I would like to start by apologizing for the unforgivable delays in sharing State of the FIRE portfolio performance updates. I have a very legitimate excuse though and it’s a very exciting one too.
We are partnering on a new E-Book on Financial Independence for Aussies. It’s a super exciting project where we are co-authoring with some of the most well known FIRE bloggers in the Aussie community. And that’s what we had been busy doing, finishing up our chapters that would go into the E-Book. But it’s back to doing a bit of ‘belated’ autumn & winter (It’s winters here in the southern hemisphere!) cleaning now.
And because I’m so far behind in these updates, I figured it may make sense to do a quarterly update instead of doing monthly ones. So here’s how we did in Q2 2020.
Winds of Winter
I’m no fan of the winters (Yes, really, its winters here. I’m not kidding!), but this April was the spring of hope for the stock markets. Bourses across the world clocked the best monthly growth in over 20 years. The S&P 500 gained 12.7% and the ASX 200 was up a whopping 8.8%.
May continued to see the upward momentum of April. ASX reached an 11-week high and rose by over 27% since the lowest point in March 2020 and about 16% since March-end.
While June also saw an upward trend with the markets making a small gain, it did experience its fair share of drama as well. The stocks started higher, but around mid-month the markets plunged again as more and more countries saw second waves of COVID-19. However, stockmarkets were granted another lease of life when the Federal Reserve announced their bond buy-back programme.
All this growth seen in Q2 2020 has been underpinned by hope. Hope of reopening of the global economies as lockdown restrictions were eased. Hope of a potential cure for coronavirus being found. And ofcourse the fact that March 2020, the worst month since 2008, had set a very low bar helped tremendously with chalking up double digit growth numbers.
However, a quick point to note is that not all stocks have been growing equally. The biggest contribution to this growth has come from Tech Stocks, particularly those that provide stay-at-home tech products such as Zoom, Peloton and ofcourse also the Apples & Amazons of the world. While tourism, airlines and commercial real estate stocks have barely seen any growth over the past few months of recovery.
All the hope of the share markets spilled over to our Combined Net-worth as well. We knew it would improve, but we didn’t know that we would cross the $150K threshold so soon and even go substantially above and beyond. I actually stopped typing this post when I figured out and told Mr. Fireball this awesome news!
Our Combined Net-worth stood at an amazing $171.4K, which was 30% higher than our Net-worth at the end of Q3 2020. That translates to a growth of 10% per month. Not all of this was fuelled by the share market growth. I got a pretty decent bonus and raise in April which also helped bump up this number quite a bit.
Combined Net-Worth – $171,446
Debt Outstanding – $0
As was expected, the proportion of stocks in our portfolio grew quite substantially to 50% vs being at 40% at the end of Q1 2020. This was buoyed up by the markets, but also because all the bonus that I received was put to use buying more shares. The biggest loser was Cash which lost 5% in the overall proportion. Super & Bonds weren’t very far behind either, losing 3% and 2% in the proportion, respectively. The proportion of Gold in the portfolio stayed almost constant.
(Wo)Man vs Machine
Given that the share markets are almost back to their pre-Covid levels, I’m hopeful that this time around I would finally beat the Machine. It has never let me have a taste of success, but this time I can almost feel it at the tip of my tongue.
First up, the Machine
Machine Portfolio Mix
The Roboadvisor invested $3,500 in shares in this quarter, which is why you see that the proportion of shares in the portfolio has gone up to 62% vs 57% in Mar 2020. The Machine put in $1,000 each in Bonds & Gold, causing the proportion of Gold to stay constant while that for Bonds fell. The proportion of Aussie shares has also seen an increase.
The machine grew by 6.72%. Of which, Capital Gains were responsible for 6.20% growth while the remaining 0.52% came from Dividends. Aussie shares showed the biggest returns at 13.43%. And because they contribute to 73% of the overall Growth Assets, they were the biggest contributors to the 6.72% growth. Gold took the returns down by 1.12%. This was because the Machine invested in Gold at $244.19 per unit, whereas as of 30 June Gold was lower at $242.30.
And Now, the Wo(Man)
Wo(Man) Portfolio Mix
My proportion of shares has gone up significantly. From 66% in Mar 20 to 72% of the overall portfolio now. Real Estate and Gold have retained almost the same levels of contribution while that of Bonds has reduced by 5%.
This was of-course a time when the stock prices were down, while that of defensive assets like Gold and Bonds were at an all time high. And like a good little shopper, I bought more of the things that were on sale aka stocks. I bought $1,500 worth of Gold and $3,500 worth of REITs. The rest of my investment, which was a huge $20,500 (by our standards) was invested in shares.
You will notice that I have a neat little one-third, one-third, one-third invested in Aussie, Global (US) and Emerging Markets stocks, respectively. This has been my target geographic mix since I started investing and I consciously try to maintain it every time I invest.
Let me start off by saying, I was super disappointed with my returns vs the Machine of course! I didn’t expect to be beaten this time around.
All the stocks have done superbly this time. All except DJRE. Being 12% of my overall portfolio and having fallen by 3%, it really has been a big spoilsport. The fact that it provided a 1.7% dividend has been some saving grace, but even that hasn’t helped so much. I do understand why it’s down, most of its investment is in large commercial and industrial properties. With people working from home, a lot of businesses have exited from their leases or renegotiated their rents. The same is true with industrial properties and shopping malls.
But still this time I’m really gutted. I was hoping to come out on top. Hopefully, I can do better the next time.
Snatching defeat from the jaws of victory…