March 15, 2022
Man, time is truly flying these days!
It feels like only a few weeks ago I was writing the last portfolio update.
There are a few things that are different since last time, which we’ll get into in this article.
I’ll share what we’ve been doing with our money, future plans, and how it’s all going, as we continue to build our share portfolio and steadily transition from property to shares over time.
Let’s get started 🙂
At the time of writing, here’s where our net worth is located. We now have an absurd amount of cash, which will be gone in a few weeks after our house settlement goes through.
As explained in the house buying post, we had to sell a stack of shares to finance the purchase. This cash will be replenished when we sell our investment property (IP) in the next few months.
Shares fell a little before we sold, and have fallen further since then. While I’d love if the market tanked before we reinvested, I’m not really thinking about it since I have no control over the situation and am sticking with the plan regardless.
Another change from last time is that our peer-to-peer lending investment we’ve had using for the last 5+ years – Plenti – is gone. Why? Well, most of the loans were rolling off and we had gradually less invested on the platform.
As the repayments rolled in, I wasn’t reinvesting this money into new loans since the rates are now drastically lower than when I started. We’re talking 3-4% instead of 8-10%!
I did have a few thousand left on the platform after some loans were paid out early… but I just decided to take it out early (penalty free) since it was such a small amount.
I really enjoyed using Plenti as an investment, so I would definitely re-consider in the future. But the rates would need to be higher to get me interested again. If you’ve never heard of it, I explain how peer-to-peer lending works in practice in this article.
Everything else is roughly the same since last update.
Since the start of the year, Aussie and US markets are down around 5-10% as I write this.
It started with concerns around inflation, the idea of interest rates rising quickly, and now possibly war and general uncertainty.
Though if we zoom out just a fraction, both markets are up about 5% in the last 12 months, plus dividends.
Actually, let’s zoom out PROPERLY and have a look at the big picture….
Look at all the serious problems we’ve dealt with in the past. Of course, I have no clue how this one will play out, but this chart should be comforting to any long term investor.
And to be clear, this doesn’t even include dividends or franking credits! Yet look at the mind-blowing multiplication of the numbers on the left hand side of that chart. So this is actually a conservative picture.
All this to say, relax, and keep investing. If you start waiting until the uncertainty clears, prices will have already gone up. In shares, you earn higher returns because of fear and uncertainty.
Buying when prices are lower is your chance to be brave and earn higher returns than you would’ve gotten otherwise. Or, as Warren Buffett put it: “you pay a high price for a cheery consensus.”
From what I can tell, the property market has started off 2022 in pretty reasonable shape.
Prices are still rising on average, with Brisbane and Adelaide seemingly heading to the moon! Good market-timing huh… selling my Brissy property last year? 😉 Haha!
The Perth market (more important to us) looks solid too, with the right properties selling very quickly indeed. Three other houses have come up in our area as we purchased ours, both selling within a couple of days!
We’re also about about to get our investment property ready for sale. It’s starting to look a bit tired, so we’ll likely spruce it up a bit before the marketing begins (paint, carpet, etc.)
But the appraisals are indicating that the price has definitely increased over the last 12-18 months. The property itself is a spacious townhouse in a beachy suburb (Scarborough for those wondering), so there’ll be no trouble selling it.
I’m not setting my expectations too high, but it’ll be interesting to see how the sale goes. I’ll report back in the mid-year update to let you know how it went 🙂
In an odd turn of events… not much!
We started off the year buying shares regularly as usual. But our home purchase has meant we need to stop investing for a little while.
Once the IP is sold in a few months, we’ll be back to normal and buying on the regular. Can’t wait for that!
While our current portfolio is a fair bit smaller than before, the makeup is pretty similar to last time.
In terms of performance, our REITs have by far performed the best. And global shares (VGS) have performed worse than our Aussie holdings.
I’ve cashed out on opportunities like this in the past with either LICs or REITs when they become quite clearly overpriced… and I probably will in the future too.
Anyway, most of this cash went into our Aussie index fund VAS given it’s a similar holding to Argo.
It’s a little frustrating not being able to buy. I really hope the market falls even further before we’re able to start buying again. Sorry, not sorry 😉
Here’s our running annual income for the first half of this financial year, up to December 2021. This is simply dividends + franking credits.
I don’t count rental income as our properties are basically neutral cashflow (net rental income equals interest). If you include principal repayments, they are still negative. Not to mention these are being sold off anyway, so are basically irrelevant for our long term passive income goals.
This result is actually higher than I expected!
Dividends have recovered very strongly since the corona crash last year. If that rate kept up, we would’ve been looking at over $30k for the year.
This chart is probably gonna look a bit strange in the next update or two, given we sold a large stack of shares to fund the house purchase.
All should be corrected again next year though, when the portfolio is replenished and back to normal 🙂
For new readers: If you’re wondering how we consider ourselves ‘retired’ if our passive income isn’t higher than our household spending, I explain how we manage our money in this article. Short answer: cash from offloading property as we transition into shares.
I mentioned a while back that Pearler was working on a few new things. The first cab off the rank is Pearler Micro.
I was told the reason they created Micro is because they found a surprising amount of new investors were investing small amounts at a time, like a few hundred dollars.
Paying full brokerage each time on small amounts is a pretty inefficient way to invest. So Pearler felt compelled to create a more suitable offering for this group of investors within the platform.
Here’s what they came up with:
And here’s how the monthly fees compare to the other two popular options:
Obviously ETF management fees are separate to this just like when you invest normally. Speaking of which, the fund options are below.
They may be tweaked or expanded in the future, based on customer feedback, but here’s the choices they’re rolling with at the moment:
It’s true, I’ve generally not been the biggest fan of micro investing apps. While it’s definitely better to invest than not, I never saw a micro investing app I really liked.
But what Pearler has created is actually pretty good. It has investment options that I would personally be happy with (my main gripe with the others), and the fees are very competitive.
If you want to start small, or maybe get your kids investing regularly without large amounts, this is a very decent option. Micro is currently open to existing customers, and the estimate for public launch is March 20.
For the rest of us, Pearler have extended their pre-pay brokerage deal until lower prices roll out. Basically, if you buy $100 brokerage credit and get $50 extra. So your $9.50 purchases effectively cost $6.33. When prices drop (in a few weeks apparently), that credit will stretch even further.
I’m really looking forward to the coming sale of our investment property!
We can then get back to the main game of building up our shares and growing that sweet income stream 😉
We may even turn our home loan into an investment loan by debt recycling before we re-invest that cash!
I think I’ve figured out a way to make everything as simple as possible on an ongoing basis while still getting the benefit. It does involve a few tweaks, but it’s probably worth it.
You’ll have to wait till the next update to hear more about that!
How’s your investments going in 2022 so far? Are you feeling nervous, excited, or indifferent about the sharemarket dip? Let me know in the comments.