• thinkrichmum

My Portfolio (August 2019)

Net worth

Between my husband and I, the chart below is our current net worth. For privacy reasons, I'll show only percentages here. I'm not sure if I really want to share the exact dollar amount - but maybe throw some rough numbers here and there.

Breaking down the chart.....

Emergency Fund - basically our savings in cash. It's about 3 months worth of expenses. The cash is sitting at the offset account of Primary Residence home loan. Our home loan is at 3.24% interest so putting our cash in the offset account looked better than having it in a normal savings account.

Superannuation - This is the total amount (as a couple) which is sitting on a "High Growth"portfolio. In saying that, my husband is with AMP and he is currently moving into a lower rate industry super fund.

Common Stocks - these are individual Aussie blue chip stocks (SYD, TCL, COH, ALX, MQG and A2M). These are cats and dogs that my husband wanted to play with. Maybe down the track, these will grow or crash (who knows).

LIC - we have only one Listed Investment Company, AFI.

ETF - these are various ETFs that we bought for the past 10 months. Asset allocation is shown below.

Real Estate Equity - a large chunk of our net worth is sitting as equity in our real estate portfolio. Our current position is comprised of 3 investment properties and 1 principal residence. The amount is computed as; the current property valuation less the outstanding loan.

Share Market Asset Allocation

Well, we started to have a good and simple approach to ETF allocation (as discussed by JL Collin's book Simple Path to Wealth). We planned to own US stocks index fund and bond index fund, simple and clean. But now, as we read more and more about investing, we discovered there are different kinds of indices. We found that we wanted to have a finger at every pie so our ETF asset allocation became so diverse. Lol.

Common stocks - as described above.

LIC - as described above, this is AFI. There is no particular reason why we chose AFI from the other LICs.

Aus Large Cap - composed of VAS (Vanguard) and A200 (Betashares)

US Large Cap - composed of NDQ (Betashares), TECH (ETF Securities) and recently purchased ETHI (Betashares).

US Total Market - VTS (Vanguard)

International ex-US - VEU (Vanguard)

Aus REITs - VAP (Vanguard)

Aus Govt Bonds - VGB (Vanguard)

Investing Milestones

Here is the timeline of our major financial investments:

2010 - purchased our first principal residence (townhouse in NSW)

2013 - purchased first investment property (house in NSW)

2014 - purchased block of land for principal residence (NSW)

2016 - purchased the second investment property (house in QLD)

2016 - mid-year, moved to newly built principal residence. Then, our previous principal residence automatically turned into an investment property.

2018 - end of 2018, we bought our first ETF and individual stocks

I guess the next couple of years will be automatic - we will continue to contribute monthly to the index fund. There are no plans to purchase additional investment properties. That said, if there is a super great opportunity to buy low on a good investment, there's no reason to shy away from that.

The Plan

So where do we go from here?

Our immediate plan is to have the whole portfolio generate income which can support our yearly expense - we are aiming for $75,000. Some people call this as the "FI (Financial Independence) number".

Now, doing a back-of-the-envelope calculation, we can get to our FI number by the following:

  1. an index fund worth $1.5M - which can generate $60,000 yearly (following the 4% rule).

  2. one unencumbered investment property - which can generate a conservative $15,000 yearly rental income (less expenses).

I'm not including superannuation since we plan to retire earlier than 60 years old. The core of our portfolio will be index funds and real estate, and once we our super kicks in, it will be a great bonus for us.

Based on our current financial position, it would take us about 15 years to achieve objective #1. But we will still make the effort to achieve our FI number sooner. We will contribute monthly into index funds. Sources of income will be from the salary we get from our current jobs and possibly a little help from the rental income of positively geared investment properties. I do plan to boost our income by:

a. Improving savings rate - two of the our largest expenses are home mortgage and overseas travels. This is a lifestyle choice. We enjoy living in our home and we deeply love travelling as a family - the kids just love it to bits. Maybe in a few years or once the kids leave home, downsizing will be an option. Our current savings rate is 20%. Yeah, I'm looking to improve this number. I'm still learning and finding ways be more frugal and efficient in life.

b. Side hustle - my husband was involved in wedding photography for quite sometime but took a hiatus for the past 3 years. He is now looking to ramp up his marketing this year. I am also looking for other ways and hopefully start something before the year ends.

c. Miscellaneous - salary increase, yearly bonus, and increase in weekly rent.

As for objective #2, the plan is to sell our current home and move to a smaller home, then sell two investment properties and use the capital gains to pay for the remaining investment property. Another scenario is when we downsize to a smaller principal residence, there is considerable amount of capital gains that would enable us to pay the outstanding loans for the 2 investment properties. Or maybe just downsize and sell all the investment properties. I foresee that the consolidation of our real estate properties would be beneficial during a property market boom. We'll see how it goes in the next couple of years.

Though there are infinite number of ways to attain our objectives, this is the strategy we created that suits us. Along the way, we might adopt a different course since there are a lot of moving parts in our masterplan - we'll cross the bridge when we get there. I am just thrilled that we now know where our financial future is headed. We will stay the course and enjoy our journey to financial freedom.



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email: thinkrichmum@gmail.com


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