s not always right, but it’s right more often than wrong.
Property market update
Given we still have some properties in the portfolio (in Perth where we live), I also watch what’s happening in the property markets.
Here’s how the various markets have fared over the last 12 months ending the March quarter:
As you can imagine, I’m very happy with this outcome!
After a notable decade for Perth real estate owners, I’ve noticed people are convinced the strong conditions won’t last. I actually think they will, at least for a few years.
There’s simply not enough supply for current demand, let alone the expanding population. Building has also been slow, and will take quite a while to catch up
–
longer than normal due to the recent issues with so many construction firms going under.
The rental market is super-tight across most of the country
–
and again, Perth especially. I don’t see that changing much anytime soon either.
People might wonder why I don’t sell now. My bet is that by waiting another 1-3 years, I’ll capture more gains than if I sell now. So I’m not in a rush, and thankfully, we can still afford to hold on. Even if I get the timing a little wrong, and sell a bit late, I still think holding longer will be more profitable.
Investment income and portfolio
This next chart shows how our investment income is faring in the first six months of the financial year.
I’ll do another update later this year with the full-year figures, but it’s heading in the right direction. You can also see the history of our dividend income since we first began investing in shares.
At the current rate, it looks as though the total for this financial year will pass the nice round number of $50k 🙂
To clarify, this is dividend income plus franking credits. I don’t count rental income since mortgages and costs soak up all the rent. Plus the properties aren’t part of the primary goal of building our cash-generating share portfolio.
If you’re wondering what happened in 2023, here’s the explainer:
The 2022 figures are suppressed because we sold a huge chunk of shares to buy our house. We also sold an investment property and transferred the loan to our current home, giving us a huge pile of cash to invest.
This is a strategy called security substitution which I wrote about here . We also decided to invest the cash in our offset account, whereas we were drip-feeding the money in before, which I wrote about here.
Okay, let’s move on to our current share portfolio...
What’s changed? Earlier this year I decided to sell QVE and simplify the portfolio further. The fund hadn’t performed very well, but it produced solid income over the many years we held it.
Regardless, the lacklustre overall performance began to annoy me. Plus, I’ve basically reached the point where I just want things to be clean and simple.
I’ve noticed that the less holdings I have in the portfolio, the more I like it. Now, two index funds can be reduced into an all-in-one index fund like
DHHF or VDHG
.
But I like the idea of keeping two for optionality and flexibility. I can buy the one that is down more, or sell the one that is up more (if cash is needed). Plus, I can control the weightings between each.
Current actions and future plans
There’s no changes planned for 2024. We’ll continue investing whatever surplus cash we have into shares. But there’s one thing that could hinder those plans…
I have two fixed rate home loans which expire in August. The current rate is a delicious 2.34%, and these rates will probably jump to over 6%. That’s an extra $2k per month of extra interest!
This had me contemplating selling a property this year. But I think we’ll just cop the cashflow hit and leave it till next year.
As for the share portfolio, the two REITs will probably be sold off over the next few years to simplify further. I’m not selling them yet as I think they’re probably being priced a bit too negatively. I could be wrong on that, but I’m happy to wait and it doesn’t really matter either way. Jeez, I sound like a pretty careless investor, don’t I? 😂
Sometime in the future, we’ll likely just have a couple of index funds with a 50/50 split of each. Given the portfolio is a decent size now, it might take a while, but that’s okay.
As the portfolio gets bigger, another goal I have is to allocate more money to philanthropy each year. The aim is to simply make it higher every year, regardless of how the portfolio or personal finances are going.
It’s just getting started, but I find it motivating to keep the streak going. This one is recorded by calendar year since it’s easier to track with our household spending.
If you’re curious where it goes, it's mostly wildlife conservation and animal-related charities.
Final thoughts
That’s it for this update. I hope you found it interesting 🙂
I look forward to seeing the mid-year dividend payouts and whether we crack the $50k mark. It should be pretty close!
As you can probably tell, I don’t aim for perfection. I follow the ‘good enough’ approach. Far too many people overanalyse things to death in the finance space, when it really can be very simple if you let it.
Hopefully my relaxed approach helps you see that you don’t have to create the ‘perfect’ portfolio. Just focus on getting the big things right and you’ll do just fine.
Earn a good income, save a solid amount, invest regularly, take a long-term approach, stay focused on your goals, and perhaps most importantly, do your best to ignore the headlines and noise going on all around you.
Thanks for reading, and happy long-term investing!
