May 11, 2021
This portfolio update is a little later than usual.
Time kinda slipped by, and with the website update I just plain forgot about it!
Anyway, we’re here now. So in this article, I’ll share how our portfolio is progressing, give an update on our dividend income, and what we’ve been buying lately.
Let’s get started 🙂
Here’s a breakdown of where our wealth is located. As always, measured in percentages.
If you’re new here, I don’t share our net worth numbers for privacy reasons. I’m not anonymous like many bloggers, and feel no need to share everything.
Besides, it would be like telling your friends how much money you have on a regular basis. Wouldn’t that feel weird?
Without super, the breakdown is: 56% shares, 32% property equity, 9% cash, 3% p2p lending.
We’re planning to sell another investment property this year, given the strong current conditions of Perth and Brisbane (where our properties are located).
We won’t actually need more cash for a while. But there’s no guarantee it’ll be a good time to sell in 12-18 months. Why trade good conditions for the hope of great conditions?
The property we are planning to sell is in Brisbane. Reason being, it’s the one which has the highest amount of equity, which is what’s useful to us. Selling a Perth property with little equity is much less useful.
Well, since my last portfolio update, markets have been flying. The US market is up over 20%, and the ASX is up about 15%.
Remember the gloomy people who promised we’d have a second corona-crash, and the recovery was temporary.
Where are they now? Probably shouting at the sunshine somewhere.
From what I’ve seen, companies have reported pretty strong results in the last few months, which has helped underpin the recovery in prices.
And pleasingly, dividends are also bounding back from the frosty winter of 2020. I look forward to some (hopefully) bigger payments later in 2021!
From all reports, capital city property around Australia is pretty hot this year.
Mortgage rates at 2% are slowly getting built into prices, as has happened every time rates have come down. I don’t see this as good or bad – it is what it is.
But if you’re an owner of real estate (which about two thirds of the population are), you’ll likely see a boost in home value and net worth this year.
On the rental side, our properties in Perth have all recently had nice rental increases. And homes are selling quickly too, so prices are starting to move.
There’s a lot of talk about affordability – yes, even here in Perth! But everyone forgets that prices and rents are still the same or lower than they were 10 years ago.
In that time, wages have slowly increased and mortgage costs have massively decreased. A lot of moaning, no context or perspective. That’s the media for you.
Anyway, we’ll continue slowly selling down one property every couple of years as planned. And a bit of price growth before then would be nice!
Since my update in December last year, we’ve continued to buy shares every month as I mentioned. There have been some small changes too.
I added one more real estate trust to our portfolio – a large, diversified real estate investment trust (REIT) with a few hundred commercial properties and very long leases, run by Charter Hall (CLW).
We now have two REITs in our portfolio. To me, they look like good value and are throwing off attractive, sustainable income streams in the 6-7% range,
We’ve also been adding to our international index fund VGS. Both of these parts of the portfolio have become bigger sooner than I expected – partly due to their performance and also having extra cash to invest.
Here’s the breakdown of our share portfolio at the time of writing. You may notice something else…
Astute observers may notice something missing… Milton. That’s because I sold it after their second disappointing dividend announcement.
Why? Well, because management basically made no effort to smooth the dividend, despite years of saying things like “we have ample cash and franking credits to support the dividend.”
And there was no good explanation. This inconsistency really annoyed me. I don’t expect miracles, but they didn’t even try. Other LICs have done much better in this area, despite the massive drop in income from their portfolios.
So I spread the funds across our other holdings like real estate and VGS, while also buying a decent amount of VAS, since Argo was trading at a premium.
I mentioned this decision in a forum and people seemed to think it was a big deal, and that I was being reactive. But it didn’t feel like that.
If one of my investments isn’t going to meet my expectations (and there’s another good option), why would I cling on? I’m not married to any investment.
You should fall in love with investing, not your specific investments.
Alright, it’s time to see how our investment income fared during the second-half of last year.
I measure this by financial year, so here’s what the first 6 months of 2020-21 looks like.
Even with a recovery of dividends in the current six months, I don’t think we’ll be matching the income from last year! This chart’s lovely streak will come to an end 🙁
Despite that, I still find this metric to be the most enjoyable way to measure my portfolio over time.
I haven’t included interest earned from peer-to-peer lending, since I can’t get a 6 month interest summary. While it won’t be enough to keep the streak going, I’ll be sure to include that in the end of year numbers.
In the new financial year, I’ll share the full-year results, and towards the end of the year, I’ll do another update of what we’ve been buying, along with the other tally I’m trying to grow over time – charity donations.
If you’re interested in the spreadsheet I use to keep a running estimate of our annual investment income, use the form below to get a copy automatically sent to your inbox.
For new readers: You might be wondering how we consider ourselves ‘retired’ if our passive income of $25k isn’t more than our household spending of $40k. I explain exactly how it works in this article. Short answer: cash from offloading property.
You can also find a detailed article on how we’re turning our equity into income, using my property-to-shares transition strategy. Feel free to skim through it to get the basic idea 😉
The last 12 months has been a really interesting time to be an investor. We’ve seen highs and we’ve seen lows.
And just like always, those who kept their cool and stayed focused on the long term are the ones who came out the other side wealthier than before.
While the dividends are starting to recover, our share portfolio’s value is at a record high. That’s what happens when you do what Peter Thornhill suggests when prices are falling: “hold your nose and keep buying more.”
That’s enough from me. How are your investments going? Let me know in the comments below…